Internet Market Structures

According to Mahadevan, all business on the Internet falls into one of three broad market structures: portals, market makers, and product/service providers. B2B portals primarily provide members of an industry with a sense of community by providing them with information about products, services, and general industry information. They are also used as focal points to channel traffic into the websites of product/service providers in the designated industry.

Market makers also offer customers a sense of community and industry information, but they differ from portals in that they participate in the facilitation of business transactions between the buyer and supplier. This market structure can provide an industry with cost reductions by reducing product search costs and transaction costs.

Product/service providers are suppliers that sell to their customers directly via the Internet. Once a company has weighed the pros and cons of taking their business online, they must then decide which direction would be best for their company in terms of implementing an e-business model.

Unfortunately, there is no unique, successful business model for companies that perform electronic business. Just as in traditional business, the model depends on the products and services that the company offers, the market structure, etc. It is also important to understand exactly what a business model is and what the company hopes to accomplish with the model. A good business model is essential to every successful organization, whether it is a new venture or an established player. Success online, just as in traditional business, involves adding value to the firm as well as adding value to the customer. A good business model should tell who the customer is, what the customer values, how the business makes money, and how value is delivered to the customer at an appropriate cost.

All new business models are variations on the generic value chain which underlies all businesses. They consist of two parts; activities associated with making something, and activities associated with selling something. A new business model involves either the design of a new product or a process innovation, a better way of making, selling, or distributing an already proven product or service In terms of business-to-business e-business models, the process innovation models are the way that companies will more commonly use the Internet. It is important for companies to understand that their business model does not have to be set in stone.

According to the article, “Business Models Matter” in Harvard Business Review, “business modeling is… the managerial equivalent of the scientific method – you start with a hypothesis, which you then test in action and revise when necessary” [18].

An eLab Position Paper from the Owen School of Management at Vanderbilt University states that “for many firms… the greatest consequence of the Web for their business is that business models are seen as a challenge”.

SELF ASSESSMENT EXERCISE

Is the Internet economy synonymous with e-commerce and e-business?
The CREC (Center for Research and Electronic Commerce) at the University of Texas has developed a conceptual framework for how the Internet economy works. The framework shows four layers of the Internet economy-the three mentioned above and a fourth called intermediaries (see Table 1).

Figure 1. Table 1: Internet Economy Conceptual Frame

Based on Centre for Research in Electronic Commerce, University of Texas, “Measuring the Internet Economy,” 6 June 2000.

CONCLUSION

The advent of the Internet has opened several doors of opportunities in business, even in the area of marketing. The Internet has made the act of marketing to be more dynamic and competitive. The playing field in marketing seems to have levelled and opening up the global market to several players. The concept will continue to thrive and expand so long there are growing demands for goods and services.

SUMMARY

1. Internet marketing, also referred to as online marketing, Internet advertising, eMarketing (or e-Marketing), is the marketing of products or services over the Internet. 
2. Internet marketing ties together creative and technical aspects of the Internet, including design, development, advertising, and sales. Internet marketing methods and strategies encompass a wide range of services
3. Internet marketing is associated with several business models. 
4. Internet marketing differs from magazine advertisements, where the goal is to appeal to the projected demographic of the periodical. 
5. Internet marketing is relatively inexpensive when compared to the ratio of cost against the reach of the target audience. 
6. Internet marketing requires customers to use newer technologies rather than traditional media. Low-speed Internet connections are another barrier. 
7. Information security is important both to companies and consumers that participate in online business. Many consumers are hesitant to purchase items over the Internet because they do not trust that their personal information will remain private. 
8. Internet marketing has had a large impact on several previously retail-oriented industries including music, film, pharmaceuticals, banking, flea markets, as well as the advertising industry itself. 
9. According to Mahadevan, all business on the Internet falls into one of three broad market structures: portals, market makers, and product/service providers. 
10. The Internet economy is a broader concept than e-commerce and e-business. 

ANSWER TO SELF ASSESSMENT EXERCISE
The Internet economy is a broader concept than e-commerce and e-business. It includes e-commerce and e-business. 

TUTOR-MARKED ASSIGNMENT
List ten methods and strategies associated with Internet marketing.