Choosing the right one for your brand can be a great way to set yourself up for success early and get a jump start on your goals for 2016 while avoiding common pitfalls.
The right business model will reveal itself to you after you do the research to figure out what’s working in your space and what isn’t.
I’m going to dive in and take a look at 4 proven online business models that are generating billions of dollars every year.
Throughout the post, I’m going to list some common advantages and disadvantages of each one so you can make an informed decision about whether or not it’s right for you. No matter which one you choose, be sure to educate yourself on different strategies to grow your business over time.
Some people consider this the holy grail of online business models and it’s with good reason.
Amazon, the largest Ecommerce store on the planet had total revenues of $25.4 billion in the third quarter of 2015 alone.
Ecommerce can be defined as the buying and selling of goods and services or the transmitting of funds or data over an electronic network, primarily the internet.
This is a broad definition and it basically encompasses any transaction that occurs over an internet connection. If you manage a blog and sold one or two products, you’d be considered an Ecommerce store by this definition.
Sending money to your friends through PayPal as well as buying a bag of dog food from PetSmart are all considered Ecommerce transactions.
It doesn’t matter if it’s personal or business, anything bought, sold, or transferred over the internet is considered Ecommerce.
Because that definition is so broad, we’re going to focus on Ecommerce stores with a shopping cart as an online business model.
Before you start a new store, it’s important to look at the ups and downs. Just like with any online business model, it’s not all roses.
As with all good things, there’s a less than perfect side to the equation. Here are a few disadvantages of having an Ecommerce store
Don’t worry though, Razorfish’s research report Digital Dopamine shows that consumers get more excited waiting for purchases to arrive as compared to in-store buys.
The way savvy internet retailers are getting around this is through generous return policies. Zappos, one of my favorite shoe retailers, has a one-year return policy and are very customer-centric.
Make sure you have the right security measures in place to protect you and your shoppers if this is the route you want to take.
In 2014, businesses in the United Kingdom alone generated over 14 billion pounds through affiliate marketing resulting in a 14x return on investment.
Affiliate Marketing is by far the easiest online business model to set up and start making money with. You don’t need to source products, create products, or license products. In essence, all you need to do is generate traffic and send it to an offer someone else has spent time and resources perfecting.
In a nutshell, affiliate marketing is when you advertise someone’s product or service for them and when you make a sale or generate qualified leads, you get a commission. The commission can vary from as low as 5% to as high as 100% of the sale price.
There are many platforms that connect affiliates to people eager to sell their products online such as Clickbank, Commission Junction, and Amazons Affiliate Program.
I use affiliate marketing extensively because it works and has an insane ROI. Like all online businesses, it takes a little elbow grease to get it off the ground and start making a decent income.
When most people think about creating products, they think about one of two things. Either they need an industrial set up and millions of dollars in capital or a video course with 30 hours of content.
You actually don’t need either.
There are fulfillment houses that can take care of everything from sourcing raw materials to putting your package in the mail for your end consumer. All you need to do is act as a middle man and reap the lion’s share of the profit.
Fit Small Business lists three great fulfillment choices and specs for each one in this post
With the internet gaining steam, you don’t even need to make a physical product most of the time. Software and information are becoming the currency of the day.
The most successful entrepreneurs are figuring this out and selling like gangbusters in the process.
Advertising is one of the oldest business models for monetizing a low cost or free service. Think about all of the largest sites in the world. They don’t sell anything to you, the user.
What they sell is advertising space to companies and advertising firms that want to get in front of the people that are attracted to those websites.
It’s one of the many reasons why the largest websites are always pumping out so much content on a daily basis.
They need a constant stream of visitors to earn enough advertising revenue to pay for all those staff members and office space. These kinds of content sites tend to have a range of digital marketing jobs available because traffic is so important. (Hint: if you’ve ever pitched an article to one of these sites, always remember, they need you more than you need them. Otherwise, they would quickly go out of business due to lack of content.)
A few of the more common sites that monetize like this are Entrepreneur, Inc., Forbes, and Fast Company.
A lot of smaller sites are also padding out their pockets by using this method. Personally, I don’t like the thought of putting advertising on my website for multiple reasons.
This is how I look at it, your website is
This is how I look at it, your website is your home, your home, your castle, and your fortress. When you allow other people to advertise on it then you’re giving up ownership of something you worked so hard to build for pennies on the dollar.
Instead, I like to advertise on other websites that are willing to host me and receive a small portion of the traffic that they’ve built.
Either way, if this is the route you want to go, there are more avenues at your disposal than just Google AdSense (they have a nasty penchant for denying newer website owners AdSense accounts).
This post on Road to Blogging Lists out 10 different advertising networks you can choose from.
The Disadvantages of Advertising are:
There are many online business models to choose from and each has its own merits. Ultimately, the one you choose will depend on your goals, budget, and timeframe.
Make sure you research any option thoroughly before jumping in headfirst. Otherwise, you’ll be six months down the road and wish you had chosen something different
Let me know which business model you’re using in the comments and don’t forget to share.
Image Credit Flickr Via Creative Commons