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We are all in business to make money. If one reads the papers, then the hottest business to be in today is the net business, launch a website, get it funded, and then laugh all the way to the bank! -well the first two seem to be in place, but the last bit about laughing all the way to bank is not really happening-seems to be taking a bit longer than we thought hmm.
With websites having a mortality rate higher than the third world infant mortality, no wonder the gurus of the net are foxed-I mean with everything going free on the net, just how are websites supposed to make a living?! Well, the rules of the revenue game on the net are still evolving. The medium –i.e. the net itself is evolving, coming up with newer uses, connectivity, reach, etc. every day, so it is natural that the money rules of this business will also take some time to evolve.
But some fundas are already in place. Firstly to earn money on the web you must be clear that the net is different from your usual information dissemination systems like magazines, newspapers, TV, Cable TV, etc. It is all those and a lot more. So if you base your revenue earning capacity on advertising alone, then baby you are big trouble. Secondly, some type of industries are more inclined or should we say web revenue adaptable-software, entertainment, information intensive services like databases etc. These industries lend themselves to the virtual rules of cyberspace-like online research about the product, ordering, paying, downloading.
Basically to date three types of revenue generation models for the web have been discussed. The first deals with Prospect generation. This is an indirect way of earning money from the net by generation of leads or prospective customers which eventually materialize into a sale. With this model, you use the web and your website to bring you leads and provide information to support the sale. The sale is then closed by e-mail, phone or face-to-face. This model is useful within the service industry, or when selling products and services that need to be customized, or have a high price tag. The main tool of this model is the online response form, Mailto: e-mail which allows you to structure the information people give you, enabling you to qualify the prospect and know how to respond. Another important aspect of this type of revenue generation model is that you have to do a great deal to support the sale, by providing a wealth of information online. With your competitor but a click away, your online presentation and information should be so complete and compelling that your prospect has no need to leave. So the obvious emphasis in this kind of a model is to attract responses, with the aim being maximizing hands rather than eyeballs.
The second revenue model is completing the actual sales transaction over the Internet. E commerce gives you the ability to extend your company's reach beyond your present market area. If you can sell products or services on the web that can be delivered outside your geographical area, then the world is your marketplace. Business-to-business e-commerce is growing even faster than online retail; nearly 80% of online transactions are between businesses. While this may not represent so much new money as a new sales channel, it does represent substantial cost savings by reducing transaction costs. This model is an adaptation of the brick and mortar business model to make it a click and mortar model. The inherent features of this model take a website from merely being a content provider into the realm of actual fulfillment of services. This model incorporates the entire transaction cycle comprising choosing the scheme/service, applying/ordering, tracking and completion of the transaction at consumers doorstep. Of course Nirvana for an Internet business is to complete both sales transactions and product delivery over the Web. Entertainment and information sites do this, cutting the staffing and inventory costs for product fulfillment immensely. Industry analysts believe that nearly all software will be delivered over the Internet in the future. The main emphasis in this type of a model is not to attract traffic but to service customers so your back room office in terms of payment technology has to be really strong. The main aim of this model is share of wallet.
Thirdly is good old advertising. Currently most of the revenue generated over the Internet is made through advertising. However, to make a website pay for itself on advertising revenue alone requires a great deal of traffic, as advertisers pay per thousand "views" of their advertisement. To generate large levels of traffic, the website content has to be outstanding – informative, entertaining, with news, an online community, etc. That content itself is expensive. Also since the number of commercial websites is increasing faster than the demand for online advertising, many millions of webpages go without paid advertising, and this tends to drive the cost of advertising down. So this is not a stream of revenue one can depend upon. Affiliate programs are another important source of revenue. This is like being paid commission when someone you introduce to another business, purchases from them. Amazon.com pioneered this revenue sharing model, and now pays affiliates 15% for sales that result from direct links to a book, and 5% of sales that result from the affiliate bringing the shopper to the amazon.com website. On line merchants have found that customer acquisition costs from an affiliate program are substantially less than paying for banner ads. With an affiliate program, the merchant only pays after an actual sale occurs, and the cost per sale is usually 10% or less than the cost of banner advertising. Many smaller site owners, and some large online companies, prefer this revenue model and have entered into affiliate agreements with merchants.
While the monthly income amounts are relatively modest for most siteowners, added to other sources of revenue they can help make a site profitable. Today most portals realize that they need multiple streams of revenue in order to prosper. Finding the right combination of revenue streams can be difficult but it is a survival strategy which has to be followed in the dot com world.
Aru Srivastava