Internet Business Through my various business activities over the past year I have learnt much about business on the internet. The internet and e-commerce have totally changed the way we do business, and changed all the rules of traditional businesses previously. What follows is my take on it all, based on what I have seen and learnt.

It is quite amazing to see how the internet has changed the way we do business, not only affecting the distribution system and the customer’s experience, but also allowing new forms of revenue streams. From a distribution point of view, the internet has allowed for businesses to “cut out the middle man” and deal directly with the customer, via a website interface. When a customer purchases something online, it can be dispatched directly from the warehouse to the front door of that customer. Aside from the convenience factor, this reduces costs by removing the retail premises from the equation, which is a big part of the costs. That is why a book from Borders.com can be purchased for significantly less than the same title from the Borders branch in town. This distribution model has also been used very effectively by Dell.

Of course the internet method of distribution is not suitable for all businesses, especially not as the only method. While some business like Dell only deal over the internet, there are many businesses that supplement there physical presence with online shopping, like Borders. This allows businesses to increase their target audience, providing to customers around the world, while still allowing for the “passer-by” who just wants to browse.

On that note, marketing is probably the single largest area that has adopted the internet medium. Before the World Wide Web, marketing usually meant spending a fair bit of money on advertising in newspapers, magazines, TV, radio, posters, billboards, etc. While these methods are undeniably still used profusely, there now exists the option of advertising on the internet. This has benefits on both sides of the equation; it allows for businesses to advertise their products on other websites, and it allows for other businesses to advertise products on their websites and generate revenue from them. This phenomenon of online marketing revenue has completely changed the rules for online business and allows for many new possibilities.

Pay-Per-Click (PPC) advertising is probably the most prevalent form of advertising on the net today. If I have a website that regularly has a large number of visitors, I can leverage off of that web traffic by selling advertising space on my site. Of course I could sell this web space in the old fashioned way by charging a flat fee for an advertiser to put their content there, and this method is still used. However with PPC an advert (often text-only) is placed on the website based on the bid of that advert and the relevance of the advert the current page. This has major advantages when searches are performed, as only adverts relevant to that search will be displayed. This dramatically increases the likelihood of the advert behind noticed, and clicked on. (The user is then directed to the advertiser’s landing pages, where the product/service is promoted.) This is the other major benefit of PPC advertising – the advertiser only pays if the advert link is clicked on. This saves advertisers from paying large sums of money to advertise in a magazine/newspaper only to receive very little in returns.

This is also a revolutionary change from non-electronic media advertising which has no effective way of measuring the interest in an advert. Previously businesses could only guess whether an advert was seen by many people who were just not interested in it, was not seen by enough people, or was seen by many interested people who later went and made a purchase. To be able to count how many people saw an advert and how many people clicked on it has major benefits for a business because feedback is accurate immediate.

An interesting off-shoot of PPC is a concept called “click fraud”. This is where owners of a website (manually or using software programs) go and repeatedly click on adverts without any interest in the pages following the link, only to increase the charges to the advertiser of that link. On the one hand it is quite humerous that such a concept even exists, but on the other hand it is a very serious offence to be wary of in the world of PPC. PPC today is dominated by Google AdWords (aka Google Cash), as the amazing success of Google continues to grow. If you are considering PPC advertising I would recommend reading Perry Marshall's’s Definitive Guide to Google AdWords. This book is widely recognised as the “bible” of the industry, and is a must for people wanting to get the most out of their money spent on PPC.

Another prevalent form of online advertising is that of affiliate marketing. Instead of paying for each advert or click-through, affiliate marketing awards the user with a commission on anything purchased through the ID specific to that user. This gives more flexibility and responsibility to the advertiser, as they do the work of promoting the site through advertising (although good affiliate programs provide different banner images and other such assistance). If I am an affiliate marketer for XYZ Company (which is usually free to set up) I can promote their products on my website or blog in whatever way I choose. The link that I would use to send them to the XYZ site would contain a unique ID that records me as having referred them. If they make a purchase on that site, I will later receive a commission because I referred them. The customer will not have to pay any extra for the product, and the company is happy to pay me the commission, as I am doing the marketing for XYZ and sending them more customers than they would otherwise have had. In essence it is the online version of referral marketing, made a lot easier by the internet.

The explosion of small businesses taking to the internet is largely due to the tiny costs when compared to cost of a physical presence. The cost of hosting a website has shrunk to as a little as the price of a cup of coffee a month, with a few cups' worth to purchase the domain for the year. If you have the technical knowledge to create the website then this is the only cost! For example I created this website using the free programs SeaMonkey and NVU and hosted it on GoDaddy.com and I expect to pay less than $100 for the entire year. GoDaddy has become well-known internationally as a good, reliable domain hosting and web services company – thanks in no small part to some very effective (and controversial) marketing. GoDaddy even has templates to help those with minimal website knowledge to get their site up and running.

The other feature that makes SBI stand out is that it sets up a marketing system for your website and teaches you how to actually earn money from your traffic. This does not even mean you have to sell something either, especially with the revenue models discussed above. I would encourage you to check out the demo video even if you are not interested in using the service, as I found it very informative about internet business in general. I myself am in the process of setting up a website through SBI to further develop the Tax Talk section of this website.