Web Business Models

I’m trying to diversify my sources of online income and came up with the following types of sites for creating online revenue

1. Advertising Based
Content or free service sites that generate revenue from advertising and affiliate sales, e.g. www.about.com

2. Affiliate Stores
Promote affiliate programs for commission purposes e.g. www.cl0.com

3. Actual Stores
These stores sell there own goods either from their own stock or via a drop shipper e.g. www.amazon.com

4. Paid Service Sites
Provide a chargeable online service, e.g. www.ebay.com

All types of sites could also use other revenue generating mechanisms; an online shop could also be host to Adsense for example. I’d like to hear other members opinions on types of sites I may have missed and what sort of site you’d expect to be able to make the most profit out of, IMO it would be actual stores and paid service sites, neither of which I have (yet ).

 

Our company has the first three on your list with the Actual stores (4) bringing in the most money with the advertising based sites bringing in a decent revenue as well.

 

Thanks for the reply, pleased to hear others diversify also. What I like about 3 and 4 (should go back and number them) is that you can actually buy traffic (Adwords) and still make a profit (hopefully). So when launching a new site you don't necessarily have to wait for organic traffic to build up.

 

I currently have all 4 of your options which you are right to pursue.
With that balance you can become less dependant on google for example.

From the 4 I received around 50k visitors with around 9k from google which shows after a few years you can get a lot of traffic from links/bookmarks etc.

My income breakdown is roughly;
1/ Advertising based 35%
2/ Affiliate 6%
3/ Actual Store 7%
4/ Paid services 52%

However I have only recently started the actual store just over a month ago so it has a lot further to go.

All 4 services are provided on the one website, there was no need in my case to create 4 different sites.

The only thing that I would add to your list is that included in my paid services income are subscriptions, a subscription based service is a very valuable thing for many obvious reasons.
.. Visitors come back to the site naturally after bookmarking you
.. Growing your customer base gives you projected income in advance dependant on your subs renewal period
.. Repeat billing
.. When your subscribers visit you can always benefit from adsense/advertising income.

 

I have 1 and 3 but I find the actual product way more profitable. Its at least 95% of my income.

I think too for someone with a traditional business background, its the easiest as you could be completely successful without a bit of SEO. You can use all the traditional methods of marketing and be very successful.

Its the choice of product where most have trouble though as the less unique your product, the smaller the profit margins.

 

I never thought of a subscription model, and your right it does have a fair few appealing features. I already have a number of sites in my 1 and 2 categories and have plans for future sites in 3 and 4. I’ll now try to get the back burner creative juices flowing on a subscription based idea

yfs, with your shop do you dropship or wholesale, and if you know, would you mind sharing example gross profit margins between the 2.

I think my 3 month sabbatical is going to be a very busy time.

 

For my actual store I looked into drop shipping but the margins were quite low.
I also found a supplier who could deliver within 1-2 days so initially offered items for sale that were not held in stock but this came back to haunt me pretty quickly when the supplier had problems and orders were not being shipped as quickly as I would like so all products are now in stock and the online shop has accurate stock figures, which makes for a less stressful time of it.

I have also done a few wholesale orders still making around 50% profit on them and 200% profit on retail.

 

I agree with the low drop shipping margins as sji stated. I only tried that for a short time but it wasn't my cup of tea.

If I was to pick the perfect product it would have to have these characteristics:
1.) Be shippable and stockable by me (which knocks out dropshipping)
2.) Be unique (easier said than done)
3.) Be light - To compete worldwide, shipping costs can't knock you out of competition
4.) Appeal to more than a local market

My biggest two problems with a dropshipping situation is reliabilty and originality. Most drop shipped products can be sold by anybody (and often are) which means little or no profit.

 

I make 100% of my money from my own consulting business. My websites have yet to make any reasonable dent in my income, but I'm hopeful.

My web conferencing/teleconferencing business is per-minute, and for the most part my customers are loyal. It takes a bit of work to pick up new clients however.

My ultrasound center had nearly a 100% conversion rate from local visitors when we were open. Our site was simply much more informative than any of our local competitors. The way I tracked that was by search terms with cities. We made good money, but we ended up closing it down because a) it was much more work than we had anticipated, b) 3d ultrasounds became a political issue with some bad publicity that hurt us, and c) we experienced a miscarriage ourselves and that took ALL of the fun out of the business. Still, it was an amazing business to be in, with almost everybody amazed at the technology. You can't beat being able to see your baby smile while it is still in the womb. Had we stuck with it, I believe I could have closed my consulting business by now.

My weddings site is still in a very preliminary phase, and we expect most of our income to be advertising based, but we will expand greatly beyond the pay-per-click model so as not to rely on adsense as our sole source of income. I think advertising options greatly open up when you have a dedicated niche market community. Once all of our tools are released, we will be replicating the solution across several vertical markets to maximize the potential of my work.

I'm weary of stocking items because I don't truly understand the business model. I've been building software for so many years that the intricacies of tangible product management have escaped me and without a thorough understanding of the niche I don't think it's easy to maintain a long term success. If I happened to see an opportunity with a new or niche product like boobie beads, but with a larger target audience I would jump on it, but trying to maintain a variety of products within a niche is dangerous if you don't really understand the niche. You could think you are getting a great deal on a hot product and it turns out it's on it's way to a major price cut or it's popularity is on an immense downslide. There are also quality control issues throughout the electronics arena and that would probably be the marketplace I know best.

As it stands right now, I'm one of maybe 2000 consultants with expertise in the software I work with, I'm one of the first 100 ever certified and I'm one of very few in the industry who understand peripheral issues like networking, web development, security, etc.; I have social skills; and I document my code like a madman. The downside of course is that my customers are all out of my local area and with the kids at home I want to minimize my travelling. Nobody in my family works for anyone. We all own our own businesses. I'm loathe to open up a franchise because you end up paying so much and getting so little in return to start out. While professional services has paid off for me, I think the web marketplace is a good spot if only I can make a solid run at it. It offers me the ability to set my own hours, work on what interests me, and make a positive impact on a large number of people.

My planning is long term. I have dedicated servers as a result of my other businesses, so web space and bandwidth is not so much of a problem. When I first started getting into SEO I read the Google Hacks book, which pointed out 15 or so steps to 15,000 visitors. Off the top of my head I forget what they were, but the main aspects being: update your website regularly, provide a free service, build a community, use proper SEO practices.

I think I have some fairly decent ideas that will bring me more than 15000 visitors a day once I implement and promote them, and extrapolating the income potential based on conservative advertising estimates I should be able to replace my current income within a year or two. My ideas don't necessarily revolve around a particular market niche, so 1) I can expand beyond my currently targetted base, and 2) I can be fairly certain that if somebody comes out with a better idea quicker I can still maintain a decent position by widening my audience. My Keys to success are innovation and motivation. I really should emulate shawn a little bit more by evaluating the amount of time it takes to accomplish something versus it's benefit to me, but I'm still learning and I get stuck on some stupid tasks frequently - like finding a better solution to a problem I've already solved.

Anyhow, more info than you asked for, but I got to babbling and here we are .

I'm thankful for this community because I see several people sailing the same winds of challenge. Many much further along than me, some not quite where I am at, and several in the same exact position. Almost everybody is helpful and I think the power that we have to help each other out is pretty great.

 

Thanks for the monster post Stephen, it makes interesting reading. I always enjoy your long "babbling" posts. I feel guilty replying with a 2 liner.

Time management could certainly turn into my worst enemy when working on my own stuff, I too frequently find myself re-doing stuff for no financial gain, must slap myself out of that habit if I find myself doing it.

 

If you were to add:
5.) Would leverage my existing resources.
6.) Would have considerable up-front costs; but once these overhead costs had been covered, would carry huge marginal profits.

then, you have just defined what an an ebook should be.

Ebooks don't fit comfortably within dct's five categories (possibly #2 if also distributed through Affiliates). However, yfs1, for example, I am sure could pull several ebooks together from the contents of his existing article site - anthologies of articles on some heavily searched and in demand themes, with articles as "Chapters", but with the full attribution and signature box live link structure retained to keep the authors happy.

Now my own experience with ebooks has been very disappointing. But then I don't yet know my RS from my elbow when it comes to website design, traffic generation, copywriting, payment systems, secure sites, etc., etc., ...and you guys obviously do.

Maybe another revenue source (if not complete business model) worth considering?

 

OK, here is a question, please don't be offended, but many don't understand percentages when it comes to sales:

What is the math to figure 50% profit and 200% profit?

(I will give the answer later...)

 

Retail 200% profit for me would possibly differ for someone else.
When I say 200% I mean

Product costs $3, shipping $1, miscellaneous/advertising costs $0.50
Selling price $13.50
$13.5-$4.5 costs = $9 profit
$9 profit = 200% of cost

That will differ for others as my time running this store does not affect my other income, therefore I do not need pay a wage etc that has to be incurred in working out net profit.

If you want to do a different math and call it something else feel free, either way I am very comfortable with my business model and profits.

I would be happy to hear your definition, when you say you will give THE answer later I think it would be better put that you will give YOUR answer. We can all judge rather than prejudge success in a variety of different measures.

 

Sorrow about making me sound like a judge, I just hate it when someone says 100% profit when they are getting a fifty percentile. You can go rounds with someone until you show them the math.

It also depends on how you word it like you did. But I had to ask.

$100 item divide by .5 +$200 retail price (or keystone)

You are also talking more of a gross profit (before taxes if you pay them)

Also, much of the time the freight is kept seperate at the sale end of things, but obviously you know something about what you are doing.

I was waiting for the answer of $5 item sold for $15, not to mention freight costing $7 of that, etc.... Some people are totally clueless to how much they made. Kind of like some newspaper routes that someone made $100 for 4 hours of delivering and they think they made $25 An hour but forget to figure they pay for gas, etc and gas is 2.50 gal times 5 gallons, plus they spent 1 hour prior to prep the paper to deliver, etc

What suchs sometimes working for yourself is putting in long days and doing the math and you made $5 hour. Hopefully it pays off later but I have done that at times.

 

From what I have gathered through my reading of forums, is that if you can build a very sucessful content site you can then drive traffic to your stores and service sites.

 

Your right, I put that poorly sorry , I know often people dont do the math properly and misuse profit terms. Macro over at sitepoint loves jumping on posts where people sell sites and misuse the term profit which is easy to do.

When your a webmaster and put in hours of time and do not keep accurate account of your costs/time it can vary perceived profits greatly, which I think was the basis of your post, which is quite correct.