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by: Yaro Starak
I've had numerous conversations with web entrepreneurs about this topic and
many of them agree that the revenue models for web business are often poorly
thought out and depend too heavily on advertising for success. Back in the
DotComBoom it was accepted that you didn't have to worry too much about your
revenue model, it was all about investment capital and IPO's. Of course this
eventually led to a crash and nowadays web business, like normal business, has
to show sound revenue models and profit forecasts. They need a sustainable way
to make money - who would have thought that!
The Internet has largely been driven by free information. Users expect services
and information to be provided for free and are very reluctant to spend.
Previously entrepreneurs used the logic that they could capture the market
benefiting from network effects and then worry about making money either from
advertising or by charging for services.
Unfortunately many web businesses quickly realised that advertising revenue
sometimes wasn't enough to even cover costs let alone make a significant profit
and as soon as they started charging for their services their audience quickly
ran off to the nearest copy-cat free service provider out there.
So what is a web entrepreneur to do? You have a brilliant idea that will likely
find an audience but how can you make money from it?
Before I go on I want to state that I do believe advertising revenue is a viable
business model if you can balance your costs, establish a niche market and use
innovative delivery methods. I know because I have made money from advertising
myself. However it's probably not the ideal method to become really wealthy
because generally the labour and resources required to feed your audience tends
to grow proportionally with the amount of advertising revenue you can generate.
There are exceptions to this rule of course, I just suggest you carefully
monitor your real results and don't invest heavily expecting advertising revenue
to make you a millionaire.
Here are a few alternative strategies you can employ to generate cash:
Sell Something
An obvious solution is to sell something. Look at your audience, or if you are
at the business planning stage, your potential audience, and think about
products or services they would be interested in. You might have an idea for a
product or service you can produce yourself and then sell directly from your
website. Alternatively buy wholesale products from a supplier and then ship them
yourself, or if you want to keep start-up costs down use a drop shipper.
Key Term: Drop Shipping. A drop shipper is a supplier or wholesaler that
provides products to resellers. As a reseller you advertise the products for
sale on your website, mail order catalogue, newsletter or other means. When
you make a sale you don't have to ship anything, you complete the order with
the drop shipper and they send the product direct to your client. This means
you don't have to hold any inventory. This is a good method to start with if
you are new to the industry or want to test your market's response to products
without heavy investment.
Affiliate Programs
There are literally thousands of affiliate programs out there that offer
products or services (courses, eBooks, software, anything really) that you can
resell to your audience. You earn a percentage of the fee from every sale you
make. Some programs will simply pay you for sending traffic to their website.
The benefit of this method is you can search for products ideally suited to your
target market that have proven value. Often affiliate programs give you direct
links to professionally produced and tested sales pages, all you need to do is
drive your targeted traffic to these sites.
Key Term: Affiliate Marketing is a widespread method of promoting a
website, in which an affiliate is rewarded for every visitor, subscriber
and/or customer provided through his/her efforts. Compensation may be made
based on a certain value for each visit (Pay-per-click), registrant
(Pay-per-lead), or a commission for each customer or sale (Pay-per-Sale).
Affiliate programs are extremely powerful methods to sell products or
services. Many of the web's most successful entrepreneurs leverage this method
to increase the exposure of their information products. When this system works
it's a win-win situation, affiliates make money and the seller increases sales
and exposure. As an affiliate it's not too hard to test a product or service
on your market, send a few links through a newsletter, write a review piece
that links to an affiliate program or just stick some links on your site and
see what happens.
A word of warning though, you must have a targeted audience and it has to be of
significant size (try 1000 uniques a day at least) before you should expect good
results. Let's say you do some conservative math - 1% of your visitors will
click through an affiliate program, and then perhaps 1% of those visitors
actually make a purchase. If that calculates into some reasonable moolah based
on your traffic numbers then perhaps you have a potentially reliable revenue
stream. Of course you may experience conversion rates much higher than that and
you should always aim to improve conversion rates through testing different
methods and sales copy, but by planning conservatively you know what to expect
in worst case scenarios.
Premium Content and Subscriptions
Over the years I've seen many of my favourite hobby sites I frequent go through
a genesis. They start off small and provide quality content which is updated
daily. Their audience expands. Costs start to get prohibitive and they need to
generate more income because plain old advertising banners are not cutting it
anymore. The next step? - offer a paid premium service for members only. They
still provide some free content but those willing to pay have access to extra
articles and other special features. This is not a bad option if you believe you
can provide something of value to your members that is worth paying for above
and beyond the free services. The good thing is you won't necessarily loose your
existing customer base because you still offer free content and hopefully you
can convert a reasonable number to paying customers. The trick is to meet needs
in both areas - the free customers and those that want more and are prepared to
pay for it. You can't offer too much or too little in the free area, it's a fine
balance. Take a look at one of my favourite tennis sites for an example,
www.TennisReporters.net, which is run by a tennis journalist. It's a good
example because the division between subscription and free content is clear and
the site itself is hardly professional looking. It's all about the content,
that's what brings in the moolah.
A possible problem is how to implement a membership system on your website. The
simplest way is to set up a password protected area on your site with the
premium content. This is easy to do on most hosting accounts and if you don't
know how ask your hosting provider. Once you have the password protected area
you simply set up a purchase link and then send the new member the appropriate
password and username. Using an autoresponder/shopping cart such as Marketer's
Choice makes this process completely automated and simple enough. You could also
just have a Paypal.com purchase link and then manually send out the password as
each purchase is made. The only problem with this method is your members can
share the login details with each other rather than each buying a subscription
each. Alternatively you could investigate hiring a freelance programmer to build
something custom for you or search online for a subscription management system.
The InvisionBoard.com forum system has an inbuilt subscription upgrade package
which controls subscriptions using member groups. The problem with this is you
have to manage your content via the forum, which if your site is intended to be
community driven may be a viable option.
The Secret - Multiple Streams of Revenue
I'm sure you can see where I am going here. The smart entrepreneurs don't plan
to make money from just one channel of income, they employ many. You should
provide advertisers with comprehensive campaign options including different
banner positions and text links. Offer a newsletter and eCourse, sell your own
products and services, sell other people's products and services and join
affiliate programs. Mix in a subscription based service and/or premium content
and you have a collection of 4-5 sources of income from your audience. You must
skilfully interweave all your content with these different advertising methods
to create a seamless revenue generating machine AND valuable service to your
clients. You maximise the return on your audience and are not dependent on one
stream of income. Best of all most of the income methods I've mentioned can be
systematised which means once you have the systems in place you just sit back
and feed more traffic to your site. You spend your time working on growing your
audience which will runoff into revenue growth as well.
| >> About The Author
Yaro Starak www.entrepreneurs-journey.com
Do you want to profit from your own successful home based Internet
business? Learn from Yaro Starak, a young entrepreneur from Australia. Get your free
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Internet Business Blog.
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