The Two Types of Internet-based Businesses

When I started my business, I struggled to get my mind around how people were making money online — and it was even more difficult to explain to my friends and family. When you’re starting out, online business models can blur together because you’re drowning in advice. Too often, everything gets lumped into the category of “blogging,” simply because most websites also function as blogs. Blogging is one business model among many options that are open to you.

The drawback to blogging as a beginning business model is that it’s what I call a high traffic strategy — the amount of money you make is directly connected to how many people visit your site. For new entrepreneurs who can’t wait two years to make money, it’s far more effective to start with a service based-business, because it’s a low traffic strategy. You need far fewer individual clients than blog visitors in order to make a living.

Three years later, I am offering a course on starting an Internet-based business. I still use mostly low traffic business models. When you are consistently drawing lots of visitors, it makes sense to add high traffic business models like selling ads or recommending products as an affiliate. There’s nothing wrong with doing those things right out of the gate, but your paycheck will be really unpredictable.

A Map of the Two Types

A glossary defining of all these terms follows below.

High Traffic

The reason blogging as a stand-alone business (as opposed to blogging as a marketing activity) isn’t a good idea for the beginner is it requires a lot of up front investment for a very unreliable amount of return. Blogs are great platforms for all kinds of business models, but it often takes years to build up a subscriber base large enough to pay the mortgage with so-called “passive revenue” from advertising income, affiliate commissions or low-priced products. These business models rely on volume to be viable.

Low Traffic

When you first begin building a presence on the World Wide Web, you have no traffic. You have not been sending people to your newsletter signup or asking them to read and comment on your posts. You’re on the outer fringes of your little web galaxy, no one knows you’re there (and it can suck). But this is why the Internet is great, because there are plenty of businesses that thrive despite low traffic. These are businesses rely on relationships — word of mouth aided by social media, customer referral and being at the center of important conversations. It’s like opening up an office where you perform valuable services for people, but instead of being far away anyone can be there in an instant. The key to a low traffic business is networking with your right people.

Start Low, Add High

Now those of you who have heard me talk about virtual products know that I’m a fan of launching them before you get a lot of traffic to your site, and that’s because they can be a great way to market yourself to your right people. It’s more of a marketing strategy than a core business activity. It’s also great to have something you can sell many times over as your audience grows. Once you’ve got your bottom line covered with some low traffic sources of income, it’s great to start figuring out how to grow your subscribers, and start adding some of the other business models to your mix.

Low traffic models are more “high touch,” they require more of your personal time and attention. You need to be on the phone with someone, coaching them, or actually doing the work they’ve contracted you to do. You may be creating proposals for individual projects. It’s work. But think of it this way — spending two years getting your blog to rank #1 in Google so you can retire to a tropical island at 40 may sound great, but if Google tweaks their search algorithm, you’re starting from scratch. Best to diversify.

The Online Business Model Glossary

Subscriptions: Recurring (often monthly) payments for access to something.

  • community memberships: Charging for access to an online community, often including a forum.
  • retainers: Charging for access to your services when needed.
  • newsletter / eZine: An online magazine, usually delivered via email

Services: Charging for your time.

  • coaching / consulting: Helping people in some way by talking to them, either one-on-one or in a small group.
  • freelancing / subcontracting: Someone else hires you to do their work for them.
  • teaching / training: Helping people, either individually or in groups, to learn information or a new skill.
  • speaking: Being paid to do public speaking.

Joint Ventures: Any of the above where you collaborate with someone else, sharing the effort, the profits, and possibly your audiences.

Indirect: Using your online presence for some offline benefit that does not make money online.

  • attracting job opportunities: Using your online presence to generate leads or increase your chances of being hired for a desirable position.
  • growing offline business: Using your online presence to generate leads or send customers to your brick-and-mortar business.

Affiliate Marketing: Recommending other people’s products and collecting a commission for referring leads or customers.

  • blog: Writing blog posts, some or all of which recommend products for which you are an affiliate.
  • niche site: A website about a narrow topic that recommends products for which you are an affiliate.

Advertising: Making money from website visitors clicking on your website’s ads.

  • blog: Writing blog posts to get visitors to your website, where they then click on ads.
  • niche site: A website about a narrow topic. The website contains ads for visitors to click on.

Licensing / Franchising: You create a system for other people to use your intellectual property or build their own businesses, and they pay you to use your system.

Leave a Comment

Previous post:

Next post: