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Inner Circle Roundtable of 21st Century Marketers |
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Chapter Six Money-Making Business Models on the Web
By Ben Hart
There are so many ways to make money on the Internet – sometimes call “monetization models” by the Internet marketing consultants who want to sound expert.
In a way, we might be “putting the cart” before the horse here because building a successful online business really all comes down to building traffic for your site – the right traffic, targeted traffic. That is, you want people coming through your site who are looking to buy what you are selling, or who are at least interested in the topic your site is addressing.
A physical store in the offline world cannot make money without traffic coming through the store. No traffic; no sales. It’s really as simple as that – which is why location is so essential for a physical retail store. You need a lot of walk-in traffic to succeed as a retail store, auto-service store, dry cleaner, restaurant, beauty salon, whatever.
If you have traffic, you can generate sales. The key at that point is then to have lots of products to sell. Pharmacies figured out that people who walk into pharmacies don’t just need pharmaceuticals. They also need milk, paper towels, toys for their kid, holiday cards, batteries and all kinds of other items. The big pharmacies (Walgreens, CVS, etc) figured out that as long as people are in the store, they might as well offer all kinds of items – so they can maximize the value of bringing in a customer.
The key to making money is generating traffic – traffic around a core product or business (in the case of CVS phramaceuticals). It all starts with generating traffic.
Once you have the traffic, making money from your traffic is easy.
But we’re going to “put the cart a bit before the horse” anyway – in part because I want to know where I am going before I launch off on my journey; and also because you need to have a core business in mind before you develop your traffic-building strategy.
There are also many ways to build traffic, the right traffic for your site.
But your traffic-building strategy must fit your business model.
So this is a chapter about some basic online business models – the main business models that have been successful on the Web.
Most of the rest of this book will be then be about how to build traffic for your site.
Online Stores
Most online stores look about the same and follow the same proven, time-tested formula.
What most of them do is feature a particular product prominently on the home page – usually one of their high-demand products. The marketing model here is to heavily promote the hot selling product with their advertising. Their ads drive them to their general site shopping site which features the product being advertised. Not only is the business hoping you will buy the featured product, but that you will also make some impulse purchase along the way.
Here are some good examples of online stores:
If your business is a store that offers many products, follow this proven model and you will do well. The reason you usually want to feature one big-selling product on the home-page prominently for your online store is that you need to provide your reader a focus point for their eyes.
If a visitor to an online store is greeted with 1,000 items to choose from, with no one item featured prominently, the reader won’t know what to do, or where to go. There’s nothing to grab the attention of the eyes. So if you are selling 10,000 items, feature one on your home page. And then have hyper-linked text by category for the rest of your online store.
And be sure to have a good search function so your shoppers can easily find what they are looking for.
By the way, this formula is no different from traditional department store advertising.
Advertising for department stores promote one product at a time in their ads – or one line of products. The ads won’t cover all that Bloomingdale’s is selling – just one item per ad. The advertising is driven by the hot product. We could buy this product at other stores, but Bloomingdale’s wants us to buy the product at their store.
I love Apple’s site (www.Apple.com). Apple follows this formula exactly. Apple always features one product on it’s home page – whatever Apple’s hot new product is.
Now, this formula is a little different for a company like Dell.
Dell does not have the Bloomingdale’s marketing problem.
Dell manufactures and sells, essentially, one line of products – computers, computer accessories and some other electronics. Everyone knows the kinds of products Dell sells. So Dell’s home page features a few major categories of products you can click on, with a photo representing each major category.
I like Dell’s site. It’s a hybrid site. It looks a little more like a general business site than some of the other shopping sites.
General Portals
The biggest general portal sites are Yahoo.com, MSN.com, AOL.com and MySpace.com.
These sites try to be all things to all people. They are news sites, meeting places, shopping areas and are supported mostly with advertising revenue.
These sites want to be your home page.
AOL is both a free service and a subscription service. The monthly subscription side of AOL’s business is collapsing because AOL was so slow to get into providing a high-speed connection. People don’t see why they should pay both AOL and their high-speed service provider a monthly fee. Yahoo is becoming the home page of choice for a plurality of people.
AOL is inferior to Yahoo as a general portal (a media property) and inferior to the cable companies as a high-speed connection to the Internet. AOL’s big strength is it’s email service, which is better and has more features than Yahoo’s or it’s other competitors. Though an argument can be made that Google’s free Gmail service is now better than AOL’s.
AOL is sinking fast.
MySpace.com is aimed at young people. It emphasizes meeting other people and self-expression. Myspace.com has an informal, amateurish look to it – mostly because the content is provided by it youngish members. As MySpace.com describes itself: “MySpace is a place for friends. We are dedicated to providing a safe online community where our members can hang out, connect with each other and express themselves.”
The big four general portals are Yahoo, AOL, MSN and MySpace. Facebook.com is also rising fast.
Others include Go.com, Excite.com and Netscape.com
Portal sites usually double as search engines – though 90 percent of searches are powered either by Google or Yahoo.
It would be tough sledding to compete with the big general portal sites.
To be a successful portal site, you would want to target a niche – similar to what MySpace did by giving young people what they are looking for. Facebook.com is doing the same for the college-age crowd.
I would target an even narrower niche. Of course, then you would not really be a general portal anymore. You would be more of a specialty site.
News and Commentary Sites
These are kind of like portals, but are more strictly news and commentary.
The DrudgeReport.com is one that I visit everyday. The site is a conservative-leaning site pioneered by Matt Drudge, but is also packed with gossip and unusual “man bites dog” type articles. I’m a big fan of this site. Matt Drudge and his small staff do not write the articles. His site just links to the most interesting articles he has found for the day.
His site succeeds because you know you’ll always find an interesting article there to read. And it’s updated throughout the day.
The layout is ugly. Almost no graphics – just a list of headlines linked to articles.
But he gets millions of visitors every week because the articles are interesting.
Matt Drudge is a multi-million-dollar media property on the Internet. He knows that content is king on the Internet. If you have consistently interesting new things on your site everyday throughout the day, you will build traffic. Matt Drudge is supported by ad revenue, as are all the news sites.
Some news sites are general news sites, like FoxNews.com and CNN.com.
Some are news and commentary sites – usually coming from a left or right point of view. For example, NationalReviewOnline.com, NewRepublic.com, Slate.com, Salon.com, MotherJones.com, NewsMax.com, WorldNetDaily.com
Just like the news sites and portals, these are supported with ad revenue, though some also sell their own products.
When you advertise on a political commentary site, you know you are reaching a particular audience. If you are advertising on NationalReviewOnline.com, you know you are reaching well-educated conservatives. If you are advertising on NewRepublic.com, you know you are reaching well-educated liberals.
Personality Sites and the “Law of Polarization”
Some sites are built entirely around a personality – usually a high-profile controversial personality.
Examples include RushLimbaugh.com, AlFranken.com, AnnCoulter.com, MichaelMoore.com, HowardStern.com, Hannity.com.
These sites usually work best if you have an regular radio or TV show you can use to build your audience and use your show to drive people to your site.
Usually these personalities are selling their own products on their sites.
Rush Limbaugh wants people to join Rush 24/7 for $49.90 per year plus $3.96 S/H.
This gets you 24/7 access to his radio show – so you no longer need to listen only what he’s actually on the air. You can listen anytime that’s convenient for you. And you get a pile of bonus items. Throw in an extra $10 and you get Rush’s printed monthly newsletter.
So that’s not a bad offer if you are a Limbaugh fan – who he calls a “dittohead.”
On the site, you can also buy Rush Limbaugh coffee mugs, neckties, tee-shirts and even a “Rush Baby on Board” sign for your car.
So that’s how personality driven sites make money.
If you are a polarizing figure, like Rush Limbaugh, who has a big following and a huge radio show, this business model works very well. Rush’s site is one of the better personality-driven sites, clearly designed to make money.
Rush is a capitalist. Nothing at all wrong with that.
Rush, by the way, is cashing in on the “law of polarization” in marketing.
This is a well-established marketing principle.
You will attract an audience if you stand for something controversial – and if you have the talent to express strongly held views shared by a large number of people.
Not that conservatism is all that controversial. Roughly half the country is conservative. The other half is liberal. Well, there’s a group in the middle that have no opinions on politics. But the point is, the country is divided between two groups who hold polar opposite views on many subjects.
Rush not only polarizes by having strongly held views. He polarizes by having an arrogant personality that drives liberals insane and causes his fans to cheer.
You could not build a personality-driven website around your standard network news anchor – not even the most famous news anchor of all-time, Walter Cronkite.
Why?
Because everyone likes Walter Cronkite. He’s not controversial. He mostly keeps his political views to himself. And even when he expresses them, he does not do it in a way that causes a large group of people to hate him.
You need to be polarizing figure for your personality-driven website to be a commercial success. “You will never stand alone if you stand boldly and loudly for something.”
That’s how you build a cult-like following.
Ann Coulter and Michael Moore have managed to do this without a radio or TV show of their own. They have both built careers on stating positions, and in such an outrageous and provocative way, that cause ordinary people to say “Huh?? What was that she just said??”
They are attention-getting. They are provocateurs. They have built their careers entirely by using the “law of polarization.”
Like Rush’s site, Howard Stern’s site also promotes being able to listen to Howard Stern’s program on your computer. In fact, you have to subscribe to Sirius to listen to his show at all.
I happen to believe this is the trend of the future. People are so fed up with the non-stop barrage of ads on old-line TV and radio that more and more people will pay a subscription fee or a membership fee in order not to be interrupted all the time by ads.
Specialized Information Sites
When people conduct a search on the Internet, usually they are looking for information on a specific subject. They type keywords and keyword phrases into their search engine or into their browser having to do with whatever they are looking for.
The search engine then delivers a listing of web pages and sites dealing with the topic. The search engines don’t want to deliver just snippets of information on the topic to the searcher. The engines want to deliver comprehensive information – unbiased information.
The search engine does not want to deliver ads. The search engine wants to deliver articles – and if possible an entire website and archive on the subject.
So a site that is all about a specific topic is a goldmine for a search engine, because that means the engine can deliver of something of value to the searcher.
So a general news site is not so valuable to the search engine because that’s not valuable to the searcher – though the search engine might snag articles off a general news site if they are exactly on the topic being looked for. But the search engine would much prefer to deliver an entire site with an extensive archive that’s entirely on the subject of the search.
So a powerful marketing strategy on the Internet is to build a site around a specific narrow topic – one that includes an extensive archive of articles all on that topic.
To do this most effectively, you need to imagine the keywords and phrases people will be typing into the search engine to find the topic you want your site to address. And then write your articles and build your site with these keywords and phrases in mind.
Why?
Because those are the keywords and phrases the web spiders, crawlers and robots will be looking for.
When the robot or crawler bumps into the keywords and phrases that have just been typed into the browser, the engine will include the article or site in its listing. Your rank in the listing will depend on many factors. And I’ll get into these factors in some detail later.
But the biggest factor is the actual content of the article and the overall site. How close is the match between the content of the article and site and the keywords and phrases typed into the engine? The closer the match, the higher your site will rank in the listing for the search.
Here are some examples of specialized information sites:
But better than building a site around cancer, would be to build a site around a particular kind of cancer. When people are searching on the Internet for information on cancer, they are looking for information on a specific type of cancer.
So even a site that is just about cancer is too broad.
On the Internet, the more specialized and narrow your focus, the more targeted your traffic, the higher you will rank on search engine listings for that topic, and the better chance you will have to get visitors to fill out your sign-up form to get your valuable book or newsletter on the subject, and to keep coming back to your site.
In other words, the more narrowly focused your site is, the more loyal your visitors will be, the more your visitors will want to return to your site over and over again, and the more qualified your leads will be for whatever it is that you are selling.
All this assumes, of course, that the information on your site really is good and really is valuable to your visitors.
So if I were to build an Internet information business around the subject of cancer, I would start with a particular type of cancer. If that proved successful (and there’s no reason such a site should not be successful), I might then create another site focused on another type of cancer. Over time, I might have enough sites on the various kinds of cancers that I would then have enough material to create a major portal on cancer – and become the Yahoo of cancer.
But don’t start that way. Start narrow and focused. Build a site around a particular kind of cancer.
The same formula applies to other subjects.
Let’s say you like fashion and you want to build a site on the subject of fashion.
You would be better off picking a niche within fashion – say “Budget Fashion.”
The reason is fashion is too broad. That subject covers fashion models, fashion designers, fashion for kids, fashion for pregnant women.
In fact, all these sub-categories of fashion have the elements of the thriving Internet business.
It is certainly possible to get too narrow. If your site is focused on an obscure artist no one has heard of and no one is searching for, you’ll have a tough time generating the traffic you need to have a profitable Internet business.
The key to success on the Internet is to generate traffic into your site – traffic from the right people; traffic that’s looking for exactly what you are offering or that is interested in the subject your site is addressing.
A site on the subject of old socks is not likely to be successful. So you don’t want your subject to be too broad or too narrow.
The ideal kind of site is one dedicated to a subject that gets a lot of searches, but where there are not a lot of quality sites serving that traffic.
You might think that’s would be difficult, that all the heavy traffic niches are filled. That’s not the case – not even close to the case. Yes, most heavy traffic niches are filled by some site. But 99 percent of the time (and I’m not exaggerating) the sites at the top of the search engine listings for a heavy-traffic category are very poor. And by poor, I don’t mean the sites look bad (though they usually do look bad). By poor, I mean that there is very little quality information on these sites; and that most of these sites are rarely updated.
A good information site about a subject needs to have at least 50 pages of quality articles, all on that subject. And it needs to be updated regularly, several times a week. A site that does not meet this standard will not be taken seriously by readers or by the search engines.
Later in this book, I’ll get into more detail about how to conduct accurate market research, so that you can zero in on exactly the right niche for your site and have the highest probability of having a commercial home run.
A big part of finding the right niche for you is to make sure your site and your business is about a subject or a theme that is fascinating to you. Why?
Well, because to be successful, you need to love what you do. You need to have fun getting rich.
But there is also a strong marketing reason to build your business around what you love doing.
Your readers will sense your enthusiasm in your writing and throughout your site. Your writing will come across as genuine and from that heart. Your readers would never have found your site on the Web if they were not specifically looking for the subject of your site. So this is a subject they are intensely interested in – whether it’s golf, stamp collecting, cigars, wine, surfing, politics, religion, gadgets, hunting for buried treasure, tracking tornadoes, or spotting UFOs . You could build a highly profitable Internet business around any of these subjects and thousands of others. But whatever theme you choose for your site, your readers want to know you share their passion for your subject.
I’m a big believer in building a site around your hobby or your sport – something you love, a subject you’d be spending a lot of time on even if you were not getting paid.
More on this all-important theme in the pages ahead – that is, on how to build a highly profitable Internet business out of your hobby or your passion.
Now onto another great category of online business.
Hosted Service Sites
One of the fastest growing business sectors on the Internet is the third party hosted software service.
These sites are not designed to sell anything or market anything. They are the service.
Examples include online website builders, bulk email broadcast marketing services, offsite data storage, podcast creation and hosting services, web-based conferencing, merchant accounts, shopping carts, electronic banking. Microsoft is offering more and more of its office applications as hosted online services.
The great advantage of the hosted service is your software never goes out of date. Your software is updated all the time. And you always have instant technical support and help.
If your data and your files are backed up and stored elsewhere and professionally, its far more secure than if all your files are in your computer – even if you are diligent about always backing up your files (which most of us are not).
The online website builders are getting better and better. They are easier to use than your desktop Microsoft Word program. You just put up web pages and edit them using a Word-style editor. You can choose from thousands of templates the online site builder provides, or use your own graphics. After working with the online site builder for one hour, you’ll have a professional looking site.
As more and more software applications, data, and files are hosted online, this might also go a long way toward solving the virus problem. Online service hosts are more expert at protecting against viruses than the average consumer. They’ll have to be to stay in business, because their business clients especially want data to be secure.
The disadvantage of the hosted service is that its functionality can be slow if your Internet connection is slow, or if the server hosting the service is slow due to heavy traffic. Also, the web is an inherently less stable environment than the operating system on your computer. But all this will become less problematic as we move forward in time. And fiber-optic cable provides internet connections that are 20 times faster than even the already-speedy traditional cable.
Bill Gates predicts that it won’t be long before most software applications are hosted services on the Web. He’s calling Microsoft’s initiative in this arena “Live Software.”
Here’s a beta test version of Microsoft Office Live: http://office.microsoft.com/en-us/officelive/default.aspx
Features include:
o Online website builder o Free domain name and web hosting o As much storage space as you need o Your own company branded email system o Online workspace to share information o Storage and management of your customer lists
Other examples of hosted service sites include:
www.SiteBuildIt.com (online site builder and marketing tools) www.citymax.com (online site builder) www.HelloWorld.com (digital media storage) www.AWeber.com (bulk email marketing) www.iConntact.com (bulk email marketing) www.UpStreamNetworkscom (streaming audio and video for your site) www.attonlinevault.com (data and file storage) www.eTrade.com (securities trading and banking) www.oe.quickbooks.com (online accounting and book keeping) www.carbonite.com (online backup for all your files)
The further development and expansion of hosted Internet-based services will make the traditional brick and mortar office even more obsolete than it already is. And you won’t need a big lumbering desktop computer anymore or a bulky network server connecting the desktop computers of your employees. All this will be done off-site, with a third-party hosted service. Everyone will just have laptops. Your laptop can now be your entire office.
Entertainment Sites
As internet connections get faster and faster, your television and computer will merge and becoming interchangable. The boob tube used to be the main distraction in the home preventing us from getting anything done. Now it’s the Internet.
Are you an aspiring movie producer or director? Are you creative? Do you have a great story to tell? If your answers to these questions are yes, then the podcast revolution that’s still in its infancy on the Internet is a potential goldmine for you.
Some of the super-low-budget movies and TV programs that are now being made for the exploding podcast audience are surprisingly good. Most are awful. But the frontier here is limitless for a creative and enterprising aspiring movie producer to completely bypass the big Hollywood movie studios.
You can make a good feature length film now for almost no money. You just need a decent digital video camera. Remember “The Blair Witch Project”? That was a great movie. It cost just $35,000 to make and looked like it cost $10 to make. The entire movie was intended to look like it was shot with a video camera. It was intended to look amateur. They certainly achieved that. But the story was riveting and the movie brought in $150 million at the box office.
That’s what happens when you have a good story to tell. You don’t need all the Hollywood special effects and big name actors. Just have a good story to tell and people will flock to your movie. Nine out of ten movies that Hollywood churns out are unwatchable. Most of the rest are barely tolerable. HBO, Showtime and the pay-per-view movie channels re-run the same movies over and over again.
The world is starved for something new. As much as I love Clint Eastwood, how many times can I really watch Dirty Harry and The High Plains Drifter?
I love these movies, but enough already!
They keep showing these movies (and a few others) over and over again because there is nothing much else worth showing. Hollywood is so brain dead that the keeps remaking the same movies over and over again because they can’t think of anything else to do. I hope they don’t try to remake Casablanca . . . but I’m sure they will. They even remake the movies that were awful the first time out. Example: The Hills Have Eyes. And then they had the nerve to come out with a remake of The Hills Have Eyes Two. So now they are even remaking the sequels.
That’s how lazy and contemptuous of the viewing public Hollywood has become. They really do think we’re all idiots.
The podcast revolution holds out the promise of saving us from the mind-numbing, boring crap Hollywood shovels into the movie theaters every week.
If you are an aspiring movie producer or director, money is now no barrier for you.
It costs you almost nothing to distribute your movie or your TV show on the Internet. If it’s good, word of it will spread like wildfire across the Web and you will become an overnight sensation Remember, money is not the currency that counts on the Internet. Imagination, creativity and brainpower is what’s rewarded on the Internet. This is true capitalism – a “free-market of ideas” that can’t be held back for lack of money . . . because money is no barrier anymore to promoting and distributing your movies, your TV shows, your radio shows, your books, or your products and your services.
The big advantage that Hollywood and the big corporations had over you is gone – the advantage of money. The free market really is free to work on the Internet.
It’s not “If you build it, they will come.” It’s now “If it’s good, they will come.”
The cream really does rise to the top on the Internet.
What is the definition of a “podcast”?
It’s just audio or video that’s on the Internet.
I can’t wait for the podcast revolution to overwhelm Holywood and regular TV by putting some good material out there into the marketplace.
It’s not quite happening yet. The field is wide open. Why shouldn’t it be you who pioneers the really good movie that’s created entirely for and distributed to the podcast market?
What a wonderful breath of fresh air that will be!
Podcasting might even put Hollywood out of business. Probably not, but why not wish for it. At least the public will have more choices than what’s now coming into the theaters and over the boob tube.
I believe the podcast is the next huge money-making frontier for anyone who has the imagination, creativity and motivation to go for it. I’m hoping the next Stephen Spielberg is a podcaster.
Dating Sites
More than 55,000,000 Americans visited an online dating site in 2006. The revenue generated per year by the online dating industry is estimated now at $600,000,000.
Is there room for more?
Heck, yes.
eHarmony was launched in the year 2000. As of this writing (2007) eHarmony has passed the $100,000,000 per year mark in sales.
eHarmony did this by establishing itself as the site for those who are interested in a serious relationship. eHarmony also made heavy use of off-line traditional advertising, offering the free compatibility test.
eHarmony founder Dr. Neil Clark Warren, a 35-year clinical psychologist, found in his research that some people are just not compatible for each other and should not be in a relationship with each other. He believed you can test in advance for this, and that a compatibility test could be used as a screening device for online daters.
Dr. Warren’s twist in the online dating arena is a great illustration of how a relatively small change in your positioning can make an enormous difference in your success.
The safest path to marketing and business success is to enter into a well-established market. That is, offer a product or service that you know for certain people want. And then figure out a way to differentiate yourself from the crowd. As yourself: “What is it that makes me different from my competitors? Or what little change can I make that will make me different and make me stand out?”
This is called offering a Unique Selling Proposition (USP) in marketing. eHarmony struck gold by creating an online dating service with a difference.
And of course, finding romance is among the most powerful human desires in life.
Business Networking Sites
If you have worked in an office in recent years, chances are you have received emails from business contacts asking you to update your information. One of the big companies behind those emails is called Linked In – www.LinkedIn.com
Linked In offers people in business and easy way to make sure all their contact information is up to date and to reconnect with people you might have lost track of. Members post their profiles on Linked In, which are a goldmine for both recruiters looking to hire and job seekers looking to be hired. Tech giants such as Google and Microsoft say they use Linked In to find the best and brightest employees.
Linked In helps those in business and in sales build and maintain their prospect and contact list. It’s also a brilliant strategy by Linked In to build it’s own network, which now boasts nearly 20,000,000 users as of this writing. Linked In makes its money by offering its users a variety of premium services. Posting a job listing will cost you about $95 per month. The site’s 60,000 personnel recruiters pay an average of $3,600 per year to be able to send email messages to members outside their own person network of contacts
Link In launched in 2003 and is projecting revenues to hit $100,000,000 in 2008.
Other business networking sites include Spoke.com, JigSaw.com and Jobster.com
The key to the success of all these sites is that they provide a solid reason for people to put their profiles and contact information in the databases of these sites. That reason is to build your own list of contacts and leads, which will lead to more sales. Everyone in business knows that contacts and building your network is a big key to success. So that’s what these sites offer.
The people on these data bases tend to be more motivated, higher net-worth people than the average citizen. So this makes these databases extraordinarily valuable to a marketer, especially if you are selling to business.
Social Networking Sites
MySpace.com is the #1 social networking site.
61% of young people between the ages of 13 and 17 have profiles on MySpace.com, Friendster or Xanga. Traffic on MySpace grew 367% in 2006. MySpace is now pulling in about $300,000,000 a year in ad revenue.
MySpace has also teamed up with Cingular to market a MySpace mobile phone. And MySpace is now #2 on the Web for online videos, #1 being YouTube.
FaceBook.com is another rapidly growing social networking site, aimed more at college students.
The business model for a social or business networking site is to target a specific demographic, or an audience that shares some common interest. Money is generated with advertising and by selling products and services of interest to your target audience. You have both a media property and a highly targeted list. The profiles on your social or business network allow you to precisely segment your list into categories so that you can deliver highly targeted offers.
The field is still wide open for more social and business networking sites.
IGolf.To is a social networking site for golfers, but it doesn’t look very good to me. Plenty of room for competition here.
The easiest path to success in this arena is to narrow your target market.
Create a social networking site for golfers, for skiiers, for tennis players, for outdoor enthusiasts, for sailboat owners, for duck hunters, for stamp collectors, for wine enthusiasts.
The possibilities are endless.
I already mentioned the possibility of developing an information site around your hobby or enthusiasm. You can also develop a social networking site around your passion – or, better, make it a combo information and social networking site.
Combine your love of your hobby or sport with the profit motive that Linked In has done so well. A business networking site for golf fanatics could be huge. You develop your business contacts while doing what you love – all at the same time.
This way you have a double-affinity (this is key) working for people who join the network. They are in business and love to golf. So you get not just any golfer – but high net-worth, success-oriented golf fanatics – a goldmine for advertisers and target marketers.
How about a business networking site for duck hunters?
What’s terrific about this model is that members of the site create much of the content of the site. They post their profiles, their videos, their photos, their comments and insights. And they are easily able to find people near where they live who share their enthusiasm.
Social and business networking sites can be free. You would then make money by selling ads, participating in the Google AdSense program, and/or participate as an Affiliate Marketer for products that are in line with the theme of your site.
Or your site could be a membership site, for which you charge a monthly fee.
There are many ways to monetize (make money) from your website. We’ll get more deeply into the best ways as we move forward in this book.
Classified Ad Sites
In 1995, Craigslist.org started out in San Francisco as a bare-bones bulletin board site for people looking for almost anything, such as apartments, dates or baseball tickets. Its founder Craig Newmark started the site originally as just a way to inform friends about upcoming art and technology shows and as a place to post his resume.
Today, Craigslist brings in about $20,000,000 a year and eBay recently bought a 25% in the company for $15,000,000. I could have put Craigslist in the social networking category of site. But most people think of it more as a free classified ad service, so that’s why its here.
Oddly, Newmark seems not at all focused on revenue or profits. Currently, Craigslist charges $25 for job postings in six of its largest U.S. cities and $75 for job listings in San Francisco. Craigslist also charges a $10 fee for apartment listings in New York City.
That’s how Craiglist makes money – period. End of story.
All other postings on Craigslist are free. Craigslist is like a 21st Century supermarket bulletin board.
For Newmark, Craigslist remains more of a hobby than a business. He does not allow banner ads or Google AdSense text ads on the site. When asked why, since this would clearly be an enormous source of ad revenue for Craigslist, Newmark answer “because our users have not asked for them” – as if that’s an answer.
Here’s a facscinating excerpt from an interview with Criag Newmark conducted by InternetNews.com that gives you an insight into the mind of the Craigslist founder:
Q: What kind of business model did Craigslist create
A: We really don't have a business model. We are a community service, and we found some years ago that we could provide a really good service to employers and recruiters. Then we asked our community, "What is the right thing to do along these lines?" They told us to charge the people who would otherwise be paying more money for less effective advertising. And that has helped set our moral compass. We are charging recruiters and employers in San Francisco, Los Angeles and New York.
Q: With eBay holding a 25 percent stake in Craigslist, do you still consider the online auctioneer a competitor?
A: We overlap a little bit, but we do similar good things for the community. Right now there is plenty of classified business for everyone, and we really don't think we are competing with people.
Q: We hear a lot about how Google's business model is actually built on the concept of others creating its content. The same is true for Craigslist. So would that make you a really smart aggregator?
A: I wouldn't put it that way. That would involve a change of mindset I'm not capable of right now. We provide a community service that helps people. Google has a very different business model.
Q: To what would you attribute the success of Craigslist?
A really good culture of trust, and we are a simple and effective site. We are kind of like a flea market, and flea markets have a social aspect, as well as a commercial aspect.
Q: Is keeping it simple something you've been conscious of from the outset in 1995?
A: Yes. I only know how to do things simply. We're lucky that I have no talent with Web design. Initially, we only had two links: us as we existed and the other was my resume. Then at some point it became four links plus my resume. There were events, jobs, apartments and everything else. It just grew from there. So what we have today is a direct evolution of what we had all that time ago.
Q: How have you managed the growth of your site?
A: It was very gradual. When I saw something that needed work, I would just write some code to make it much easier. That's what we do today.
Q: It has been reported recently that Craigslist is costing newspapers in the Bay Area $50 million to $60 million in advertising revenue. Do you see Craigslist competing with newspapers for ad dollars?
A: I don't know if I believe that about the $60 million. And again, I keep saying that there is a lot of classified business out there that newspapers could get.
Q: What is the next big thing for Craigslist?
A: I don't think there is a "next big thing." We are just talking about incremental improvements continuously.
Q: People have offered to buy Craigslist. Would you ever sell it?
A: No. I've done well enough. The fundamental question for any human is how much money do you need to make.
Monster.com
Monster.com is a jobs listing site that currently brings in about $1 BILLION a year in revenue, and is yet another business built on the model of putting buyers together with sellers.
For example, if you want access for two weeks to resumes of people living within a 100 mile radius and up to 400 viewings, that will cost an employer $650. If you want nationwide access for two weeks, that will cost an employer $950. Employers can also pay an annual fee of about $10,0000 that will by them nationwide access to Monster’s resume database for a year. It will cost an employer $475 to list a job opening, with discounts for bulk order job listings.
So that’s how Monster makes money.
Jobster
Jobster.com has an interesting business model.
Unlike Monster, Jobster allows employers to list job openings for free. Employers are also instantly alerted to potential candidates (based on tags that are part of a job seeker’s profile). Job seekers will also be alerted to opportunities that fit their profile. Jobster’s business model is ad revenue.
Jobster is more of hybrid site – part classified ad-style listings and part networking, similar in that respect to Linked In. Jobster has also partnered with Facebook – which primarily targets college students.
Overall, classified ad sites are a booming industry on the Web, generating about $3 billion in 2007 and growing at a rate of about 15% per year. When you combine classified ads with social and business networking, you have an explosive profit machine.
When you think about it, the search engines have organized the entire Internet like a giant classified ad service or directory. When people are looking for something, they type keywords and phrases into search engines. The search engine then retrieves web pages and sites that best match the search terms being used. The listings Google and the search engines give you look much like classified ads.
Directory Sites
Enormous money can be made in the directory business.
Directories are compiled lists organized by category. Directories are another way people find what they are looking for.
The Yellow Pages and Super Pages are directories. The phone book is a directory that is organized alphabetically and by town or region so that you can easily look up a phone number.
Industry associations usually maintain directories of their membership – which you can access usually only by being a member of the association.
A directory can be hugely valuable. For example, let’s say I am trying to reach realtors because I have a product that would interest realtors. I would pay money, perhaps a substantial sum, to gain access to a directory of practicing realtors. The more information the directory has about each realtor, the more valuable the information becomes.
Some directories aim to be comprehensive. A directory might include all licensed drivers in Manhattan. Another directory might just include just paid member of the American Automobile Association in Manhattan.
Directories are essential for marketers.
One of the most valuable sites on the Web for me is SRDS.com
SRDS is in the list research and information business. SRDS stands for Standard Rates and Data Service. SRDS produces all kinds of directories designed to help target marketers find their most likely buyers.
One of the SRDS directories that I use the most is the SRDS Directory of Lists for rent. This is a 1600 page directory that lists more than 30,000 different lists that are available for rent for your direct mail or direct marketing program. These lists are organized by subject.
I pay $695 per year to have access to this and other SRDS directories.
Another SRDS directory I use is the SRDS Directory of Business Publications – enormously useful for my B2B marketing campaigns.
I will spend hours studying the SRDS directories as I plan my strategy for reaching a specific target audience with my marketing message.
Without the SRDS List Directory and other directories, I would have a very difficult time reaching my target audience of likely buyers. We could not conduct direct mail campaigns without lists of people who have a history of buying products similar to what we are selling. Specialized lists, complied according to subject matter or certain criteria, are the same as directories.
The point is, directories are an essential tool for navigating life. We need a way look things up.
Compiling a directory can be an enormously lucrative business. The Yellow Pages has been an enormously successful business now for more than 120 years. A dictionary is a directory of the words we use.
Here’s Google’s directory of topics and categories: www. directory.google.com
Here’s the site for the Open Directory Project: www.dmoz.org
Here’s a health and wellness directory: www.standardlife.ca/en/health/directory/index.html
The list and cataloging business is a multi-billion dollar industry. It’s how we organize information.
One of the nation’s biggest data bases for direct marketers is InfoUSA. One of its products you might have heard of is SalesGenie.com. You might have seen Sales Genie’s Super Bowl ads, or one of its other ads.
What the salesgenie.com program does is supply sales people with qualified leads. It’s able to do this because it’s data base includes:
· 14 Million U.S. Businesses · 2.6 Million New Businesses · 13 Million Executives & Professionals · 600,000 Manufacturers · 250,000 Big Businesses · 5 Million Small Businesses · 210 Million U.S. Consumers · 75 Million Homeowners · 15 Million New Movers · 4 Million New Homeowners · 8.5 Million Bankruptcy Filers · 13.4 Million Homes with Children
InfoUSA collects a lot of key information about each name on its data base, including credit history, estimated net worth, buying patterns, profession and more.
This information is a goldmine for marketers who know how to use it. I’m in the list compiling business myself, so I know.
The InfoUSA product was once geared toward big mass-marketers. With it’s relatively new salesgenie.com product that’s delivered over the Internet, targeted leads are now available to the small business and commissioned salesperson. A list of likely buyers of the product or service you are selling is just about the most valuable information there is for a commissioned sales person or a business. As a result, the salesgenie.com product is making a fortune for InfoUSA – a company that I use for some of my own list work.
If you have a way to compile and organize information in a way that is useful, you can make a fortune in the directory or list compiling business.
Google AdSense Sites
Google AdSense is a program where Google pays you to run Google AdWords pay-per-click ads on your website.
Here’s how it works.
If you have ever run a Google AdWords campaign, you will have no trouble following this.
What Google does is take the ads of its Google AdWords customers and puts them on sites that match the content of the ads, as defined by the keywords connected with the ads.
You are paid each time someone clicks on a Google AdWords ad that’s running on your site. The more clicks on the ad, the more money your make.
Google’s goal is to match Google AdWords ads to the content of sites and to maximize the number of clicks on its ads. The more traffic that comes through your site, the more clicks you’re likely to get on the ads that Google is running on your site.
Your general business site is not a good candidate for your Google AdSense program.
The best sites for AdSense are built around a specific topic and that are comprehensive on that topic. It’s also best if the site is purely informational and is not a sales site.
Why?
Because when people conduct searches on the Internet, they are searching for information.
Google wants to deliver information to searchers, not ads. So information sites rank higher in search engine listings than sites that are clearly commercial or advertisements.
As a result, information sites are higher traffic sites.
The size of your wallet is not what Google cares about when deciding where to place the ads of its AdWords customers. All Google wants to know is which sites have content that is most relevant to the ad. It you deliver this, Google will bring traffic to your site of people searching for the topic that your site addresses. What counts with Google is matching the ad to the right content so that content searchers will encounter ads related exactly to their area of interest. Google does not reveal the sophisticated algorithms is uses to achieve this.
But this is a great way for you to build an information site around a hobby of yours, or a subject that you love, and make a boatload of money from Google AdSense.
I’ll get into more of the details of how AdSense works later.
Online Auctions
As everyone knows, eBay is the 800-pound gorilla in this space. eBay’s revenue was $5.9 BILLION in 2006 – up 24% from 2005.
It would be as tough to compete head-to-head with eBbay nationally and globally in the online auction market as it would be to compete with Crest toothpaste. Yahoo and Amazon are trying.
Some say Yahoo’s and Amazon’s online auction technology is superior to eBay’s. But eBay has hammered out a place in our brains as the place to go for online auctions. That’s eBay’s brand. It’s very tough to compete with a big successful brand in the exact same space.
But if you were to try to get in the online auction business, the way to do it would be on a local level. The case you would make is that your buyers and sellers could meet in person to complete the transaction, and the ability to do this helps protect buyers from fraud.
That would be a strong argument for doing business on your online auction site rather than eBay’s – where you have to trust you aren’t being ripped off by someone you’ve never met and probably could never find if you are not satisfied with the product you bought.
Being the local service is always a strong reason for people to do business with you. They can find you. They can walk into your store if they are not happy with what they bought. They can track you down.
In addition to being local, another twist you might add that would further differentiate yourself from eBay is not to call yourself an auction site. Consider positioning yourself as a local online flea market or a local trader site – where you put buyers and sellers together. eBay also keeps jacking up its fees. More and more, sellers are becoming more like salaried employees of eBay. So there is plenty of opportunity to challenge eBay in a local area.
The key is to differentiate yourself from eBay. “Differentiate or die,” as we marketers say.
Getting just a tiny piece of the multi-billion-dollar online auction business – as in your local area – will still make you a fortune. Then, if you are successful in one local area, you replicate your success in another local area. And you do it again and again – in exactly the same way McDonalds and Starbucks build stores, one store at a time.
Media and Software Download Sites
Anything that’s digital is downloadable – including music, audio, print, software.
What’s great about selling a downloadable digital product is that you have no inventory.
Inventory can be a big cost to a business. In fact, miscalculating inventory is a major reason businesses go out of business. If you over-estimate demand and are stuck with a big inventory of an unsellable products, that’s like having a big pile of money sitting on your warehouse floor that you can’t use. Or if your product is selling more slowly than you expected, your inventory creates a cashflow problem for your business.
On the other hand, if you underestimate demand for your product and can’t fill orders quickly because you have too little inventory, not only is that leaving money on the table, but you have an army of frustrated buyers out there who can’t get what they want from you. This creates negative “word-of-mouth” for you, which can spread like wildfire and also kill your business.
Managing inventory and accurately estimating exactly how much inventory you need to keep up with demand is one of the most vexing problems in business.
Dell manufactures computers and accessories. Michael Dell was so successful because he perfected a process of precisely managing his inventory.
Dell does not build the computer until the order comes in. Dell’s assembly lines can snap together a computer is about 12 minutes. So he has eliminated a big part of his inventory by being able to assemble a computer after the order comes in.
But Dell still has an inventory of parts. The number Michael Dell tracks most closely is not sales, but inventory. The ships carrying the parts arriving from Asia and India must be precisely timed and must be carrying exactly the right parts in exactly the right number, or Dell has an inventory problem. Dell’s success is due, in large part, to its process of managing and estimating its inventory needs more precisely than any company on the planet.
But if you are selling products that are downloadable, you eliminate your inventory problem.
Personally, I don’t want to have big warehouses full of stuff. I don’t want to build factories that manufacture products that I then have to sell. I don’t want to have to deal with banks and investors to capitalize all this infrastructure that’s needed to manufacture and store inventory.
I want to sell something that’s almost free to deliver and store – something digital.
I happen to be an Information Marketer. I sell books, seminars, articles, newsletters, audios and videos designed to help entrepreneurs improve their marketing. All this can be delivered digitally. Yes, I do have some inventory of my printed books. But I try to keep that to a minimum. My big profits are made with my digital downloadable products.
I’ll explain my own business model in more detail later.
Here are some examples of media and software download sites:
Content That Creates Itself
Some of the most successful sites have content that creates itself.
What I mean be that is the users of the site create the content. Examples include: Google, Yahoo and all the search engines, eBay, Craigslist, all the classified ad sites, Amazon, Match.com and all the dating sites, MySpace, Linked In and all the social and business networking sites and, of course, YouTube.
What’s great about users creating the content is this take a big burden off the site owners. “Organically” created content also makes the content more interesting.
AOL, a Time-Warner property, creates much of its own content. And its content, frankly, stinks; and seems to get worse every day. AOL’s content on its home-page is incredibly inane and should insult the intelligence of anyone with half a brain. Even worse than the stunningly stupid articles AOL treats its subscribers to all the time is that AOL is increasing the practice of feeding it’s subscribers paid advertisements that masquerade as articles. AOL talks a lot against spamming, but AOL is one of the worst spammers on the Web.
In addition, AOL runs the same articles over and over again. You’ll see the same non-hard news article come through every few days. I guess AOL thinks we are too stupid to remember reading the articles that came through a few days earlier.
As a result, AOL is losing subscribers in droves.
One reason AOL has this problem is that it’s difficult to create or find new and interesting content all day long, everyday – no matter how big a staff you have. Not only is this very expensive, but most of AOL’s writers clearly just graduated from college (if they are that old) – which explains the mind-numbing stupidity of the writing at AOL. Mostly what AOL does is run the articles of others – articles from the Associated Press. So it has trouble even creating original content.
But sites like eBay, Craigslist, MySpace, YouTube, the search engines and the dating sites don’t have a content creation problem. On these sites, the content creates itself. In the case of search engines, the content is out there. The search engines just have to crawl the web, find it and retrieve it for its searchers. For the classified ad sites and dating sites, the users create the content.
These sites are enormously profitable because they don’t require a lot of staff to run. The site simply acts as a facilitator for what the users want to do. Craigslist has 12 employees and brings in about $25,000,000 in annual revenue as of this writing, or about $2.1 million for each employee (including the janitor and the receptionist). Not bad.
Google had about 8,000 employees in June 2006 and brought in $10.4 billion that year – which is $1,250,000 per employee (right down the janitor). By contrast, media giant (and content creator) AOL-TimeWarner had 90,000 employees in 2006 who generated $44 billion in revenue, or about $488,000 per employee (a third of Google’s profit per employee). Time-Warner’s profit margin was 14.2% in 2006, while Google’s was 29.4%.
Both businesses are clearly great. But which is better? One that requires a lot of employees to create content? Or one that just uses the content of others – in Google’s case, the world’s content.
Yahoo is a hybrid. It provides a lot of content for its news sections and uses the content of others. Yahoo’s search engine, dating area, classified ads and chat rooms are a big reason people go to Yahoo. Yahoo’s 10,000 employees brought in $6.4 billion in 2006 – or about $640,000 per employee – so (as we would expect) about half way between Google (which uses almost all content created by others) and Time-Warner (creates almost all its own content).
It’s expensive to create all your own content. It’s more profitable to be a facilitator – a middleman. The Charles Dickens character, young Oliver Twist, had a great line on this. Oliver’s adoptive father Mr. Brownlow asks Oliver if he might like to write books someday. Oliver’s answer: “I think I’d rather be a bookseller, sir.”
Even young Oliver Twist knew that it would be far more profitable to sell other people’s content than to create it all yourself. And it’s a whole lot easier. Just set up the system or mechanism – i.e. YouTube, Google or Craigslist. The content then just creates itself, “organically.” Others do all the content creation work for you.
That’s what Matt Drudge does with his news site www.DrudgeReport.com
He creates almost none of his own content – just links to the best articles and most interesting news stories and tid-bits of the day.
And it’s far more interesting content than if all the content you are selling comes out of just you, or the few people working at your company.
Affiliate Marketing Sites
Another great Internet business model is to sell the products of others.
There’s really no need to bother creating your own product or products – which can be a costly, time-consuming and risky proposition.
Instead, find the best, most profitable products . . . and sell those.
Affiliate marketing sites are a huge business on the Internet. What companies do is offer a commission to those (“affiliate marketers” or “associates”) who sell their products for them. Commissions for sales range from 10% to 60%. So you are paid by your performance. Why go to the bother of creating your own products when these kinds of commission payouts are available – and for excellent, hot-selling products?
There are many ways to be a successful affiliate marketer.
But the best way is to set up a terrific information site on a specific subject. And then, in and around the great articles you’ll be running, you include ads on the products you are receiving a commission on. The useful, informative articles bring in your traffic. You make money when someone clicks on the ad on your site that takes them to the site where the product can be found. The way most automated affiliate marketing programs work is that code is placed in the links that lead to the product-seller’s site. This code allows the main marketer of the product to track the origin of the customer and pay the commission.
Commissions can also be paid just on the click-through to the site – regardless of whether the person buys anything. This is how the Google AdSense program works. If you are running Google AdSense ads on your site, you are paid whenever someone clicks on the ad that’s running on your site.
The key to it is that a code, unique to your site, is embedded in the link. That’s the tracking mechanism for the payout of affiliate commissions. In addition, the better affiliate programs will also insert a cookie into the computer of the visitor you brought to the main marketer’s site, so that if the visitor does not buy anything on that visit, but returns again later by some other route, the affiliate marketer will still get credit for the sale.
Many sites are set up for the sole purpose of earning affiliate marketing commissions.
websitebuildersreview.com is an example of such a site.
If are searching the Internet for online website buildling tools, you might stumble across www.websitebuilderreview.com. If you click on one of the links on this site, end up on the website of the product seller and buy the product, the owner of websitebuilderreview.com receives a commission on the sale.
Another example is the ezine Web Marketing Today (www.wilsonweb.com). This is a quality publication with a lot of useful information. The site is supported by ad revenue and affiliate commissions. The site also sells the products of the site owner, Dr. Ralph Wilson.
Jeff Bezos, the founder of Amazon.com, is one of the pioneers of affiliate marketing on the Internet.
The story goes that Bezos was chatting with a woman at a cocktail party who told him that she would like to sell books on her site. So this started Bezos thinking. Why not just give this woman, and others like her, a commission on books she’s able to sell through her site?
Amazon would do all the work -- fufulfill the order, ship the books, etc. All she would need to do is bring her people to the books she’s recommending on Amazon. She would then not have to carry any inventory. Soon after this conversation, so the story goes, Amazon in 1996 rolled out the Amazon Associates Program. Under this program, Amazon Associates would simply place banner or text links on their site for the books they are recommending, or to Amazon’s homepage.
When visitors click from the Associate’s site and buy a book at Amazon, the associate is paid a commission. The Amazon Associates Program played a big role in making Amazon the Internet behemoth it now is. Though Amazon’s affiliate program is one of the most famous, the first known affiliate marketing program of this kind was launched by CDNow.com in 1994. Some affiliate programs don’t rely on code, but are performed manually – just like a traditional referral program or standard commissioned sales program.
Under these programs, the affiliate marketer (or sales person) simply supplies the names of people he’s sending to the site, perhaps also with email addresses. The names and email addresses are then preserved in the company’s data base, linked to the affiliate. Whenever one of these names buys something, the affiliate marketer gets the credit.
Another powerful method of tracking the performance of affiliates is to offer a special discount at the main marketer’s site for anyone who comes into the site by way of an affiliate. The visitor is then asked to plug in a discount code. The code is unique to the affiliate marketer so that the affiliate marketer can then get the proper credit.
So affiliate marketing programs can be run in many different ways.
Some affiliate marketing programs use a combination of these methods.
I will get into much more detail on affiliate marketing, and it’s power both for the main advertiser and the publisher, later on in the chapter on Affiliate Marketing.
Blogs
Blog is slang for Web Log.
I won’t cover blogs too much here. I’ll get into blogging more extensively later.
A blog is is a website where entries are made in journal style, are dated, and are in reverse chronological order. a blog is usually a long scrolling web page, win one article after another. Most blogs are one-man bands. The best ones reflect the distinct, sometimes quirky, personality of the blogger.
Blogs can be on any subject. A typical blog is mostly text, but can include images, podcasts, links to other blogs and sites, and other media related to its topic. Blogs usually allow for readers to post comments on articles.
As of November 2006, blog search engine Technorati was tracking 60 million blogs.
Blogging is quickly becoming one of the most powerful marketing vehicles on the Web. Blogs allow advertisers to reach highly-targeted niche audiences. The big revenue source for bloggers is Google AdSense, which is expected to generate sales of $5 billion in 2007 What’s great about blogs is how easy they are to create. You can easily create a blog on a third-party hosted site such as www.Typepad.com, www.Blogger.com, www.MovableType.com.
This is perfect for those who are not the least bit tech savvy. Adding articles to your blog requires no more than typing into a field and then hitting “send.”
You can also add video and audio to your blog Your blog can be a staging area for your podcast. Blogs also allow readers to post comments. So they are interactive, acting as a kind of community bulletin board. Word of the most interesting blogs travels like wildfire in the blogosphere. The way blogs can make money is no different from any other website. Advertising is the main source of revenue for the most popular blogs. Many blogs participate in the Google Ad Sense program. Blogs also sell the products and services of the blogger. As with just about any site – the formula for success in blogging is the same. The best way to bring traffic to your blog is to focus your blog on a specific topic. Search engines will reward a blog like this by ranking your blog high on the search engine listing for those searching for the topic of your blog. Search engines like blogs because blogs have lots of articles. More later on why blogging is such a powerful marketing tool, and how to use it.
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