Online Business Models An Introduction

Don't do what I did - decide that I wanted to make money from home by making money online and start with a blank slate. Finally after 18 frustrating months I am starting to get there - but I wish I had read this article first - this is about why having a online business model is absolutely critical for making money online.

In this article I am going to review some of the common online business models: their pros and cons and what skills you need to bring to make money long-term. Some models are easier than others - and something that may work for you longer term, but as you initially get your online business off the ground its important to make sure you pick so "low hanging" fruit - that will give you confidence, and equally importantly cash flow to move onto more challenging business models later on.

If you are not familiar with the skills that you need to bring to your online business then check out my article on Entrepreneurial Skills For Making Money Online

What is an Online Business Model?

A business model is quite simply how you intend to make money with your new business. Saying that you are going to make money online is like saying you are going into small business. Its a starting point but it needs an awful lot of refining before you actually know how you are going to make money with your online business. A practicable online business model has to something which is not only proven to make a significant amount of income.

Online Business Models - The Difficult

Making Money Blogging About Making Money Online

Starting a blog is not the start of an online business - unless you have figured out your business plan and know how you are going to monetize that blog for most people starting a blog is fun not something that is going to make you financially free. Although many beginners look to the original "big name" bloggers such as Darren Rowse at Problogger and thing gee I could do that! The reality is that you almost certainly can't compete with a blog that started in 2004 - its many years in front of yours in terms of brand recognition and traffic.

If you are already famous in the real world than starting your own blog is probably a great way to make more money - you will immediately have traffic from your existing fans. You can then sell advertising direct on the blog because of the numbers of visitors. Even if you can't write you probably have the resources to hire a ghost writer for your blog.

Its likely, if you are reading this, that you are not already a real-world super star! For most of us, without an existing "bankable brand" - starting a personal blog to make money will just end in frustration.

The worst thing though is that many bloggers gravitate toward the making money online niche, probably the most difficult niche of all to make money, because you lack the "first mover advantage" of the early bloggers and people looking for making money online are notoriously difficult to sell to - they will either ignore the ads or they will substitute their own affiliate code for a product to ensure they get a discount rather than you getting a commission.

Make Money Being Paid For Links

Frustrated with their lack of ability to get enough visitors to their blog, to make any significant money using Adsense or other affiliate programs many bloggers will turn to schemes such as pay per post (PPP). A company will pay the blogger to promote a particular product by including a link in their post. The higher the page rank (PR) of the blog the more they are paid. Unfortunately Google considers that these links are "paid links" and will almost certainly kill off the blogger's PR in the next update. You can make some easy money if you do a blitz of PPP knowing that your PR will be gone in month or two. Unfortunately the flurry of ads rather than posts will probably drive away the few readers the blog had originally as well.

Marginal Online Business Models

By marginal I mean schemes such as being paid to blog a dollar or two for a blog you do not own, or being paid to take online surveys. Most of these schemes are restricted to American residents - and although they may make you a little pocket money they will not scale up to make a significant income for someone living in North America. These business can struggle too, because even paying a few dollars for an article up front may be too much of an over-head compared to the advertising revenue that article will bring in - making the business overall unsustainable.

Making Money Online - Freelancing

Freelancing is not really the same as a business. A freelancer only gets paid because they exchange their labour for money. Stop working and the pay stops. You can develop a freelancing business where you sub-contract work to others and therefore multiple your efforts. Most freelancers never get to that stage though because they burn out much sooner. Freelancing is basically swapping one boss in a job to multiple clients all of whom think they are your boss!

Freelancing can be a step along the way to having your own business: it can be money now which you can reinvest in your own business and at the same time you are improving your own skills. Its flexible - you can pick your working hours - so long as you make those deadlines.

The most common, and most competitive freelancing skill is writing - with the large number of excellent English speakers living in cheaper countries its very difficult to make enough money freelance writing to make the equivalent of even the minimum wage in Western Countries.

Freelancers with more specialist skills may do better: designer who can produce attractive graphics and logos; those that can setup blogs for the technically challenged, those that know enough Search Engine Optimisation to advise owners of other websites. With these types of skills a freelancer can do well because they can charge an excellent hourly rate for skills which many lack online.

Diversified Income Streams Which Create Long Term Passive Income

If you have read this far - you might be wondering how on earth you do make money. Well for my money the lowest risk way to make money online is to develop a network of money making niche websites. I like this model because it combines diversification with passive income.

Don't get me wrong passive income is not the same as doing no work. You have to put the work in up front, lots of it - but once you have got your site ranked in Google you will have a continual stream of passive income which will pay you even if you are asleep or at the beach.

At you won't always pick a winner - even the most experienced Internet marketers don't claim to chose the right topics 100% of the time. Even if you do hit a home-run rules change, affiliate stop paying, or change the rules. Diversification is key to avoid being held hostage to one affiliate program or one ranking in the search engines.