Digital Business and Revenue Models

The chapter initiates with a comprehensive exploration of the new network economy, highlighting its distinct departure from the old economy. Special emphasis is placed on the transformative nature of internet businesses and their departure from traditional business models. To facilitate a deeper understanding, the chapter introduces and examines five distinct categories of internet businesses: online vendors, e-service providers, content providers, multi-platform providers, and community providers. Each category is analyzed, their unique characteristics and their relevance to market dynamics and pricing constraints are examined. Subsequently, the chapter delves into an in-depth exploration of revenue models, especially three crucial drivers: the long tail effect, two-sided network effects, and lock-in effect are identified. These drivers establish the fundamental business logic behind pricing strategies and revenue considerations within the internet industry. Notably, these revenue models often challenge conventional pricing wisdom observed in traditional business models. To foster a deeper understanding, the chapter moves on to present a comprehensive analysis of five general pricing types. Each type is explained in detail, elucidating its underlying rationale, operational mechanisms, and its correlation with the three revenue drivers and various internet business categories. Concluding the chapter, three case scenarios are examined, with a particular focus on the decision-making process for pricing strategies in the context of market growth, revenue growth, and network effects. These scenarios offer valuable insights into the complex considerations and factors that shape pricing decisions within the internet business landscape.