Online business models have evolved and have grown with advances in digital technology. Indeed, the digital platform is giving everyone with internet access the opportunity to earn extra money or even to become very rich.
Let’s have a look at some of the established online business models to see how they fare in you quest to becoming a millionaire…
The Affiliate model
With affiliate marketing, you can earn an extra income and even a full-time income from home. To that end, affiliates are people who agree to sell a product (or service) online for free. Indeed, the key to creating a successful affiliate business involves developing an audience interested in a particular topic and then finding and recommending products you think they will like 1.
An affiliate’s payment is based on commission from the company they are an affiliate of. Affiliates may also be paid via an affiliate marketing program or networks.
Radhika Basuthakur writing in Affilorama suggest to following to start an affiliate website:
- Choose your niche.
- Research different affiliate programs and products.
- Build a site.
- Produce excellent content.
- Build an audience.
- Promote your affiliate product(s).
- Repeat steps #4–7 on a continual basis!
The pros and cons of the Affiliate Online Business Model (The Balance):
| PROS | CONS |
|---|---|
| No need to create a product or service | It may take a long time to generate enough traffic to start earning an income |
| Not necessary to have stock or to ship products | No control over the businesses' product, service, or the way they do business |
| Work anytime from anywhere with internet access | High competition |
| There’s a potential of passive income | Customer belongs to the merchant |
Affiliate marketing is a multi-billion dollar per year industry and over the next 10 years, it is projected that companies will be spending much more to develop affiliate partnerships than they are today. However, it may take years for the average affiliate marketer to make their first dollar (if they ever make anything at all).
But then, there’s that story about the affiliate earning hundreds of thousands of dollars within one year of starting. That’s not impossible, but rather improbable for the average affiliate. For us (the ordinary people), success only comes after a series of failures, hard work and persistence…
Here are links to popular Affiliate Programs (OutBrain):
- Amazon Associates – is a great platform to kick off your new venture.
- eBay Partner Network – is simple, and there is a never-ending supply of interesting products to promote.
- ShareASale – is one of the largest affiliate networks out there, running for nearly two decades, so it’s built up a lot of trust in the affiliate industry.
- Fiverr Affiliates Program – bills itself as the world’s largest digital services marketplace, with over 11 million users in 190 countries.
- Affiliate.co.za – is an affiliate network that serves the South African market.
Read more: Affiliate Marketing – Let other people help to market your products
The Membership model
A membership model has two characteristics. To run it, you have to:
- Charge a monthly (or annual) fee
- Supply content that keeps your member interested
The content that you supply can be informal, or you can organize into specific courses.
A membership site is a gated part of your online business where only members who subscribe can access the content you’ve placed behind the gates. So, a “gate” is simply a barrier you build into your website using a plugin.
The pros and cons of the Membership Online Business Model (MysTech Dynamics):
| PROS | CONS |
|---|---|
| You can guarantee an increase in profit (by virtue of your required membership fee). | You have to generate interesting and timely content regularly. |
| You can obtain useful information about your audience to generate better content. | You have to keep up with your site’s comment or forum section. |
| You can keep your audience up-to-date with your brand’s latest developments. | You have to address member queries, comments, and complaints. |
| You automatically acquire user following and patronage. | You have to implement rigid regular site checkups to keep your password-protected areas secure as system issues and hack attempts can destroy your reputation. |
The subscription model is a booming field. In recent years, this market has grown by more than 100% a year, increasing from $57 million in sales in 2011 to $2.6 billion in 2016, according to Zuora CEO Tien Tzuo in Stanford Business.
It seems that to run a successful Membership site, members will only continue paying their subscriptions for as long as they’re getting value. Therefore, you need to show up and deliver on an ongoing basis, creating new content and interacting with your community. After all, they’re paying regularly, so you need to deliver value regularly.
Most online businesses in future may be using the Membership business model.
The Aggregator Business model
This model allows people with similar skills to access a business framework to display and sell their goods or service. Indeed, this framework allows people to avoid having to set up their own shopping carts and customer-service mechanisms.
How does the Aggregator Online Business Model work?
Theoretical explanation of this model is simple (Feedough):
- Aggregator visits the Good/service providers.
- Aggregator promises them more customers and proposes a partnership plan.
- Service providers are now the partners.
- Aggregator builds up his own brand and tries to attract customers through many marketing strategies.
- Customers make purchases through the aggregator.
- Partners get the customers as promised.
- Aggregator gets the commission.
Examples of online aggregators are Uber, Ola, Oyo, Munchery, etc.
The Aggregator Business model requires its owners to spend a lot of money to get the brand recognized and trusted. You need extraordinary marketing and people skills to succeed with this online business model.
The Online Retail Model
A vendor offers goods available online and ships them to a buyer. Additionally, the vendor may also have a group of vendors who supply his goods, which he then ships.
For example, drop shipping is an online retail model that is considered as a medium-risk business. In fact, most of the money in this business model is spent on advertisements because drop shippers rely on paid marketing efforts to sell their products.
The pros and cons for the Online Retail Model (In Business Info):
| PROS | CONS |
|---|---|
| Easy access to market - in many ways the access to market for entrepreneurs has never been easier. | Website costs - planning, designing, creating, hosting, securing and maintaining a professional e-commerce website isn’t cheap, especially if you expect large and growing sales volumes. |
| Reduced overheads - selling online can remove the need for expensive retail premises and customer-facing staff. | Infrastructure costs - even if you aren’t paying the cost of customer-facing premises, you’ll need to think about the costs of physical space for order fulfilment, warehousing, and returns. |
| Potential for rapid growth - selling on the internet means traditional constraints to retail growth – e.g. finding and paying for larger - are not major factors. | Security and fraud - the growth of online retail market has attracted the attention of sophisticated criminal elements. |
| Widen your market / export - one major advantage over premises-based retailers is the ability expand your market beyond local customers very quickly. | Legal issues - getting to grips with ecommerce and the law can be a challenge that you’ll need to be aware of. |
| Customer intelligence - ability to use online marketing tools to target new customers and website analysis tools to gain insight into your customers’ needs. | Advertising costs - while online marketing can be a very efficient way of getting the right customers to your products, it demands a generous budget. |
| Customer trust - it can be difficult to establish a trusted brand name, especially without a physical business with a track record and face-to-face interaction between customers and sales staff. |
Read more: Drop Shipping in 2017 – Opportunities and Turbulence for Retailers
Concluding
If you want to seriously make money online, you need to have the mindset of a business person. For that reason, formalize your business, draft a business plan, implement your strategies and measure your results. As with almost everything in life, online business models are not a quick way to get rich.
In fact, only a small percentage of online business startups generates income and continues to do long-term business.
Read more: Planning Your Online Business
A well researched and written Business Plan helps to get your business started the right way.
Note
1 Patrick, Z. and Hee, O.C. 2019. Factors Influencing the Intention to Use Affiliate Marketing: A Conceptual Analysis, International Journal of Academic Research In Business and Social Sciences, 9(2):701-710