There are many different methods of making an income online. In reality, they are all very similar to the business models you see in the offline world. You can sell goods and services, you can produce products for wholesale distribution, you can sell information, you can sell tools to help people in your own business model, you can sell advertising, or you can provide consulting services.
Do you see a common theme in all these models? That’s right: to have a viable business, you literally have to provide some kind of good or service that adds value to someone or something, whether online or offline.
I think when people think about doing business offline, they look for a need in their community and try to fill that need. Online, they tend to think, OK, what can I do to make a lot of money? There is a big difference between the two. Online, I think people really believe that if they open a website and sell something, the money will just pour in. It’s just not an accurate thought, but I think almost everyone has thought of it at one point or another.
So in order to generate income online, you have to fill a need, just like you would in the offline world. It satisfies that need by producing, developing, distributing, or trading a product or service. That’s all. You will never make a viable long-term income from schemes and scams, any more than a bank robber will make a viable long-term income by robbing banks.
Here are some of the basic business models you can find on the web:
1) Production model. This is a company that produces value by transforming one good into another for online consumption. An offline equivalent would be a shoemaker or gold mining company. The online equivalent could be the development of new search software or technology, or the development of online technology that assists in the execution of some of the other online business models.
2) Merchant model. This is a company that specializes in sales and arranges the delivery of goods and services to an online marketplace. This can be compared to the offline equivalent of a merchant. Some online examples are bookstores, grocery stores, catalog websites, and other organizations selling goods and services.
3) Advertising model. This is a company that specializes in providing the advertising or promotion service to other online companies, for example, those companies that operate under the production or commercial model. This model charges these businesses a fee to advertise the goods and services provided by the other online business models.
4) Affiliate model. This is a model that is similar to the advertising model, but is different in that it focuses on recruiting many individual companies or individuals to advertise in a systematic and piecemeal fashion. Whereas in the advertising model, the advertiser is paid based on the amount of advertising distributed, the affiliate model pays the affiliate marketer when a sale or step in a sales process is completed. This step can be an online visit, a request for more information, or the sale itself.
5) Brokerage model. This model is one that compensates the broker for bringing the buyer and seller together, usually in the form of a personal, one-on-one presentation. An example of this could be an online auction or an online payment processor.
6) Information model. The information business model is one in which the company provides information to a specific field or market niche. This information would generally instruct another company or individual on an easier or more efficient method of performing a task, or actually teach the task or the implementation of the task.
7) Subscription model. This is a layered model, usually built into one of the other models. This model would provide a good or service over an extended period of time and would provide a guaranteed and generally constant level of that good or service over a period of time, for example, over the course of several months. Two products that fit this subscription model might be monthly online video rentals, or services like food or medicine that are delivered regularly by commitment.
8) Utility model. This model works much like an offline utility would, offering a product that through its use has become a necessity and is often tightly controlled. An example of an online utility model would be access to the internet or telephone service through an online network.
9) Community model. This is a business model that focuses on bringing together people or companies with similar interests in order to develop relationships and share information. Two examples of the community web phenomenon are the recently created Myspace and the old online forum.
When deciding to start an online business, it is important to determine which of these business models interests you the most. Which of these models do you suit best? In which of these models are you most likely to be considered an expert, or in which would you be willing to become an expert?
