How To Start A Profitable Online Business

by: Alvin Tan

Before you rush out to register a domain name, set up a website and declare that you are in business online, do you know where your revenue come from? Can the profit sustain the business and more importantly, giving you, the business owner, the rewards you wanted. In other words, what is the Business Model of your business? Is it profitable?

You may said, “Why do I need to know my business model? I just want to make money.” Then I would ask you “How do you generate revenues? What are your costs? Who are your customers?” Or you may have a great idea that you know everybody will be crazy over it. Then the next step you need to do is to find a suitable business model to start your business.

Basically the business model shows how a business will generate revenue by identifying its product offering, value-added services, revenue sources and target customers. Some business models will fit naturally for a particular type of business. But with creativity and planning, you can add multiple new streams of revenue by combining several different models as part of your overall Internet business strategy. For example, a commonly seen strategy is for a content driven businesses to blend advertising with a subscription model.

Here are some of the successful business models found on Internet.

Affiliate Model

This model allow the merchant website to offer financial incentives for affiliated websites when they provide purchase-point click-through to the merchant.

Brokerage Model

Brokers bring buyers and sellers together and facilitate transactions in exchange for a fee.

Advertising Model

Web advertising model is an extension of the traditional media broadcast model. The website provide content or service (like e-mail, chat, forums, newsletters, search results) mixed with advertising messages.

Example: Yahoo!, Google, Overture, Hotmail

Merchant Model

Online wholesalers and retailers of goods and services, just like those in the offline world.

Direct Sales Model

This model let the product or service creator to reach buyers directly and thereby compress the distribution channel.

Example: Dell Computer

Subscription Model

Users are charged a periodic fee (eg. daily, monthly or annual) to subscribe to a service or product

Example: America Online

The above models are not exhaustive or definitive. Internet business models continue to evolve. Expect to see new and interesting variations in the future.