THE BROKERAGE 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, of which the brokerage model is simply one, 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.

One Internet business model is the brokerage model. At the heart of this model are third parties known as brokers, who bring sellers and buyers of products and services together to engage in transactions. Normally, the broker charges a fee to at least one party involved in a transaction. While many brokers are involved in connecting consumers with retailers, they also may connect businesses with other businesses or consumers with other consumers. A wide variety of different scenarios or business configurations fall under the banner of a brokerage model. These include everything from Web sites posting simple online classified ads and Internet shopping malls (Web sites that sell products from a variety of different companies) to online marketplaces, online auctions, aggregators, and shopping bots.