How To Make Money Online
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Fifteen billion smackers: That's the value Microsoft
recently slapped on Facebook when the computer giant invested $240
million for a 1.6% stake in Mark Zuckerberg's online social-networking
site.
You could seethe with envy--or you could chase your own fortune on the Web.
Some
online businesses require only a few hundred dollars in equipment,
while others demand significant hardware and perhaps even a warehouse.
Some might make you rich; others might just cover beer money. And all
involve various levels of time, capital and technological skill.
"Some people have dreamed about owning their own business and
have not followed through because of the investment in resources," says
Jim Griffith, head of eBay University, for those aiming to set up shop
selling goods at the online auctioneer's site. "The Internet allows
people to at least try without making a large initial investment."
Army
veteran Brandi Ramos of Springfield, Ill., did it. As a single mom in
need of extra income, she started her online retail career peddling "big
and tall" men's clothing on eBay.
Three years later, Ramos, 32,
makes a good living working online out of her 600-square-foot basement
packed with hanging displays and baker's racks piled with tupperware
containing underwear and belts. Ramos aims to offer quick service,
answering all e-mails within four to six hours. She claims to net
$25,000 on $100,000 sales a year, and even earns a few bucks per order
on shipping.
If managing inventory seems too big a chore, play
virtual landlord and charge other retailers monthly fees (or
per-transaction fees) for the opportunity to market their products on
your site. Amazon.com
(nasdaq:
AMZN -
news
-
people
) nabbed 28% of its revenues this way in 2006.
Craigslist
is another take on this model: The 25-person company, worth a reported
$2 billion, charges businesses to post help wanted ads in San Francisco,
New York and L.A.; it also collects fees for apartment listings in New
York City. Total page views per month: about 5 billion.
Then
there's every pajama-clad blogger's dream: producing content supported
by advertising dollars. Selling advertising is how thousands of
established online media outlets pay their electric bills. They charge
advertisers two ways: by the number of overall Web pages (called
"impressions") served up, and by the number of people who click on the
ads.
Setting up a blog requires not much more than a basic
publishing program, a server and software to track ad clicks. The hard
part, though, is attracting enough eyeballs to make it worth someone's
while to pay to advertise on your site.
To have any prayer of
attracting large advertisers, sites need to attract at least 500,000
unique visitors per month, says David Hauslaib, publisher of Jossip.com,
a media and gossip blog that counts Coca Cola
(nyse:
KO -
news
-
people
) and Sketchers among its advertisers. Sadly, even if you do
generate enough traffic, the "click-through" rates on ads tend to be
quite low--in the neighborhood of one half of 1%.
Subscription-based
models are even harder to crack. Unless your site fulfills an urgent
need (for tangible investment ideas, a potential mate, etc.), users
aren't likely to pay for the content.
One way to garner
subscription revenue is to run a virtual marketplace. These sites
collect by allowing buyers and sellers easy access to each other. Many
of these marketplaces flamed out in the dot-com bust, but some persist.
Mfg.com, for instance, matches equipment manufacturers with smaller
component suppliers. Dating sites like Match.com charge subscription
fees for access to their members. And H2Bid.com links municipalities
with wastewater-equipment vendors.
As with tangible real estate,
you can buy virtual plots (URL addresses), flip them and make a buck.
GoDaddy.com sells unused domain names for under $10 dollars apiece. To
attract buyers, run tests to determine how often certain key words are
searched so that you can demonstrate the likelihood that your URL will
show up in a Google
(nasdaq:
GOOG -
news
-
people
) or Yahoo!
(nasdaq:
YHOO -
news
-
people
) search. One tip: The best domain names are short, sweet, specific and easy to remember. (For more on this model, check out "Meet Noah Of The Internet" and "The Most Expensive Web Addresses.")
As
Internet usage grows, so too will the sophistication of online business
models. Take 3-year-old Yoonew.com, which sells futures contracts on
sports tickets.
Fans buy the right to take delivery of tickets if
their teams make it to a coveted playoff game, perhaps months away.
Given the uncertainty of the bet, those contracts sell for a fraction of
the future market value of the underlying tickets. If your team makes
it to the big game, you've locked in a cheap seat; if it falls short,
you lose that insurance premium.
Yoonew makes money when the
revenue it collects from selling all those contracts exceeds the cost of
delivering a small number of very expensive tickets on game days. The
danger: If ticket prices spike, or there are no seats available, the
company could suffer a loss or alienate its customers.
Sure, you can make money online. But no one said it was easy.
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