The second way to make money online is by selling a product.  This is pretty straight forward.  You produce and sell or resell something.  The trick is doing it.  Getting a well functioning shopping cart service and interested buyers can be very challenging.

The fact is anyone, anywhere, can sell products online.  Auction services like EBAY are full of people that have made a business or hobby out of reselling products they procure.  However, I’m going to be focusing on businesses that are selling product from their own site or have some kind of store feature through EBAY or Amazon.

Traffic comes into play again as you have to have marketing tactics that will bring people to the site that are interested in the product.  Some of these can piggyback on EBAY or Amazon.  Those sites have significant traffic and will let vendors list their products on the site.  There is nothing at all wrong with this, the problem is that it’s hard to build up your business in this way.  Buyers are usually oblivious as to who they’ve bought from and it severely limits ongoing relationships and return buyers.  In Amazon’s case many users are unaware that the product was not bought direct from Amazon.

So the alternative is developing your own e-commerce solution.  The challenge is flipped here.  You have every opportunity to build a relationship and manage the buying process, getting people to the site can be more of a challenge.  There are many tactics to choose from, some examples being, pay per click ads, organic search engine optimization, email marketing, direct mail, advertising, etc.

Assuming that you drive traffic to the site, making a business thrive on product sales is often a challenge in streamlining the buying process.  People need to be convinced to buy, feel secure that the business is credible, and confident that they will receive their item in a timely manner.  Testing plays a big part in optimizing a shopping cart to suit all these needs.

Obviously there is a lot to talk about on product but as an overview, anyone that has a product to sell or resell can leverage that to make money on the internet.

Traffic is typically the business model for hobbyists and “web ventures” though some companies try to leverage it as revenue.  Sites that predominately rely on traffic for revenue rarely promote their own product or service.  Typically the site is designed to fill a niche.  The really successful ones make up the rags to riches stories that every web venturist dreams of. 

So  where does the money come from.  One of two ways:

1. Selling advertising space.
2. Referral linking for commission.

Selling advertising is the most common by far.  With Google Adsense making advertising easier than ever, any person can attempt revenue generation from ad space with little effort.  A site owner doesn’t have to sell the deals, Google will do it for them.  Sounds great right!  Here’s the catch (there always is one), most people make next to nothing, or nothing, on their advertising.  Google will place the ad but if no one clicks on it you get a whopping goose egg for payment.  Hence traffic makes revenue.  The more people to the site, the more chance an ad gets clicked, the more revenue generated. Google will do it’s best to put relevant adds on your site but that puts the responsibility on you to have a target audience.

Referral commissions are similar, and also have broker companies.  (Fair warning, many of these sites are scams and want sign up fees.  Once you sign up and pay your money you get exactly nothing in return).  However, there are some legitimate services that sell product through referral links.  Some type of ad or link is placed on your site, visitors click it and go to the sponsor, if they buy something and it’s tracked to your site, you’re paid a commission.  You essentially take on the role of lead generator for someone else and it’s up to you to compel visitors to get there from your site.

Both methods have two critical problems.  The first is that visitors tend to be less and less likely to visit ad links, though Google is beginning to buck this trend.  In the case of referral commissions, they are even less likely to click and buy.  These resistances make generating significant revenue challenging.  The second problem is generating enough traffic to make it a viable revenue stream.  Let’s be honest, many of the successful traffic and social sites are lucky.  There was no in depth analysis done to accurately gauge a market deficiency.  Someone did a project or started a site because it was fun, it happened to hit a niche, the site owner was smart enough to develop that, and the business took off (read the link above for a case in point).  Predicting social media hits is extremely challenging, I can’t do it, any honest internet marketer will admit that they can’t as well.  The odds are similar to predicting the lottery, that few social or traffic driven sites succeed.  This is not a knock on social media marketing, which can be a valuable piece of a marketing matrix, it’s a knock on building a business that is social media or generating revenue solely based on traffic.

The point is that traffic can be turned into money.  New and better tools are available to do it.  However, building a sustainable business from it is hard.  If it wasn’t everyone would have advertising revenue flooding in from their site.  If this is your goal, two pieces of advice are prudent.  First, be passionate about what you’re creating because financial success could be a long time in coming.  If you enjoy the project and learn, that can be the fulfilling part.  Second, put the work in.  These sites succeed from good content for a solid niche market.  If you are knowledgeable enough in a specific area, people will be interested in your content.

One final thought, if you’re toying with using this a secondary or tertiary revenue stream, think through it.  Advertising can undermine credibility for the wrong market and end up costing a lot more than it brings in.

This is the most common thing I hear from people with a “web idea”:  I build this or that, and make money on the internet (subtext: I should be a millionaire within the year).  While there is money to be made on the internet many people have been brainwashed by dishonest ads and get rich quick schemes.  The internet is like anything else, money can be made with a good idea and work.  It’s not going to fall into your lap just because you make a website or application.

So in an effort to debunk some get rich quick notions I’ve broken down legitimate opportunities into 3 categories and explain how people actually make money through the internet.

1. Traffic
2. Products
3. Services

I’ll break each one down into categories in the coming posts and show how each one has potential but also takes time and effort, sorry, I don’t have an incredibly easy way that anyone can make $20,000 a month.

There is a common misconception of internet and online marketing that it’s only for global customers.  It doesn’t apply to businesses that only have local clients and customers.  This thought is dead wrong, focusing on a local market changes how a site should be structured, but it should still be a featured piece of the marketing mix.

While it’s true that the world-wide web is world-wide, that doesn’t mean you can’t focus your site to appeal to your immediate geographic area that’s on the web.  Think about it, many major e-commerce and online sellers already do it.  Auto sites let you search by area or zip code, eBay will show you local listings if you prefer to pick items up , and small businesses featuring services to a set geographic location have successful internet campaigns.

How do you cater to your local market?  First make sure your site is set up so people can see where you are located, if done properly it will help search engines do the same.  Tie your site in with your other local marketing campaigns, direct mail, flyers, ads, etc.  Finally SEO can make a big difference.  If you are only interested in people finding you in a certain area it eliminates search engine competition.  With some effort your site should be ranked first for your product or service within a set geographic area, zip code, or area code.  Don’t waste the opportunity, if you’ve got a local market that you aren’t reaching through online media, start.

This will have tips on online marketing usually focusing on email marketing.  Use the tips to tweak your campaigns and increase your responses.  Also feel free to sign up for our monthly newsletter if you find you still crave more internet and email marketing knowledge.

 – Eric