What does the downfall of the dot-coms mean to home-based entrepreneurs? Maybe not much. However, the question that plagues the dot-coms also haunt the small online entrepreneurs: how do we make money on the Internet?
The past few years have been a sobering experience for Internet entrepreneurs. The collapse of many high-profile dot-coms can be compared to a head-splitting hangover that just won't go away. Yes, the dot-com world has learned that even online businesses must make money in order to survive.What does the continued downfall of the once-mighty dot-coms mean to home-based entrepreneurs? Maybe not much (unless you use their products or services).
The dot-com world seems too far removed from the humble operations of the home-based entrepreneurs. Unlike the dot-coms, the small online entrepreneurs do not have IPOs to consider, shareholders' interest to safeguard, public images built by costly primetime advertising to maintain. We also do not have venture capitalists on our backs pressuring us day-in-and-day-out to deliver, demanding quick returns of their money. We do not have hundreds of staffs to pay, chic offices to rent, and costly technology buys. What we lack in cash and capital, we compensate for total control of our businesses, growing our own online ventures at our own pace.
However, the question that plaques the dot-coms also haunt the small online entrepreneurs: how do we make money on the Internet?
Sell products or information
Selling a product, service or information is the best way to make money on the Internet. Customers pay you for a product or information. You can sell information-based products such as books, courses, kits, e-books, business research tools, and databases. Commercial products, on the other hand, can range from baskets, beads, handicrafts, toys, wine and liquor, electronic products from all over the world. The range of products that you can offer on the Internet is just incredibly wide.
You can also sell custom-made items or products you yourself manufactured, selling them directly on the Web without the wholesalers or retailers. As the manufacturer, the Web can enable you to reach your buyers directly, allowing you to set prices that are more competitive as you eliminate middlemen. You can also appoint dealers or what is called "affiliates" in the Internet and give out generous commissions for reasonable sales volumes. Your knowledge and understanding of your customers will also enable you to provide better customer service.
Having your own products to sell is the best strategy for making money on the Internet. You will not be thoroughly dependent on your traffic, as compared to businesses that rely on advertising for their revenues. Traffic is less valuable for e-commerce plays because revenue is more essential. The important question is "how much sales did I make today?" and not so much as "how many people visited my site today?" Although, of course, the next important consideration is: 'how much will they pay to keep it?'" In other words, will they keep coming back for more? The success of your site will depend on how well you are able to convert your traffic to sales, and how much of your customers will become repeat clients.
Sell advertising and ad products
The advertising model is a common business model on the Internet employed by both generalized and niche portals. Sites such as Yahoo and Blue Mountain make their living primarily by selling advertising.
To earn money through online advertising, your web site must provide content (usually, but not necessarily, for free) and services (like e-mail, chat, forums). You may offer free services such as collection of scripts or even web hosting. Advertisers then pay to reach your audience, with their advertising messages often presented in the form of banner ads. The banner ads will then be the major or sole source of your revenue.
However, the advertising model only works when the volume of viewer traffic is either large or highly specialized. If your site attracts a specialized market, such as home owners, new parents or home-based entrepreneurs, it can be highly sought after as a venue for certain advertisers who are willing to pay a premium to reach that particular audience. Nonetheless, the quality of your traffic is still essential.
Therefore, if you are going to pursue this revenue model, be sure that you can convince potential advertisers that have a solid customer base and that you can indeed reach your market. Advertisers may require a minimum number of page views that your site can deliver.
Sell consulting services
A number of small business entrepreneurs do a living on the Internet by selling consultancy services on a variety of subjects - from Internet marketing, import-export, securing loans, financial services, personal development, and many others. You can create a web site that aims to provide advice and guidance to people who may need help in your subject area. Website Analyst of Israel (http://www.website-analyst.co.il), for example, offers consultancy from Web site planning to publicity strategies. The creators of Internet Marketing Challenge (http://www.marketingchallenge.com) gathers a number of "Internet experts" and offers a collective consulting services to those requiring help in marketing effectively on the Internet.
Bring buyers and sellers together
You can also earn on the Internet, not by selling goods or information, but by bringing together buyers and sellers. An example of this is eBay, which have popularized the auction model. Market exchanges, business trading communities, buy/sell fulfillment and other B2B business models fall under this category.
Small online entrepreneurs can launch their scaled down version of B2B business models through sites that facilitate transactions, earning fees in the process. You can create a site where people sell a product or information to other people, and you take a cut of the transaction. For example, many netpreneurs have created classified ads sites, providing a listing of items for sale or wanted for purchase. They then earn from the listing charges regardless of whether or not a transaction occurs.
Another way for a home based entrepreneur to earn money using this approach is through the creation of online malls, where you provide a central place on the Net where people can find a particular business or service. You earn money through setup fees, monthly listing, and/or per transaction fees. Virtual malls, however, is best handled by an experienced Internet entrepreneur with some capital.
Sell subscriptions
Some small entrepreneurs sell subscription-based services over the Internet, although this could be the hardest. This model entails offering your content to members willing to pay your subscription fee.
However, a 1999 survey by Jupiter Communications found that 46 percent of Internet users would not pay to view content on the web. To succeed, you must offer high value-added content that is not available elsewhere for free. The Wall Street Journal (http://www.wsj.com) is an example of a successful subscription model. Generic news content, viable on the newsstand, has proven less successful as a subscription model on the web. Slate.com and TheStreet.com are good examples of these failures.
The challenge for a small online entrepreneur is how to make your site with an unknown brand succeed in charging a minimal fee amidst all the free information available on the Internet. Check the demand and supply equations for the kind of information you are providing. Are the subscribers demanding this information enough to want to pay? Can they get the same kind of information for less or even free elsewhere? How well have you established yourself as an expert in your field that people will be willing to pay a fee to read what you have to say? These, and other questions, need to be answered before you can expect your subscriptions-based site to earn money for you. Some businesses have combined free content (to drive volume and ad revenue) with premium content or services for subscribers only.
Whatever way you plan to make money on the Internet, be aware of the so-called "free trap." Start out by giving away your product and customers will disappear (along with your business) when you start charging.
The Internet as a business medium is still evolving. Home-based entrepreneurs must learn from the excesses of the dot-coms. As more and more people gets connected to the Web, the Internet will continue to be a potent force in commerce.
