Internet Marketing: Various Online Business Models

There are many different methods of generating income online. In reality, they are all very similar to the business models you see in the offline world. You can sell goods and services, you can produce products for wholesale distribution, you can sell information, you can sell tools to help people with their own business model, you can sell advertising, or you can provide consulting services.

Do you see a common theme in all of these models? That’s right: to have a viable business, you have to literally provide some kind of good or service that adds value to someone or something, whether it’s online or offline.

I believe that when people think of going offline, they look for a need in their community and try to meet it. Online, they tend to think, okay, what can I do to make a lot of money? There is a big difference between the two. Online, I think people really believe that if they put up a website and sell something, the money will just come in. It’s just not an exact thought, but I think almost everyone has thought about it at one point or another.

So in order to create an income online, you have to fulfill a need, just as you would in the offline world. You meet that need by producing, developing, distributing, or trading a product or service. That’s it. You will never earn viable long-term income from schemes and scams, no more than a bank robber will earn viable long-term income from robbing banks.

These are some of the basic business models that you can find on the web:

1) Production model. This is a company that produces value by transforming one good into another for online consumption. An offline equivalent would be a shoemaker or gold mining company. The online equivalent could be the development of new software or search technology, or the development of online technology that helps in the execution of some of the other online business models.

2) Merchant model. This is a company that specializes in sales and organizes the delivery of goods and services to an online marketplace. This can be compared to the offline equivalent of a merchant. Some examples online are bookstores, grocery stores, catalog websites, and other organizations selling goods and services.

3) Advertising model. It is a company that specializes in providing advertising or promotion services to other online firms, for example, those firms that operate using the production or commercial model. This model charges these companies a fee for advertising the goods and services provided by the other online business models.

4) Affiliate model. This is a model that resembles the advertising model, but is different in that it focuses on recruiting many individual companies or individuals to advertise in a systematic and fragmented way. Whereas in the advertising model, the advertiser is paid based on the amount of advertising distributed, the affiliate model pays the affiliate marketer when a sale or step in a sales process is completed. This step can be an online visit, a request for more information, or the sale itself.

5) Intermediation model. This model compensates the broker for bringing the buyer and seller together, usually in the form of a personal and individualized presentation. An example of this could be an online auction or an online payment processor.

6) Information model. The information business model is one in which the company provides information to a specific field or market niche. This information would normally instruct another company or individual on an easier or more efficient method of accomplishing a task, or would actually teach the task or the implementation of the task.

7) Subscription model. This is an overlay model, one that is generally incorporated into one of the other models. This model would provide a good or service over an extended period of time and would provide a guaranteed and generally consistent level of that good or service over a period of time, for example, several months. Two products that fit into this subscription model could be monthly online video rentals or services like food or medicine that are delivered regularly by commitment.

8) Utility model. This model operates in the same way that an offline utility might operate, offering a product that, through its use, has become a necessity and is often strictly controlled. An example of an online utility model would be accessing the Internet or telephone service through an online network.

9) Community model. It is a business model that focuses on bringing people or companies of similar interest together in order to develop relationships and share information. Two examples of the community web phenomenon are the newly created Myspace and the oldest online forum.

When deciding to start an online business, it is important to determine which of these business models interests you the most. Which of these models are you best suited for? In which of these models are you more likely to be considered an expert or in which would you be willing to become an expert?