Truth 15. Internet businesses: The sky does seem to be the limit
Although starting an Internet business isn’t a distinct business-entry strategy, like starting a business from scratch or buying a franchise, many people put it in a category of its own. The Internet, as a place to do business, continues to grow, and there are a number of ways that individuals are starting part-time and full-time businesses that are strictly online.
While many Internet businesses simply sell products or services online rather than through brick-and-mortar stores, one of the beauties of the Internet is that you don’t have to have a product or service to sell to support an online business. If you know a lot about a particular topic, such as cooking, investments, or home repair, you can launch a Web site, populate it with articles and other useful information, and make money by essentially selling access to the people you attract to your Web site. You do this by selling advertising space on the Web site. This one factor has enabled numerous people to convert hobbies and personal interests into part-time and full-time online businesses.
People make money online in a variety of ways; however, this Truth focuses on how people support part-time and full-time businesses via Web sites. The two most common ways are e-commerce Web sites and advertising-supported special-interest Web sites.
E-commerce Web sites
E-commerce refers to the direct buying and selling of products and services online. Most e-commerce companies sell products, although there are a growing number of online businesses that sell services. People opt to sell products and services online rather than through traditional means for a variety of reasons. Some online stores are set up to sell a product that wouldn’t sell in sufficient volume to support a brick-and-mortar store. An example is Oddball Shoe Company (www.oddballshoe.com), a Web that sells a size 16 EEEE athletic shoe for men and similar odd-sized shoes. Another rationale for an online store is to gain a broad audience for a specialty item. An example is Wadee (www.wadee.com), a Web site that sells handmade children’s toys.
There are two ways that Web sites that sell products are set up. Some companies make their own products or stock products made by others and then ship them to customers when they receive an order. Other companies utilize a process referred to as drop shipping. Drop shippers feature an online storefront but don’t have inventory. Instead, when they take an order, they pass it on to a wholesaler or manufacturer, who fills the order and then ships it directly to the customer—usually in a box with the online retailer’s name and invoice inside. By utilizing this method, an online merchant earns a lower margin than it would if it controlled the entire process itself, but its costs are lower, too. It also doesn’t get stuck with inventory that goes out of style. eBags (www.ebags.com), an e-commerce company that sells luggage, backpacks, and similar items, is an example of a drop shipper.
Some online stores are set up to sell a product that wouldn’t sell in sufficient volume to support a brick-and-mortar store.
Advertising-supported special interest Web sites
The second type of Web site that supports part-time or full-time businesses is an advertising-supported special interest Web site. These sites post articles, tips, and other forms of information about a specific topic or category of topics and make money by attracting visitors to the site and then selling advertising to companies interested in reaching those visitors. There are three ways to sell advertising on a Web site:
Pay-per-click programs— A pay-per-click program places ads on Web sites, and the owner of the site is paid a small commission every time someone clicks on the ad. All the major search engines sponsor pay-per-click ad programs. Examples include Google’s AdSense, Yahoo! Search Marketing, and MSN adCenter. The most compelling aspect of pay-per-click programs is that they deliver contextually relevant ads. This means the ads mirror the content of your site, which is good for the advertiser and helps boost your commissions.
A pay-per-click program places ads on Web sites, and the owner of the site is paid a small commission every time someone clicks on the ad.
Affiliate programs— An affiliate program is a way for online merchants, like 1-800-FLOWERS or Amazon.com, to get more exposure by offering a commission to Web sites that are willing to feature ads for their products or services. In most cases, the ads are small text ads, and the merchant sponsoring the program pays the affiliate a small commission every time someone clicks on the ad and buys one of its products or services.
Direct ads— You can also go directly to advertisers and sell space on your Web site. These ads tend to be banner ads, skyscraper ads (tall ads that run along the side of a Web site), or ads with pictures that are embedded in the content of a Web site. If you run ads like these on your Web site, you’re paid a commission based on either the number of times an ad is clicked or the number of times it is seen (that is, the number of impressions).
An example of an advertising-supporting Web site that has good content and generates substantial revenue is Ask the Builder (www.askthebuilder.com), which is sponsored by Tim Carter, a well-known columnist on home repair. Information and instructions on all types of home building projects and repair are available on this Web site, as are links to areas that focus on specific topics, like air conditioning, deck construction, and plumbing. Clicking any one of these areas brings up Google AdSense ads that deal with that specific area. All together, the site has hundreds of AdSense ads. Carter can do this and still attract large numbers of visitors because the information he provides is good and helpful.