How does everyone make money on internet
At Specrom Analytics, this is one question that we keep getting at almost every startup accelerator and incubator events we go to:
"How do I monetize my website/app?"
"I get tons of great traffic from OECD countries such as US/EU but I don't know how to monetize it"
A variation on the above question is:
"Can I tell how much revenue/profit a website makes by just looking at it?"
Well let us walk through all the major ways people make money on internet and walk you through all of it.
1. Sell something
Well, this one sounds obvious, right? you can become a billionaire by just selling “something” on Internet. What is that something you make ask, well Duh! the same stuff you can sell in brick and mortar setting.
This category is more formally known as “Ecommerce”, or “Internet commerce” and refers to the buying and selling of goods or services using the internet, and the transfer of money and data to execute these transactions.
Let us subdivide this into further categories so that it’s easier for you to follow along.
1.1 Sell physical products
Physical products are anything you can hold in your hands. It can be anything, really, from specialty organic foods you can buy at Whole Foods to used dashboard speedometers on the 1977 Mustangs that you found in the local junkyard to the old floppy disk of the game Doom you found at the local flea market.
The only requirement here is that the product must be in physical form and that you will need to physically send it to your buyer.
This is obviously a huge category, and you can enter this market by becoming a third party seller on Amazon or join their fulfilled by Amazon (FBA) program and simply be a dropshipper.
If your niche is more suited for Ebay than its pretty easy to become a seller there too. If you are in arts and craft niche than Etsy may fit the bill.
A lot of our clients also run their own ecommerce sites in addition to selling products on Amazon. There are lot of reasons why people do this, but a major motivation is saving on 10-30% platform fees by selling to the buyers directly.
Shopify and Woocommerce are one of the biggest ecommerce plugins to run on your own site. There are advantages and disadvantages to both of them and there are some better alternatives out there but that is out of scope for this article.
1.2 Sell digital products
In so many ways, selling a digital product such as a Ebook, or a software application, is pretty much the same as selling physical products. The only difference here is that you get a lot more places you can sell your product.
1.2.1 Sell an Ebook
If you have a Ebook for sale, you can head over to Kindle direct publishing, create your book and selling it on Kindle. You can also go to other self publishing platforms such as Lulu or Leanpub.
Traditional publishers are still a major force in ebooks and it will be a good idea to approach their acquisition editors and send in a book proposal.
You can also sell your pdf guide on places like Fiverr, indeed, I know a particular seller there who has made about $3k selling a pdf How to guide there. Usually, in my experience, people sell pdf guides on Fiverr not just to make money through it but rather as part of their lead generation strategy.
1.2.2 Sell your online course or tutorial
You can take your ebook business one step further and create entire courses or tutorials for the subject of your choice and sell it on your site. You can also use a site like Clickbank and use the available affiliate marketers there to sell your course.
This is a huge business globally, and there are thousands of courses listed on platforms such as Udemy, Udacity, skillshare etc.
1.2.3 Sell a downloadable software
This includes anything which the customer installs on their own computer, smartphone, tablet or server. You already know that this is how Microsoft made the big bucks by selling windows operating systems and MS office. In B2B enterprise lingo, we refer to this category as On-premises software or commonly shortened to on-prem software.
Selling your app on Google play store for android and apple store for IOS smartphones/tablets is also pretty much a proven business model. Google chrome addons can also be monetized.
But if you are a small business, you might be thinking that the market is saturated by these big players. Well, that’s not entirely true.
You can still sell a downloadable software such as a wordpress plugin, theme etc., software widgets, Excel macros etc. You can check out how popular these products are by doing a simple Google search.
Indeed, lot of freelancers on upwork and elsewhere start packaging their most popular services into “products” and sell it on various marketplaces such as codecanyon.net.
Certain products such as enterprise level databases such as Oracle can also be monetized it by selling one year licenses with additional fees for continual support.
1.2.4 Server based products
We define Server based products as software running on your server and communicating to your client through Application programming interfaces (APIs) or other programming constructs or communication protocols such as FTP, SSH etc.
Infrastructure as a service (IaaS) and cloud computing providers such as Amazon Web services (AWS), Azure etc come under this category. Platform as a service (Paas) providers such as Heruku also make money through this category.
If you haven’t worked with categories described above than don’t fret, I have left the largest and most commonly used server based product last, which is none other than Software as a service (SAAS). From your backup provider such as dropbox to enterprise email mailbox, tax preparation software such as Turbotax to Microsoft office 365 all belong here.
As a small business or a startup, you can still enter this field with low barriers to entry by getting your product listed on marketplaces such as aws marketplaces, rapidpai, algorithmia.
2. Services (aka Work for hire)
This is a broad category intended to capture almost all kinds of work you do to meet client specifications. For example, your Uber driver is performing a service for you as a client taking you from point A to point B.
All kinds of freelancing jobs available on Fiverr, Freelancer.com, Upwork, Guru, Peopleperhour fit this category. On the low end of the spectrum, you can do Amazon Mechanical Turk jobs. One the higher end of services spectrum, you have platforms such as Toptal which target higher value jobs.
Online tutoring, in person training seminars etc are also type of service. Don’t forget consulting, including phone consulting on clarity.com, to make more money.
3. Make money by becoming an Affiliate Marketer
Affiliate marketer, commonly known as “publisher” in context of affiliate marketing, earns a commission by promoting other people’s (or company’s) products.
The merchant aka someone whose product you are selling will pay you a commission if the customer you refer to them makes a purchase.
Well, it sounds easy enough in theory but how does all of it work in reality?
Lets say that you run a blog, all you need to do is generate a trackable url which directs the user to the merchant product you wish to earn a commission on.
If a user clicks on that link and makes a purchase within a certain time duration, meaning that they become a paying customer, then you as an affiliate marketer will earn 10-50% in commission depending on the merchant and type of product you are selling.
The time duration of the trackable cookie varies from merchant to merchant, but is generally from 24 hours in Amazon’s case to 90 days for some merchants selling digital products.
The commission rate is also a variable, physical products typically get you a much lower rate than digital products.
Generally speaking, there is a fourth wheel in the affiliate marketing cog known as the affiliate network which serves as a platform for tracking sales, creating trackable links, paying out commissions to affiliates etc.
Big e-retailers such as amazon run their own affiliate network, but most companies selling physical products are on reputable network such as CJ affiliate. Similarly, many merchants selling digital products such as courses etc are on clickbank
If you are looking to monetize your website via affiliate marketing, than you will have to get approved to get into these affiliate networks and also get approval from the merchants whose products you’ll like to sell. This generally shouldn’t be a problem for sites which proven traffic but we have seen rejections from some affiliates who were not based in US. In such cases, a phone call to the affiliate manager should sort things out in most cases.
Some merchants like Amazon have automatic approval for their affiliates program but they require that you have driven 3 qualified sales within 180 days of joining.
One potential issue with Amazon is that you’ll need to join separate Affiliate programs for each regions such as US, UK etc in case you want to sell products from different geographical regions.
Almost everyone who is selling a product or service online these days run an Affiliate program. A good way to find which network a given merchant is enrolled in is as simple as googling the name of the merchant along with affiliate keyword to get the their dedicated page which should give all the details such as network name, commission structure, cookie duration etc.
Due to complications of enrolling in separate affiliate networks, getting approvals from merchants etc, many publishers get put off by affiliate marketing, and even if they are enrolled in some networks, they aren’t monetizing their site to its full potential.
Ofcourse, this will pay less then if you would’ve registered directly with the merchant affiliate, but this is more convenient, and that itself may make it a good fit for lots of publishers.
4. Make money by putting ads on your website
This sounds pretty simple, right? if you have a site with good traffic, all you need is run some ads to monetize it. Indeed, ads were (and are) major revenue streams for traditional media companies selling print newspapers.
Now all we have done is taken it online and if you look, major online newspaper sites such as New York times and Washington Post still are running lots of banner ads on their sites which is now contributing even more to their revenue streams unlike in the past where subscriptions were offseting the cost of publication to some degree.
So you can run banner ad on your site, where the advertiser pays you directly for putting the banner ad on your site based on how long you keep it and pay you on that basis. Even though this is simplest type of online ad, it probably won’t be suitable for most websites.
The simple reason being that advertisers these days are much more savvy and they want to run a goal based campaign where they want to link advertising spending to some sort of goal or conversion metric.
One of the commonly used terms is cost per action (CPA). Defined broadly, it means that the advertiser pays the publisher each time a user performs certain action such as clicking on the ad, or filling out a form and giving out contact details.
If a publisher is paid based on how many times a user clicks on the ad displayed on their site, then that type of CPA is called pay per click (PPC). This is how Google Ads, Bing Ads, Facebook, Linkedin etc all run ads based on PPC model and you can enroll into Google program to run ads on your site.
PPC makes decent cost per click (CPC), however, to get higher returns, you can enroll in different type of CPA where you get paid if an user fils out a form and giving out contact details; this is known as pay per lead (PPL) model.
5. Make money by trading securities
This is inherently a very broad category, and it basically includes everything you can trade on stock exchanges such as commodities (agricultural, base metals, precious metals such as Gold), shares, futures and options, Forex etc.
This used to be domain of Hedge funds, big banks etc but in recent years with fast internet connections, low data latency and access to good quality historic price datasets at low prices from sites such as quandl has enabled individuals to be profitable with algorithmic or quantitative trading.
I have left out cryptocurrency trading from this list since I am not sure if the security being traded has any inherent value or not. Besides, that, with the explosion of new cryptocurrencies, there is a real concern that converting them to real currencies such as USD is getting harder, if not impossible, in certain countries.
6. Accept donations
If your site has great content or does good work which is appreciated by your readers or users, you can bypass all traditional modes of revenues and directly solicit donations from your users without running any ads. This is what sites such as wikipedia, damninteresting.com and tons of other individuals on Patreon are doing as their cheif revenue source.