Making money on the Internet is hard. Those of us who work in the “new media” business wish it were not so. We wish that we could tell people that in light of what is going on in the global economy today, their best bet for making a living is to simply get online, pick an e-commerce business model and start churning out the cash. We wish we could say these things because that is what the world really needs right now — a way for people who just lost their careers, or people who just got out of school and cannot get started in a new career, to either replace the income they used to have, or in the case of recent grads, begin earning a nice living from their online efforts right away. We would love to say that is can easily be done, but we can’t. Making money on the Internet is something that can be done, but like some many other things, it is extremely challenging.
If you know something about the history of the Internet, you might be aware that the late 1990’s was the high-water mark for Internet commerce hysteria, and the era of the original Internet bubble where almost any kind of online business idea could get funded. Quite literally, several hundred companies that obtained venture capital funding or issued stock in an IPO in the few months before the 1990’s expired have gone out of business very quickly. Of the thousands of Internet related companies that sprung up between 1995-2000 only a handful of them are still in business today. You do not need any more evidence than that to actually understand how hard it is to make money on the Internet.
Barrier to Entry
Those looking for a reason why making money on the Internet is not as easy as they are led by marketers to believe can be chalked up to simple economic principles; namely supply and demand. If you are looking to profit by providing some kind of product or service you are not going to have much luck if a billion other people are trying to do the same thing. The windup is that the Internet is an awesome universe that provides unlimited potential opportunity, and at the same time provides for unlimited competition, and it’s the competition that is what is likely standing in your way. It is hard to gain any traction when there is too much competition.
When you understand the special set of dynamics that drive Internet economics, you will quickly come to the realization that the main issue that you want to focus on is the concept of barrier to entry. In the offline world the barrier to entry could be a patent, a copyright, or a trademark. It could be your secret ingredient, your special sauce, or your “11 herbs and spices”. It is the one thing that makes you or your product different, special, and hard-to-duplicate. The Coca-Cola corporation has as its prime asset, the original secret formula for making the soft drink. If that formula were to be made “open source”, then it is doubtful that the company could maintain its dominant position in the beverage industry, because the world would be flooded with cheap soft drinks that would in theory be just as good as Coke.
In the online world your barrier to entry might something as simple as a very clever domain name. Since there can only be one of any single domain in existence at a time, by itself the domain name registry provides all of us with the means to obtain a good barrier to entry and keep out unlimited competition. Another non-tangible barrier to entry that you can take advantage of is your organization’s brand. Industry experts define a brand as “the emotional and psychological relationship you have with your audience”. A strong brand is one that elicits the kinds of thoughts, emotions, and even physiological responses it in its audience. Perhaps the most influential brand in the world at this time is Apple Corporation, and you can easily see how that brand enhances the company’s image and prospects. If you are looking for clues in this piece on how to get your hands on a workable barrier to entry for yourself, then you can begin with thinking about getting a good domain name, and a desirable brand identity.
How to Measure Success on the Internet
If making money is your goal, be advised that the Internet is a far different animal than what you might have thought it was, or what you might be accustom to in the offline world. Internet history is replete with examples of companies that were regarded as very successful even though they made no money at all. The prime example of that is Amazon.com which operated (and grew rapidly) for about a decade without making any profit at all. This is an important lesson to learn right here, because later in this piece we will try to show you how you can make money by not making money.
People who work in the online advertising industry suggest that for a website be taken seriously by them as a potential candidate for brokering ads on, it needs to garner about 500,000 page views per month. For somebody who is just getting their feet wet in the online money making game that is a pretty big number. When you break it down, it looks like this: If your visitors are viewing 20 of your site’s pages per visit, then you need to drive 25,000 unique visitors per month in order to make the numbers required to be a viable player in the online ad game, which means in real world terms, you are just barely grinding out a minimum income. Once you are here at this point in the analysis, then you are in a good position to confront the true economic realities that drive the whole of the Internet money making game, and these realities are very daunting indeed.
If you and I need to drive 25,000 unique visitors per month to make our newly minted money making website economically viable, then we have to come to terms with exactly how we are going to do that. For the most part there are three basic ways to generate the kind of traffic that we need to make our site viable. One of them costs money, and the other two require a great deal of time consuming work. So, if we want to drive traffic right away, and we have the budget for it, we can buy it as in the Pay Per Click model. The downside of this method is that it can be monumentally expensive. There are businesses right now using Google’s Adwords advertising service to buy clicks, and they are paying a dollar (or more) per click. If we need 25,000 visitors per month, and if we can get them at a cost of only 5 cents per click which is a true bargain, then we will need to pony up $1,250.00 for the first month’s traffic acquisition budget. It is of course an open question as to whether or not we will even be able to sell $1,250.00 worth of advertising the first month. If we want to continue on this path, then we need to put up the same about the next month, and the month after that, and so on. Buying traffic can turn out to be a very expensive proposition, and for many Internet business developers it is not an option.
One way for us to get traffic that we do not have to pay for is to somehow write a bunch of articles and then get them posted to the many article directories that are on the Internet. The idea behind this is to get these articles indexed by Google and the other search engines so that after being found by searchers, the visitors will come our way. Of course, exactly how many articles we need to write, and how much time we need to spend submitting these articles is unknown. What else is unknown is how much traffic we will actually get, and how long it will take before we see any. Although this method is on the face of it much more cost effective than buying clicks, the results can be unpredictable.
Still another way for us to get traffic to our site is to publish some good quality content, and then spend our remaining time creating backlinks to that content. We would do this on other websites and online forums thereby creating pathways for people who are out in cyberspace to find us. Like search engine optimization, and article marketing, link building gets us traffic for free. The problem is that we do not know how much work we need to perform before we see any traffic, and we do not know how long the process will take to work, if indeed it works at all. All the very best available evidence suggests that if you are relying upon using free traffic methods to drive traffic to your site, you have a very long road ahead of you.
Outside of the above traffic methods (pay-per-click, SEO, and article marketing), there are not many alternative traffic methods worth mentioning here. The truth is that most moderately priced webhosting plans currently available to you today are not robust enough to handle all the traffic that you need to drive anyway, therefore; there is almost no point in trying. The search engines know this and they are careful about ranking websites very high if they are ill equipped to handle high volumes of traffic. Search engines are in business to deliver a good user experience, and sending people to a site that is down more than it is up is not a good experience.
On the face of it, there seems to be little point in driving a lot of traffic to our newly minted site, but without traffic, how can we run a business? Perhaps a better way to look at this is not so much in the context of running a business, but in building a business, and that building a business takes time and effort, and that all of the little things that we do to improve our business and bring us closer to the day when it will have a lot of visitors and that the platform on which it resides can handle that traffic, and that traffic can sooner or later be converted into some kind of meaningful business activity. This is a multi-step process that can take time and during that time you are not earning any money, and this is for better or worse the real reason why doing business on the Internet is so hard.
The Flow Forward Value Creation Model
When we are working diligently to shore up the value of our website project, and we discover after some time that we are not making any actual money for ourselves, we might after a while get discouraged and start thinking about just quitting. This is how failure happens on the Internet, and failure is extremely common. People start out with good ideas and try to carry them out in good faith until so much time goes by where they subsequently run out of patience just stop. This happens every day and you can see this reflected in the sheer number of domains that are allowed to expire every year. People quit because they lack the commitment to press on until they can develop their ideas and drive all the traffic they need to make their project work. As stated above, the development of the core ideas of a project into a workable online property is just the beginning. You either have to come up with money to buy traffic, or do the work of developing it over time. When the traffic doesn’t come the developers tend to just let the projects go because they do not see any rational economic argument for carrying on.
Just because a project does not have traffic or earnings at the present time, it does not mean that the project has no value. Many of us make the mistake of thinking that the only inherent value a site has comes from its earnings power. This is not so, and our above analysis of what branding is shows us this. Our brand can have value, our unique content can have value, our ideas and creations can have value, and the unique way that we present our content to our visitors can have value. It might not make money today, but it has value today, and perhaps even more value in the future. This non-tangible value that our website project develops over time is called “equity”, and if it is money that you are after, then maybe you should start thinking about creating equity and using that as an asset that you can sell either now or in the future to get the money that you after.
Every little thing that you do to your website project to make it better increases its utility to others, and therefore adds to the equity value of it. If you were to keep up with the project long-term, it would over time have the traffic, the revenue and the earnings that you wish for. If you are not able to stay with your project long-term, then your goal should be to continue to add value to the project by improving the quality and quantity of the content, by engaging in marketing of it, or by building links and pathways to it. Each little thing that you do builds up the equity value of your project. If you cannot want for the project to begin to generate revenue and earnings, then you should be able to sell it to somebody who can take that project a little further and add more to it and thereby sell it for more to someone else and so on until the project is finally completed.
If you are trying to figure out how to make money on the Internet, then perhaps the correct course of action for you to take is to start a new project or acquire an existing project that is yet incomplete and then add value to it so you can sell it forward to somebody else who can later do the same. Each step in the flow forward equity process makes the property more valuable with a higher degree of equity, and confers upon it a higher selling price which makes the process worth it for everyone involved.