Thursday, 29 October 2009

Internet Marketing--Various Online Business Models.

There are many different methods of making an online income. 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 their own business model, you can sell advertising, or you can provide consulting services.

Do you see a common theme in all of these models? That’s right---to have a viable business, you have to literally provide some kind of a good or service that adds value to someone or something, either online or offline.

I think that when people think about going into business offline, they look for a need in their community and try to fill it. Online, they tend to think, OK, what can I do to make a lot of money? There is a huge difference between the two. Online, I think people really believe that if they put up a web site and sell something, the money will just come in. It is simply not an accurate thought, but I think that just about everybody has thought it at one time or another.

So to create an income online, you must meet a need, just like you would in the offline world. You meet that need by producing, developing, distributing, or brokering a product or service. That is just about it. You will never earn long-term viable income from schemes and scams, no more than a bank robber will earn a long-term viable income 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 a gold mining firm. The online equivalent might be the development of new software or search technology, or the development of online technology that aids in the execution of some of the other online business models.

2) Merchant model. This is a company that specializes in the sales and organizes the delivery of goods and services to an online market. This can be compared to the offline equivalent of a merchant. Some examples online are bookstores, food stores, catalog web sites and other goods and services sales organizations.

3) Advertising model. This is a company that specializes in providing the service of advertising or promotion to other online firms, for example, those firms that operate using the production or merchant model. This model charges these companies a fee to advertise the goods and services provided by the other online business models.

4) Affiliate model. This is a model that resembles the advertising model, but is different in that it focuses on recruiting many individual companies or individuals to do the advertising in a systematic and piecemeal way. 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 may be an online visit, a request for more information, or the actual sale itself.

5) Brokerage model. This model is one that compensates the broker for bringing together buyer and seller, usually in the form of a personal, one-on-one introduction. An example of this might be an online auction or a processor of online payments.

6) Information model. The information business model is one in which the company provides information to a specific field or niche market. This information would typically 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 an overlay model, one which is generally incorporated into one of the other models. This model would provide a good or service over a protracted period of time, and provide a guaranteed and generally consistent level of that good or service for a period of time, for example over the course of several months. Two products that fit into this subscription model might be that of online monthly video rentals or services like food or medicines which are delivered on a regular basis by commitment.

8) Utility model. This model operates in much the same way as an offline utility might operate, offering a product that has, through its use, become a necessity and is often tightly controlled. An example of an online utility model would be that of internet access or telephone service via an online network.

9) Community model. This is a business model that focuses on bringing together individuals or companies of similar interest for the purpose of developing relationships and sharing information. Two examples of the community web phenomenon are the recently created Myspace and the older online forum.

When deciding to go into business online, it is important to determine which of these business models most interest you. To which of these models are you best suited? In which of these models are you most likely to be considered an expert, or in which would you have the willingness to become an expert?

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