Conventional Business Model in New Format

Technology has driven human's life for a change.
The digital revolution is upon us. We see it every day at home and work, in businessess, schools, and hospital, on road, and even the wars. One of its major aspects is the digital economy.
The digital economy refers to an economy that is based on digital technologies, including digital communication networks (the internet, intranets, extranet, and VAN's), computers, software, and other related information technologies. The digital economy is sometimes called the internet economy, the new economy, or the web economy. In this economy, digital networking and communications infrastructures provide a global platform over which people and organizations interact, communicate, collaborate, and search information.
The digital economy also refers to the convergence of computing and communications technologies on internet and other networks and the resulting flow of information and technology that is stimulating economic commerce and vast organizational changes.

28th years old before people conducted a business in EC, people conducted their business with their partner by face to face either directly or not. In payment for a transaction that has been made among the people, someone must have physically met each other. The people need the others to promote their product and soon. The people pay a fee for a transaction, the peole must pay a fee for a subscription. The people must pay a fee for advertising and pay a fee for a business partner, and soon. All of which conducted physically. We can say that situation as a conventional business model.

But in digital economy all of which has been changed. By using digital technologies, the model business is similar but to be different in business format or structure. The structuture of the digital economy model consist of two elements:
1. Revenue models
2. Value proposition

A revenue model outlines how the organization or the EC project will generate revenue. A company use its revenue model to describe how it will generate revenue and its business model to describe the process it will use to do. There are five common revenue model.
a. Transaction Fees model-Commissions paid on volume of transactions.
b. Subscription model- Fixed amounts are charged, usually monthly.
c. Advertisement model-payment from advertisers.
d. Affiliate model-Commissions for referring customers. for example; Wordtracker's affiliation program on the picture below



This firm offers a program affiliation for anyone is interested. The member of wordtracker's affiliation is given a fee pay per click for referring customer from member's site to wordtracker.

e. Sales model-revenue from sales of goods or services.

Value propositions also included in business model. A Value propositions refers to the benefits, including the intangible, nonquantitative ones, that a company can derive from using the model. A value proposition defines how a company's product or service fulfills the need of customers. The value proposition is an important part of the marketing plan of any product or service.

Reading: Turban, King, Viehland, and Lee,(2006). Electronic commerce-A Managerial Perspective, Pearson International Edition.