Referral-based models are used a third-Party intermediary and earns fees br firms that steer customers to another com- referring viewers to other sites through its pany for a fee. One type is the affiliate model affiliate programs. As noted earlier, Ama in which a vendor pays an affiliate a fee each zon. com not only earns revenues by reselling time a visitor clicks through the affiliates marked-up merchandise but also has gener Web site and makes a purchase from the ated income by charging fees for providing vendor. Many name brand companies use expertise based on its transaction capabil- affiliate programs. For example, Wedding- ties. Major manufacturers such as Ford Channel. com, which provides a bridal reg Motor Co and Dell Computer not only use istry where wedding guests can buy gifts their sites to manage procurement with sup- from companies such as Tiffany,s, Macys pliers, but also to advertise their services and or Crate barrel. receives a fee each time provide consumers with information that is a sale is made through its Web site. Another used to order customized products referral-based example is Yesmail. com, Table 1 summarizes the key feature of which generates leads using e-mail market each Internet business model, suggests what role content may play in the model, and Subscription-based models are used by businesses that charge a flat fee for providing ties-search, evaluation, problem-solving, either a service or proprietary content. Inter and transaction--can become sources of net service providers are one example of this competitive advantage model. Companies such as America On-line Clearly, Table 1 provides a framework and Earthlink supply Internet connections for exploring means by which a compa any can for fees that are charged whether buyers enhance its sources of competitive advan- use the service or not. Subscription-based tage. By using Internet-specific value-adding models are also used by content creators such activities in the context of viable business as The Economist or New York Times. Although models, many new avenues for using the these recognizable brands often provide free Internet to add value may come to light content, only a small portion is available free. Firms seeking to add value by using Internet The Economist, for example, advertises that 70 capabilities might ask: percent of its content is available only to How has the internet affected our subscribers value-adding processes? Is there some are use aspect of our value chain that needs to by companies that provide ongoing services be reevaluated or realigned? Are we similar to a utility company. Unlike the com- relatively strong in our use of the sion-based model. the fee-for-service Internet, or has it exposed new weak- model involves a pay-as-you-go system. That nesses that are making us vulnerable? is, activities are metered, and companies pay How might our firm make better use only for the amount of service used Applica- f search, problem-solving, evalua- ion service providers fall in this category tion, or transaction capabilities to For example, pRoject. com provides virtua mprove its value proposition or save work space where people in different physi costs internally? cal locations can collaborate on-line. users How can we enhance the content of essentially rent Internet space, and a host of our Web site with testimonials, ex tools that make it easy to interact, for a fee tise, or entertainment programming in based on their usage. order to strengthen the usefulness of It is important to keep in mind that many the Internet? companies combine these models to achieve Has the digital economy created new competitive advantages. For example, a com- opportunities that our firm can seize pany such as Lending Tree not only sells by deploying its unique competencies dvertising but also earns a commission a and capabilities? Conversely, do 168 ORGANIZATIONAL DYNAMICS
Referral-based models are used by firms that steer customers to another com￾pany for a fee. One type is the affiliate model in which a vendor pays an affiliate a fee each time a visitor clicks through the affiliate’s Web site and makes a purchase from the vendor. Many name brand companies use affiliate programs. For example, Wedding￾Channel.com, which provides a bridal reg￾istry where wedding guests can buy gifts from companies such as Tiffany’s, Macy’s or Crate & Barrel, receives a fee each time a sale is made through its Web site. Another referral-based example is Yesmail.com, which generates leads using e-mail market￾ing.
Subscription-based models are used by businesses that charge a flat fee for providing either a service or proprietary content. Inter￾net service providers are one example of this model. Companies such as America On-line and Earthlink supply Internet connections for fees that are charged whether buyers use the service or not. Subscription-based models are also used by content creators such as The Economist or New York Times. Although these recognizable brands often provide free content, only a small portion is available free. The Economist, for example, advertises that 70 percent of its content is available only to subscribers.
Fee-for-service-based models are used by companies that provide ongoing services similar to a utility company. Unlike the com￾mission-based model, the fee-for-service model involves a pay-as-you-go system. That is, activities are metered, and companies pay only for the amount of service used. Applica￾tion service providers fall in this category. For example, eProject.com provides virtual work space where people in different physi￾cal locations can collaborate on-line. Users essentially rent Internet space, and a host of tools that make it easy to interact, for a fee based on their usage. It is important to keep in mind that many companies combine these models to achieve competitive advantages. For example, a com￾pany such as LendingTree not only sells advertising but also earns a commission as a third-party intermediary and earns fees by referring viewers to other sites through its affiliate programs. As noted earlier, Ama￾zon.com not only earns revenues by reselling marked-up merchandise but also has gener￾ated income by charging fees for providing expertise based on its transaction capabil￾ities. Major manufacturers such as Ford Motor Co. and Dell Computer not only use their sites to manage procurement with sup￾pliers, but also to advertise their services and provide consumers with information that is used to order customized products. Table 1 summarizes the key feature of each Internet business model, suggests what role content may play in the model, and addresses how the four value-adding activ￾ities—search, evaluation, problem-solving, and transaction—can become sources of competitive advantage. Clearly, Table 1 provides a framework for exploring means by which a company can enhance its sources of competitive advan￾tage. By using Internet-specific value-adding activities in the context of viable business models, many new avenues for using the Internet to add value may come to light. Firms seeking to add value by using Internet capabilities might ask:
How has the Internet affected our value-adding processes? Is there some aspect of our value chain that needs to be reevaluated or realigned? Are we relatively strong in our use of the Internet, or has it exposed new weak￾nesses that are making us vulnerable?
How might our firm make better use of search, problem-solving, evalua￾tion, or transaction capabilities to improve its value proposition or save costs internally?
How can we enhance the content of our Web site with testimonials, exper￾tise, or entertainment programming in order to strengthen the usefulness of the Internet?
Has the digital economy created new opportunities that our firm can seize by deploying its unique competencies and capabilities? Conversely, do we 168 ORGANIZATIONAL DYNAMICS