Different Types of Online Business Models

Written By Alex

Business entrepreneurs have never had it so good, and it’s all thanks to the internet. The information superhighway is now integral to our day-to-day living, plus it’s also indelibly changed how we perceive “business” to be. The internet has given opportunities to budding entrepreneurs that simply didn’t exist a decade or so ago.

But with a seemingly endless stream of business opportunities come certain difficulties. For example, finding the perfect business model for your particular needs, aims, and skills. With so many options available, you may become overwhelmed and unable to determine the perfect fit for you.

Bear in mind that when we refer to “your business,” this actually means you as an individual. We are referring to how a person can build a lifestyle business, meaning a business that fits around your living circumstances, allowing you to work regardless of where you’re living at any particular point in time.

What’s fundamentally important is that a business caters to the wants and requirements of its intended customers and clients. At the same time, no one business model fits all, and each individual entrepreneur will need to find the model that fits their own particular needs and lifestyle.

Maybe you’re looking to make your living from an internet business or want to merely use it to earn some extra cash on the side. Perhaps you want to be involved in an internet-based advertising agency business model that provides high margins and involves constant communication, or you’d prefer more semi-passive involvement in affiliate marketing. Whatever your preferences or goals, you’ll need to find a business that suits you as an individual.

This article will shed some light on which online business model could work best for you. I’ll be using my own experiences and insight to help guide you through the answers to some questions regarding budding internet business entrepreneurship. Let’s get to it!

Internet Business Models—Some Examples

First and foremost, before picking your preferred internet business model, you’ll need to identify your strengths and goals. While it’s true that some business models are intrinsically more challenging than others, their success (and the time it takes for them to become successful) also depends on the entrepreneur and their unique abilities and preferences.

Additionally, think about how much time you are willing to invest in your business venture. While some people thrive on challenges, working hard and for a long time before hitting sweet success, many would instead prefer to take a more swift, direct route. Which applies best to you?

Here, we’ve compiled a list of some of my favorite internet business models. These models vary in terms of their profitability, risk factor, input, etc. The list isn’t exhaustive, but it should provide a good starting point, an idea of what’s out there, and what models could be a good fit for you.

1. Affiliate Marketing

With an affiliate marketing business model, you’ll build an audience to whom you’ll sell others’ products or services. How fast you’ll make money on this model will depend on which route you take.

For the more risk-averse entrepreneur with small capital, the best way to build and grow an affiliate marketing website is to use SEO or organic traffic. You’ll need to be willing to put the work into your “free” traffic acquisition channel. There may be a shift towards operational expenses as your business grows. However, this is generally the cheaper (albeit slower) option for a money-making venture.

You can use paid traffic for a quicker way to earn seven figures (as long as you find the appropriate products and offers to sell). Here, a knowledge of pay-per-click marketing (PPC) using search engines, display/affiliate marketing, or social media can be put to potentially lucrative use.

Compared to other business models, using paid traffic in affiliate marketing takes less time and effort. However, a word of warning: it doesn’t come without its risks. You could find yourself taking a long time pinpointing the right offer, during which you may run out of resources.

Additional risks include bankruptcy (you need to significantly invest in ads, and you may run out of cash before the affiliate network pays out), or traffic sources may ban you. You may even have to face copycats stealing your whole operation (therefore forcing you to significantly reduce your margins).

Unsurprisingly, many people who start this type of business model are ex poker players. The card game’s strategies and tactics (such as reducing the risk of ruin) come in incredibly handy in affiliate marketing!

2. Agency

A significant problem that consultants and freelancers potentially face is the difficulty of quickly scaling up. Accordingly, many businesses now want content providers who can help them market themselves online.

Generally, agencies provide clients with many useful services in a single “package,” hence their appeal. Rather than coordinating several different freelancers to deal with various tasks, such as web development, SEO, and advertising, clients ideally want a single contact in charge of their whole campaign or project.

The content provider business model is one of the most lucrative online businesses to take up with little cash investment. Arguably, all that’s needed to create a profitable online business following this model is toil, time, and effort.

However, there are disadvantages to taking up this agency online business model. Proper management and organizational structure are key components of its success. Without these, you may find that your business drains your time, energy, and money disproportionate to growth.

As the agency business model takes a significant amount of hard work to grow and then sustain success, it may be less appealing to buyers when it comes to selling your business in the future. It’s not an ideal source of passive income; therefore, buyers looking to make a quick buck will tend to look elsewhere. However, if you’re passionate about what you’re doing and are willing to put in consistent time and effort, you could find yourself with a nice sum of money in a couple of years.

3. Blogging/Content sites

It takes effort, dedication, and hard work to build a website and get it to rank high in search engines. It’s easier to start a simple blog, although writing compelling, quality content may be more challenging (albeit potentially fun, and you get to indulge your creative side). On the downside, it may not be easy to get your blog to grow to the size it needs to be to be profitable each month.

The good news is that once you get your blog or content site to where it needs to be, it has the potential to be a steady source of semi-passive income. This online business model is called “semi-passive” as although it doesn’t require as much concentrated time and effort as other online businesses, it still requires some kind of maintenance. To remain successful, you’ll need to keep updating content or creating new content and updating content management systems.

However, unlike other online business models (such as digital marketing), you don’t necessarily need a large team to keep this type of business afloat. There are countless solopreneurs out there who successfully manage content sites and blogs independently.

But if you feel inclined to hand over the more repetitive or mundane tasks to others, you can employ a small team to deal with these at little expense. Plus, as your portfolio grows, this may become more of a necessity, especially if you want to scale up rapidly.

One of the most appealing aspects of this business model is its versatility. There are numerous types of monetization strategies to choose from, including affiliate programs, renting the site out, or display advertising. There’s also the option, once your audience has been built, of selling your own products.

It’s not uncommon to create these websites, get them to a certain success level, and then sell them for a profit (i.e., flip them). You could also buy an already-established website to improve it and then sell it once you’ve done so.

Of course, the margins aren’t going to be as appealing as the agency business model, but once your website or blog is established, you can make a decent profit. Also, remember that there’s a considerable amount of cross-over with this type of business model and affiliate marketing (if you’re utilizing SEO for the site’s leading traffic source).

4. Dropshipping

With this business model, you make sales through your online store without personally owning any inventory. In other words, you own a sales website but have no physical store or products; a separate supplier or business owns these.

A customer on your site will make a purchase. You then contact a supplier and place an order with them, and this supplier then ships the product(s) to the customer.

There are several pros and cons to choosing dropshipping as your online business. What seems like a relatively quick and straightforward way to make money is slightly more complicated and involves more effort and input than you may think.

On the plus side, if your site sells high-value goods, you can scale up fast. As you don’t physically own any inventory, your profit margins can be significant.

Conversely, you don’t have complete control over the entire process, and you may soon learn the difficulties associated with this. Your reliance on suppliers (even with automation) can create problems. For example, last-minute stock sell-outs or slow shipping can leave you having to deal with irate and frustrated customers, in turn leaving you blocked by your payment processor due to a high number of chargebacks.

However, with determination, knowledge of what products appeal most to customers, and the forging of good relationships with suppliers, you can create a highly profitable online business. Remember that it’ll take effort and the willingness to stick with it for the long term to reap the rewards.

5. Selling information products/Online courses

The demand for information products (i.e., the sale of “knowledge”) is ever-growing. The online mediums through which people buy or consume various types of knowledge are diverse and include eBooks, E-Learning and courses, webinars, podcasts, and digital reports.

An info product-selling business can have high margins and low set-up costs (if you’re mostly doing the work yourself).

Unlike affiliate marketing or dropshipping, the major bonus of this type of online business model is that you own the product you’re selling. You don’t have to stress about being paid on time by others or relying on others’ stock supplies or shipping efficiency (or lack thereof).

Once you’ve decided on your product, created it, and developed marketing strategies to promote it, your online business will make sales with little more input from you. You’ll find this type of online business especially rewarding (and profitable) if you have valuable experience and expertise on a particular subject that you want to share.

However, as with other online business models, it’s never always that straightforward. You’ll often have to utilize tools such as Zapier to help with the automation of repetitive tasks across various apps. You’ll need to be efficient in coordinating, communicating, and marketing.

And if creating your own content doesn’t appeal to you, nothing is stopping you from selling others’ digital products. In fact, it’s relatively easy to find content providers willing to build products for you to sell, which can be a great way of making this type of online business model work at scale.

6. Services arbitrage (“drop services”)

This online business model works differently from other models where growth is directly proportional to work input. Business models working on that principle can run into problems when your limit is reached regarding how much more you can input, regardless of the number of resources and finances at your disposal.

With drop services, you connect clients with service providers (i.e., you’re the “middleman”). Any profit you make comes from the services you sell. These types of services can include legal services, content writing, graphic design, digital editing (YouTube, podcasts, etc.), and video production.

The service you provide to both clients and customers can be extremely valuable. For example, you’re helping those who don’t know how to market themselves connect with people willing to pay a flat rate.

With this type of online business, you don’t need particular skills or expertise in any subject(s). As long as you develop a simple and efficient website, can communicate well with others, and set up connections with decent, reliable contractors, you should find yourself with a viable business model.

With this online business model, you need to be thinking in terms of providing a package of services to clients that they feel are tailored to their particular needs. Clients are more likely to part with their cash if they trust in your ability to take care of all the small details and allow them to get on with what they have to do. As long as they can rely on your business to get the job done (and get it done well), they don’t care who’s doing the actual work.

Finding the Right Internet Business Model for You

Firstly, you need to figure out what the “right” business means to you personally. What are you ideally looking for in a potential internet business? Perhaps you want high returns but in a short time. In that case, the “cash cow” business model—like an agency—would be your best bet.

On the other hand, you may be aiming to build a more long-term asset to stick with for the long haul or one that you want to sell eventually. Content websites, blogs, or selling info products might serve you best if that’s your aim.

In other words, you need first to identify your goals clearly. Once you’ve done so, you’ll better understand which internet business model could potentially suit you best.

In addition to your business objectives, you’ll also need to consider your personality. If you choose an internet business model that’s at odds with your personality, skills, experience, or expertise, you’ll be setting yourself up for failure.

All in all, as we’ve outlined in this article, there are numerous ways to make money from an online business—and there are various business models to choose from. Take your time to determine which suits you best, so you don’t choose a path you’re more likely to struggle on.

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