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Internet Money Making Principles

6:14 pm on Sep 4, 2002 (gmt 0)

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I have seen a lot of interest lately with making money on the web, from frustration to hint dropping from those who have had success. Thought I would throw out a few principles I follow regularly to help clear away a bit of the enigma of becoming profitable on the web.

1) Distinct products or services. Everything sold can usually fall into these two categories. Services might be web design, web hosting, consulting, etc. Products are self explanatory. Products are the way to make big $ but may be harder to get going at first and have risk unless demand for the product has already been proven or carefully researched. Either way, you must differentiate yourself from the competition, not merely copy. Copycats have a hard time wrestling away consumers from already established businesses. It is harder to get a customer intially than keep them. If you have no competition, you must set and keep the standard with your company. Just because you don't have competition now doesn't mean you won't have it within a few months.

2) Understand margins. A margin is the amount of product expense verses profit. If it costs you $10 to make and ship a t-shirt and you sell it for $15, you have a $5 margin. Low margin items require a very high volume to make money. High margin items require much less traffic but depending on the price of the item, may require more skill in getting people to part with their cash. Low retail price products with high margins are gold. Next time you get spammed over and over again by a certain product, think about why they are marketing it so aggressively.

3) Understanding markets. Competition is fierce in some categories (travel is a recent example). Carve out a niche in a competitive market (i.e. target a city, region, or state) for more viable results. Low-competition markets (new or emerging markets) require you to set your own boundaries. How broad or narrow will depend on your goals and viability of servicing an audience and staying on top in that market.

4) Spend the most time on the most profitable ventures. If you are confident you have spent ample time on a market and the money isn;t there, don't be afraid to walk away or put the project on hold. Don't beat a dead horse...it is dead. On the other hand, if you tap into a vein that is producing very promising income, milk it for all it is worth and don't get distracted by other potential ventures.

5) Diversification. Once you have found an income stream you can tap into, you can't expect to last forever. Like a good stock portfolio, you shouldn't put all your eggs in one basket. Minimize risk through diversification. Multiple revenue streams, multiple products, multiple services, multiple businesses...whatever. Dont' overdiversify beyond what you can handle. Leave enough time to sufficiently develop promising current projects.

6:24 pm on Sept 4, 2002 (gmt 0)

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WebmasterWorld Senior Member nick_w is a WebmasterWorld Top Contributor of All Time 10+ Year Member

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Nice post James.

How about build for your audience?

Not just your website but, your business model. Mould it around what people in your niche want or expect.

If you build a business selling high end luxury products you'd better be slick baby!

If you build a business around low cost consumables, "cheap and cheerfull" may be the way forward.


7:03 pm on Sept 4, 2002 (gmt 0)

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Just a couple general tips that have worked well-

1- Know your niche and claim it
Throwing out as much as you can to see what sticks can be frusterating and result in a low ROI on your time and money.

2- Go against the grain
So every other flower site is selling roses? Focus on the wildfowers and colorful pages and gifts for the more unique person in their life. Let the others fight over the same old shoppers.

3- Watch pay per clicks closely
Jump on keywords that are being ignored-they still exist, but don't let the machines or emotions rule as prices rise

4- Make friends
Links, advice, ideas - all come from others who are also working online

5- Time or money
You are going to have to spend one or the other. The people who tell yu they are making easy money are either making it off telling people they make easy money or they have already put in their dues of time and money in the past and it is paying off now. There are exceptions, but don't expect to be one.

6- Know when it's time to get offline
You'll find it helps to deal with the kinds of people who don't live internet- those are your shoppers.

9:28 pm on Sept 4, 2002 (gmt 0)

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JamesR hit on an important point.

The Internet Market is becoming like regular markets finally. The bubble-burst was necessary to make this happen. The same thing happened with Rockefeller and oil. When the oil industry first opened up, he cashed in on it. Then after there were many ups and downs, but it eventually leveled out into a market that played by the rules of business.

The Website market is becoming the same way. Now you need profit to be considered successful. It just makes sense.

I think JamesR laid it out very well.

10:47 am on Sept 5, 2002 (gmt 0)

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I think that the lack of a good business model is the downfall of many people/companies that venture into eCommerce. All the points that people have made would all be part of a good SWOT analysis and business model.

Too many people just rush headlong into eCommerce thinking that a nice site and a few products/services are the only ingredients necessary to make money online. We've seen that this is not at all the case.

Like any market (as has been mentioned), making money online requires research, thought, effort and determination.

SWOT: Strengths Weaknesses Opportunities Threats

You don't necessarily have to employ an expensive amrketing/analysis person/company - but you do need to hammer these 4 points down:

  • What are your strengths over your competition?
  • What are your weaknesses in comparison to your competition? Knowing your weaknesses allows you to focus attention on these areas.
  • Look at what opportunities are open to you that may help you to gain an advantage over your competition and an increase in market share/sales.
  • Try to preempt any threats that you may encounter during your initial startup period, and again looking to the future.

    Remember, information is ammunition!

  • 11:20 am on Sept 5, 2002 (gmt 0)

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    WebmasterWorld Senior Member fathom is a WebmasterWorld Top Contributor of All Time 10+ Year Member Top Contributors Of The Month

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    SWOT is a very good preamble ... once you have decided to "go for it":




    Desire must be your marketing focus and address what SWOT has determined.

    From a search engine perspective Awareness and Interest are accommplished by being near the top of SERP, or inbound links, and Interest is the click through (or any other marketing method that brings visitors to your web site).

    Developing Motivation and Desire are the really hard parts of marketing. Many try to motivate by focusing on "me", the company or "my" the products or services when it should be the benefits of what "you" the visitor gets for your purchase.

    4:54 pm on Sept 5, 2002 (gmt 0)

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    Some good principles coming out here.

    Some people don't realize that not all products are viable for sale over the Internet. If you can buy the same product for the same price in town and get it immediately, why buy online, pay a shipping premium, and wait to get it? The online product or service must have a substantial benefit for the user.

    4:59 pm on Sept 5, 2002 (gmt 0)

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    >If you can buy the same product for the same price in town and get it immediately, why buy online, pay a shipping premium, and wait to get it?

    I AGREE 100%

    The fact is, however, they do buy those things online in large numbers and I don't know why. ;)

    5:15 pm on Sept 5, 2002 (gmt 0)

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    WebmasterWorld Senior Member rcjordan is a WebmasterWorld Top Contributor of All Time 10+ Year Member

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    >The fact is, however, they do buy those things online in large numbers and I don't know why.

    Convenience, convenience, convenience.

    Remember netgrocer? Louise was their poster child when they first opened up... she'd STILL be buying from peapod or anybody that had a decent number of SKUs and could ship what she wanted. Why go to the grocery store when the FedEx guy will bring them to you nicely boxed? Sure, delivering groceries to Podunk couldn't be done at a profit -but the reasoning still applies assuming the supplier doesn't break the price point. I buy a couple $K per year online, everything from gifts to business hardware -99% of those purchases are made online simply because it's more convenient.

    5:27 pm on Sept 5, 2002 (gmt 0)

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    "Convenience, convenience, convenience"

    100% agree. It is much easier buying online in most cases. I can buy a DVD, a new shirt, an obscure software program, and a Simpsons clock in 30 minutes online where it would take me visits to at least 4 stores and half a day to do it in the real world assuming I could find what I was looking for. I am willing to pay a couple bucks more for that.

    5:40 pm on Sept 5, 2002 (gmt 0)

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    I think the proper incentive is the underlying motivator. Some people value convenience, some value value :) Right now, I don't think I want to buy a car online because it is more convenient and perhaps cheaper. There isn't enough incentive to get by the risk factor. However, I might shop online and use those prices as a bargaining tool at the local dealership.


    Yeah, I can see that in the travel industry especially. I do all my bookings exclusively over the Internet.

    I think the more you can build as many incentives as possible into an online biz, the more powerful it becomes. Many people are still afraid to use a credit card online, or many don't know how. I was amazed by my wife telling me the other week that she has never bought anything online whereas I buy frequently. Maybe I need to walk her through the process. Anyway, the more you build incentive, the more you coax people who are afraid or don't know how to buy online. When it becomes almost ludicrous to buy offline as opposed to online, that is where some real powerful stuff starts to happen.

    6:40 pm on Sept 5, 2002 (gmt 0)

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    I buy a lot of technical books and computer equipment online.

    Reasons? Selection and price.

    First of all, even though I live in
    a major metro area (i.e. St. Louis metro area), the specific books
    and computer parts (I build my own) I want are not available locally.

    Secondly, the price is often MUCH better online. IMO, the local
    computer stores are really bad when it comes to pricing. For instance,
    a local national chain selling computer and electronic equip. wants
    $30 for a no-name brand 1.44 floppy drive; newegg sells a top of the
    line Teac 1.44 floppy for $9 online last time I bought one from them.

    I often see $30-50 higher prices marked on stuff like CD-RW drives
    and other components people buy for their computers localy than what's
    available online for around a $100 price point. Shipping only takes 2-3 days on average CA to MO.

    I'm NOT very price consious when I shop for computer stuff or tech books.
    The floppy drive pricing locally DOES bug me -- no way will I pay $30
    for a $9 floppy of an unknown brand name to put in MY computer.

    What I DO want are specific brands/models. The local companies don't carry
    the brands I like. They carry crummy quality stuff and charge more for crummy stuff
    than what I can buy a top brand, high quality item with good user reviews for online.

    If you want top quality stuff that's not stocked by local merchants,
    online is often the only reasonable option. The nice prices are a bonus.

    When I've watched folks shopping locally for computer parts, I can tell most
    are uneducated buyers. That's the only way I can see the local stores can
    sell lower quality parts for much higher prices than what is available
    online. I know I may not be typical, but there are a lot of folks like
    me out there buying online because it makes sense. We don't have a Fry's
    computer store in the St Louis area -- if we did I might pick stuff up there
    IF they had EXACTLY what I wanted at not too much higher a price.

    Also, I heard a guy I work with say he buys everything he can online
    because he hates to shop. As pointed out above, shopping online can
    save a lot of time compared to running around to local stores and malls.