“How do I make money on the Internet?”
Whether it’s a business person tasked with increasing their company’s revenue, or an individual looking to start an online business, that question is fundamental to their mutual purposes: leveraging the Internet for profit.
So, let’s review the basic online marketing business models, in terms of advantages and disadvantages, and see what may resonate with your needs.
By the way, the first two online business models don’t even require that you have your own product or service.
1) Publishing Advertisements On Your Websites
This is relatively easy to understand, since the ubiquity of magazines and newspapers have familiarized readers to this model. Just like magazines and newspapers sell ads to insert into their pages, which then have the opportunity to be viewed by their readers, websites can display ads on their web pages. Publishing Google Adsense, (which are contextual ads targeted to display offers that are relative to the content of the target website), are easy to set up. As your site gains a larger audience, then other types of ads can be displayed, which will generate more revenue.
a) Advantages: Easy to implement. In fact, this is the easiest way to get started if you don’t already have a product to sell. Just set up a website (most often a blog), add some content that readers are interested in, and post some Adsense on it. When your website(s) become more popular, seek higher-paying ads to display.
b) Disadvantages: Unless you manage to cultivate a LOT of traffic and establish some authority for the subject of your website(s), you will not make much money. And to get to the point where you can publish higher-earning ads, and leave Adsense behind, your website(s) will need to achieve some relative level of popularity. Furthermore, if you are selling a product or service, this type of ad income may very well reduce your income, because it takes visitors away from your site.
2) Affiliate Marketing
Affiliate marketing is all about advertising products and/or services that are provided by other companies.You are completely your own boss and you make a commission from every sale you make.
a) Advantages: No product or inventory required. No need to be concerned about customer support, or shipping, or handling the business aspect of providing the product or service you are selling. This is a pure marketing activity. Your activity is solely focused on becoming as efficient as possible in developing sales to derive the most amount of commissions possible, for the least expense.
b) Disadvantages: You are assuming all the risk for promoting some other company’s products and services. Because this is a very competitive business model, if you are buying traffic, you will lose money before you make money and you will need to continually monitor and refine your marketing performance to stay competitive.
3) Selling a Product
Similar to point #1 above, this is easy to understand. It’s what every physical and online store is doing: selling products and (ideally) making enough money to bank a profit.
a) Advantages: It’s the most basic business model. People need to buy things and someone needs to sell it to them. It’s relatively easy to scale your business up. In other words, if you are selling 10 widgets a week, as you increase your marketing effectiveness you can scale up to 20 widgets a week to make more profit.
b) Disadvantages: You need a product (not much of a disadvantage if you already have products). You need to manufacture or buy the product and unless you use drop shipping (shipments directly from the manufacturer or distributor to consumer) you need to ship the products yourself. There is more personnel and complexity needed to administer this type of business.
4) Selling a Service
Although this is somewhat a variation to selling a product (#3 above), it’s different enough to deserve separate mention. This is primarily a lead generation activity. In other words, unlike selling certain products, it cannot be conducted entirely online. The very nature of providing a service requires personal involvement.
NOTE: There is also the opportunity to sell software-as-a-service (SaaS), but in spite of the name “service,” the actual marketing activity falls under the category of selling a product (see above) or selling a subscription (see below).
a) Advantages: Selling a service is also a basic business model. People need to buy services and someone needs to provide those services. But unlike selling products, there is no products to manufacture or ship. Hence, this type of business is easier to launch than selling a product. You are selling your time to provide the service. This is a business that can be established with lower startup costs and if you are providing a service that is primarily consumed on a localized basis, then your competition is relative to your geographical area.
b) Disadvantages: There is only so much time you have. Sure, you can hire others to meet a growing demand for your service, but even so, this does not scale up as readily as selling products. Although there are exceptions, there is a potentially greater opportunity to make more money selling products than services.
5) Subscription Revenue
This is a powerful business model. Whether it is based upon a membership site or paid newsletter or software-as-a-service (SaaS), or any other way that customers will pay you on a continuous basis (often monthly) this means you are developing streams of revenue, not just individual sales. In other words, you are building a business model that continues to expand more than any of the other opportunities described here. In fact, in certain circumstances, this can include selling perishable products. For example, vitamins and health supplements can be marketed so they are automatically billed and shipped on a recurring basis.
a) Advantages: Very profitable business model. Since most of the work and expense in marketing is in generating that first sale, by using that same effort to establish multiple, ongoing (monthly) sales via paid subscriptions, each new sale has a greater impact on the business than in the other models outlined here.
b) Disadvantages: If you think any of the earlier business models are competitive, then step up to a game of even higher competition. Because this model is so lucrative, you need to be sharp. You’ll need a very good newsletter, or membership service, or product that can be continually auto-billed and shipped (continuity sales), because this attracts a lot of savvy business players who are seeking to carve out and defend their piece of the same pie.
Of course you are not limited to just ONE of these business models. You can mix and match as you wish.