The Internet and its Likely Impact upon Society, Business and the Economy

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Internet Business Models

The Internet offers numerous opportunities for the small entrepreneur.

Enhancing an Existing Business

The Internet is the biggest marketing channel in the world - by far. It can serve to attract customers to an existing physical business and/or take such a business online (ie allow it to receive orders via the Web).

Enabling a New Business

Essentially Internet businesses fall into two categories: those that deal in physical goods (books, DVDs, sunglasses...) and those that deal in digital goods (information, ebooks, software, music/movie downloads...) Of course, a business can deal in both.

Selling Physical Goods

There will always be a need for physical goods, but to be successful online a business must sell goods that are not easily available locally, and are not offered cheaper by existing online giants. The key is to identify and supply a niche.

Selling physical goods requires inventory, storage facilities, packing, shipping... There is a limit to how many items one person can list, sell, pack and ship in a day. Although if the business takes off it can be leveraged by employing others. A variation on the theme is to use drop shipping, whereby you provide the marketing, but the drop shipper packs and ships the goods. Despite the

Selling Digital Goods

A business selling digital goods can be programmed to run on auto-pilot. The customer enters their payment details and is emailed the product or a link where it can be downloaded. There is no limit to the number of sales that can be made per day. The most common models are payment for a particular product, eg ebook, or a subscription that allows access to a whole range of premium content.

Web surfers are accustomed to getting content for free, so if they're going to pay for it, it's gotta be good.

A fundamental problem with digital goods is the ease with which they may be copied and re-distributed, ie once in someone else's hands you have no control over who they share it with. Of course you can specify licensing terms, but in practice these can be near impossible to police.

Profit from Advertising

This model is based on building popularity by giving away free content (or service, eg social network/community, repository of user-supplied content) and selling advertising space in order that advertisers benefit from your traffic. This is how 'net giants like Google and MySpace make their money. The more popular your site, the bigger your revenues.

Providing Infrastructure for others

The classic example is eBay that provides market space for others to sell a whole range of products. Again the best potential for the small entrepreneur is to identify a niche. The product can be physical or digital.

Destination or Launchpad

Destinations are sites that hope their visitors will hang around long enough to perform some desired action, eg hitting the "buy" button. Launchpad sites (or portals) are like middlemen, their aim is to direct visitors to other sites that will best fulfill their requirements.

Others

Offering Web-related services, e.g. visual design, navigational design, information structure design, programming, multimedia production, server hosting/administration, consultancy. Offering other services, e.g. secretarial, translation, accountancy, graphic design, publishing.

In all cases a high level of visibility is essential to generate sufficient levels of traffic. The Web is vast, there are few unique sites. The most successful of a group of similar sites are those which feature higher in search engine rankings, and are most frequently linked to by other quality sites. A whole industry (Search Engine Optimization, SEO) has grown around optimizing Web sites for high search engine placement.

All information correct and links valid at time of writing, September 2008.