Business Models on Internet

While the whole world is getting connected through the power of web, I am scratching my head trying to figure out how these millions of web sites make money to spin the financial community out of gear. The quest to understand the inherent behavior of how this ecosystem works together lead me to make startling revelations about the power economics of web. This blog is going to be all about my learnings on wild wild world of web.

I am going to start with one of the oldest business model built around world wide web:

Advertising: One of the biggest source of revenue for various web sites is advertising. A number of companies largely thrive on the number of advertisers that they can pull on to their web sites. This in turn depends on the traffic which a web site can generate. There are different ways by which the companies charge advertisers for putting up ads on their web sites. Some of them that I am aware of include:
1) CPM (Cost per thousand impressions or views): Here the advertiser is charged on the basis of 1000 views of the ad on a specific web site. The ad can be in text or image format. Every time a visitor lands on a page where the ad is placed, it is being counted as one impression. The publisher is paid only for a unique visitor viewing the ad. The banners, popups, skyscrapers are examples of CPM. Generally CPM is around $1 for advertising on a popular web site.
2) CPC (Cost per click) : This model works on the premise that everytime a visitor clicks on a ad link, the advertiser is charged for the ad. Google model is largely based on CPC. Everytime you run a search you can see a list of adwords appearing on the right side of your search page. You can learn more about this on www.google.com/adwords.
3) CPA (Cost per action): This model requires the visitor to complete an action like filling a survery form, completing registration, voting for a product etc. The advertiser is being charged for each completed action by the visitor on the web site.

Next we will look at what is beyond advertising models.