There are four main approaches when discussing online business models.
1. Selling your product through your platform (website).
2. Selling others’ products on your platform and getting a commission.
3. Having others sell your product and giving them a commission.
4. Selling others’ products on a third-party platform – for example, reselling products that aren’t yours on Amazon or eBay and making a profit.
The most viable and safe approach, in the long run, is to create your own platform and build your own audience. The most lucrative model within that approach and the one that will grant you the most control is to sell your own products or services. The approach that would give you the least control over your income is the fourth one, selling other people’s products through a third-party platform. However, these models are not mutually exclusive, and you should use more than one method to generate revenue.
Here’s an overview of the main online business models:
If you have a particular skill like copywriting, video editing, or web designing you can offer your expertise and get hired through platforms like Upwork.com, Freelancer.com, Guru.com, or even through your personal website.
The downside of freelancing is that even if you are location-independent (can work from home or anywhere), you’re still trading your time for money. Unless the work you do is very highly paid and you don’t need to work too many hours to generate sufficient income, you might not achieve the lifestyle freedom you’re aiming for.
2. Online Consulting
If you’re a coach or have a certain type of expertise, you can sell online consulting services over the phone or via a system like Skype.
Keep in mind, however, that the same thing is true for online consulting as for freelancing you’re directly trading your time for money. However, since private consulting is usually very well paid, you might not need many clients to live well.
3. Creating and Selling Your Own Digital Products
As previously mentioned, this is usually the business model that generates the highest revenues. The most common products sold online include eBooks, audio tracks, and online courses. You can sell them on your own website, through other people’s networks, or through platforms like Gumroad.com.
4. Affiliate Marketing
Affiliate marketing is a partnership between a business that has a product to sell and another business that agrees to promote that same product in exchange for a commission.
Affiliate programs can be used in two ways:
1. Recommending other people’s products to your own audience and receiving a commission for each sale you make. This can work very well if you already have an audience that trusts you and you have built an email list.
2. Letting others sell your own product, and offering them a commission for each sale they make. If you have the expertise or knowledge needed to create a good product, then creating such partnerships is an effective way to increase your sales, since you’ll reach a larger audience. It’s also a good method to expand your brand awareness.
Generally, affiliate commissions for digital products vary between 40% and 75%. Why such a high percentage? Because once created, digital products don’t cost anything to reproduce. Thus, for the product initiator, this means generating extra sales at no extra cost.
Affiliates can be a great way to generate a significant income. It’s a very genuine form of advertising since you only recommend products that you sincerely believe your audience will benefit from.
5. Sponsored Articles
If another entrepreneur shares the same target audience but offers products or services that are complementary to yours (not in direct competition), he or she could write an article on your blog subtly presenting his/her company or product. The other entrepreneur can pay you for the opportunity to expose his/her brand to your audience.
6. Membership Websites
In this case, the buyer (member) pays a recurring fee to have access to information, a product or a service. One thing to consider with such a business model is that it requires you to constantly add new content to justify the recurring cost. I personally believe that it’s easier to start by creating single products before considering launching a membership site, which is more work.
Most forums are free to access, but some are private and require a fee to join. This business model is built around the value of being part of a community. Forums can take a significant amount of time to build and attract enough members to generate considerable income.
Brokers are basically connectors. Choosing this type of business model means creating an exchange platform and receiving commissions for transactions or simply charging a fee to the seller and or buyer.
Sponsorship is a type of advertising in which one gives money in exchange for exposure and visibility.
For example, the most popular podcasters generate revenues for their show through sponsors. They mention the show sponsors during the episodes and give them increased visibility. This is also a business model that is often used with live events.
Another business model involves renting advertising space on your website to businesses that have a specific message for your audience.
When you’re just starting, the simplest way to do this is to use third-party advertising platforms. These serve as intermediaries between advertisers and site owners. As a site owner, you set up an account with the third-party ad platform, place ads on your website, and collect revenues based on ad impressions or clicks. The downside to this method is that you give up some revenue to the third-party service provider.
The most common ad platform used for this method is Google AdSense. It’s very easy to set up simply create an account and follow the directions. To maximize the effectiveness of this business model, you should choose to display contextual ads—ads relevant to the topic of your site. You can select this option in your AdSense account.
You could also sell ad space directly to businesses. This method will generate higher revenues since you don’t need to share with an intermediary. However, you need a significant presence for this option and considerable traffic to attract advertisers.
Advertising can be an interesting model if your site gets a lot of traffic. However, since it’s rarely a sufficient source of income by itself, it’s usually used as a complement to another business model.