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Infomediary Model

INFOMEDIARY MODEL

In order to understand the definition of an infomediary model, it is helpful to first understand the concept of a basic business model.

WHAT IS A BUSINESS MODEL?

Whether a company sells products or services to consumers, other businesses, or both, there are many different ways to approach the marketplace and make a profit. Business models are used to describe how companies go about this process. They spell out the main ways in which companies make profits by identifying a company's role during commerce and describing how products, information, and other important elements are structured. Just as there are many different industries and types of companies, there are many different kinds of business models. While some are simple, others are very complex. Even within the same industry, companies may rely on business models that are very different from one another, and some companies may use a combination of several different models.

General business models by themselves do not necessarily map out a company's specific strategy for success. Strategic marketing plans, which are a specialized type of business model, are used for that purpose. They identify the specific situation in which a company finds itself in a particular marketplace, the differentials that set a company apart from its competitors, the marketing tactics used to accomplish strategic objectives, and so on.

Business models involve different levels in what are known as supply/value chains. Value chains outline the activities involved in creating value from the supply side of economics, where raw materials are used to manufacture a product, to the demand side when finished products or components are marketed and shipped to re-sellers or end-users. Companies review and analyze different steps in value chains to create optimal and effective business models.

Some long-established business models used in the physical world have been adopted on the Internet with varying degrees of success. Among these are mail-order models, advertising models, free-trial models, subscription models, and direct-marketing models. Other business models are native to the Internet and e-commerce and focus heavily on the movement of electronic information. These include digital-delivery models, information-barter models, and freeware models.

Every business model has its own inherent strengths and weaknesses. Just as is the case in the physical world, online business models vary in their suitability for different enterprises. Business models themselves are not enough to guarantee success in the physical or online worlds. As Jeffrey F. Rayport explains, "Every e-commerce business is either viable or not viable. They hardly qualify for the paint-by-number prescriptions that business people seem to expect. Business models themselves do not offer solutions; rather, how each business is run determines its success. So the success of e-commerce businesses will hinge largely on the art of management even as it is enabled by the science of technology."

THE INFOMEDIARY MODEL

A major Internet business model, the infomediary model is characterized by the capture and/or sharing of information. The simplest form of an infomediary model is the registration model. In this scenario, companies require users to register before gaining access to information on their Web sites, even if the information itself is provided at no charge. One possible scenario for this example involves companies that offer white papers, or expert articles containing valuable advice, to Web site visitors. These white papers usually are written by the company's experts, who are available as consultants. Registration is a condition for viewing or downloading the articles so the company can capture contact information and other data from the interested party and use it to make sales calls and potentially acquire new clients for its consultants.

Companies using an infomediary model also may be third parties that provide products like free computers or services like free Internet access to consumers in exchange for information about themselves. This information is then sold to other companies who use it to develop more sophisticated, successful marketing campaigns. The information collected commonly includes things like product and service preferences; buying habits; and demographic details like age, sex, and income level.

In the early 2000s, NetZero was one example of a third-party infomediary. The company offered 40 hours of monthly Internet access to more than 8 million consumers in exchange for their marketing information. As part of the deal, consumers were required to allow a special browser called the ZeroPort to remain on their screen while online. The ZeroPort displayed ads that, based on the marketing information they provided to NetZero, were likely to interest them. It also served as a Web navigation tool and displayed customized information like sports, e-mail, news, and stock prices. Using technology from marketing software manufacturer Amazing Media, NetZero also allowed small businesses to reach local or regional consumers through the ZeroPort and view the daily results of their online ad campaigns.

In addition to its free service, NetZero customers were able to pay a low monthly fee for Internet access without banner ads. This was attractive to Compaq, which partnered with NetZero to offer its services via affinity programs. According to NetZero, these programs "are an emerging distribution channel where computing hardware products and Internet services are bundled and customized for a particular market segment such as financial companies, healthcare providers, telephone companies, and education institutions. These companies then engage with their consumer customer base, their employees, or members of their organization via the Internet by offering a bundled access device and integrated ISP as the means for providing the connectivity."

Companies using an infomediary model also might provide unbiased information to consumers about different businesses on the Internet, helping them to choose the right ones. Gomez Inc. is an example of this kind of company. It provides users with three different services. Gomez.com offered Internet scorecards and consumer reviews for different categories of online products and services including shopping, travel, and personal finance. According to the company, its rankings used at least 120 criteria to "capture the quality of the Internet delivery of goods and services for a given sector." Gomez.com also certified more than 6,000 merchants in more than 75 different industries. GomezPro was a subscription-based market research service the company offered to businesses.

Finally, some companies use an infomediary approach by functioning as third-party communication channels where positive and negative feedback about other businesses can be exchanged or shared with the businesses themselves. Epinions is one example of this kind of infomediary. According the company, personalized recommendations, unbiased advice, and comparative shopping are at the heart of its Web-based offerings. These elements help consumers make purchasing decisions and let others know about their experiences. PlanetFeedback.com and BizRate were two other examples of companies that rely on customer feedback and word-of-mouth. These companies sell software to companies that want to glean instant feedback from their customers after an online order has been placed, rather than relying solely on focus groups and customer service surveys to find out what consumers think.

FURTHER READING:

"About Gomez." Gomez Inc. April 22, 2001. Available from www.gomez.com.

Bambury, Paul. "A Taxonomy of Internet Commerce." First-Monday, 1998. Available from www.firstmonday.dk.

"BizQuickStudy." Computerworld, November 1, 1999.

McDowell, Dagen. "Dear Dagen: Business Models Explained." TheStreet.com, September 13, 1999. Available from www.thestreet.com/funds.

"Most Viral Companies, Industries Emerge as Consumers Share Opinions With Others." PRNewswire, March 29, 2001. Available from hoovnews.hoovers.com.

Rappa, Michael. "Business Models On The Web." April 9, 2001. Available from www.academic.uofs.edu.htm.

Rayport, Jeffrey F. "The Truth About Internet Business Models." Strategy & Business, Third Quarter, 1999. Available from www.strategy-business.com.

Sviokla, John. "Listen Up!" CIO Magazine, April 15, 2001. Available from www2.cio.com/archive.

Timmers, Paul. "Business Models for Electronic Markets." Electronic Markets., April, 1998. Available from www.electronicmarkets.org/netacademy/publications.

SEE ALSO: Business Models

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