You know you are behind in your financial achievements when Entrepreneur magazine starts running articles on how to make your first billion.
Or when you see a property exhibition for apartments in Brooklyn, Pretoria, that cost up to R24-million. Each.
Or when you read that there are more than 5 000 South Africans who became new dollar millionaires last year, bringing our total up to about 50 000 or so.
The good news is that if you want to make more money than you have right now, the web is a good place to do it. To balance out the karma, though, the web is also a good place to lose a lot of the money that you already have, so treading carefully is vital.
If you are eager to go down the road of online entrepreneurship, remember this: like it or not, at the end of the day it all comes back to one thing: advertising.
The web is a medium whose strength lies in its ability to bring the seller and the buyer together. You’ve heard it before, probably many times, so now you consider it a bit of a cliché. But do yourself a favour and think about it for a minute. Almost every website that is financially successful is so because it has a plan on how to sell the right thing to the right customer.
I recently went to a media event hosted by Google South Africa. There, country manager Stafford Massie said that when he interviews people for a position at Google, he asks them to identify Google’s business model. If they say it is advertising, he shows them the door. I think this is arrogant and deceptive. Oh, sure, Google might be all about platform and content, but I challenge Stafford to explain, succinctly and accurately, Google’s business model without using the word advertising or its synonyms. And, by the way, advertising is not a dirty word. (Although Bill Hicks seems to think it is.)
So, how do you make millions on the web? Although there are many variations of the theme, it ultimately boils down to two methods:
- 1. Create a platform, with content generated by yourself, your users or even your advertisers, and use this content to create a cohesive audience favourable to advertisers,
- 2. Become your own advertiser, and use the platforms to sell your product — online or off.
In other words, there are two parts to online success:
- create the platform, and then
- monetise it.
(There is at least a third way, which is to offer a service or a solution, often solely web-based, that solves a problem that your audience has. You then generate money by directly selling access to this service. I am not going to spend much time on this since it requires exceptional technical expertise to be successful, and is geared for a thin segment of the market. It is worth noting, though, that many of these monetised services still offer a pared-down plan that is free, and that is subsidised by third-party advertising.)
So how do you use this knowledge to earn your millions?
By viable, I mean that a considerable portion of the market’s members must have access to the internet. For instance, you would be smart to target a segment of the 24- to 35-year-olds market, but should be weary of targeting the senior market (although it is very lucrative in the US). The market should also have some appeal to advertisers. Bonus points if the market has appeal, and is currently difficult to reach offline.
The more niched the market, the easier your job will be in attracting both the users and the advertisers. The wider the market, the more money you will probably need to spend to attract and keep the users.
If you choose content, then you must determine what kind of content, and who will generate it. You have three options: generate it yourself (blog), ask your users to generate it (YouTube) or have it generated by the advertisers (Yellowpages.com).
A features-based website is one that often hosts content and then allows some interaction with it. Think Facebook, or Hellopeter. If you choose this route, know that it will most likely cost a considerable amount of money in development costs, and that you are going to have tight competition. In addition, a feature-rich website requires far more commitment from its audience, which can make your marketing of it harder. On the other hand, the financial rewards can be quite lucrative.
Once you have a dedicated audience, whether based on membership or simple site visits, you can start monetising the site.
There is a huge amount of planning that needs to go into the above three steps, and there are countless variations, options and ideas that need to be considered to make the right decision.
In my follow-up posts, I am going to continue this article series by addressing each of the steps individually, and by offering examples of real-life international and local case studies of those who have done it right, and those who have not. Expect to see information on ventures such as social networks, affiliate marketing, blog monetisation, content sales and even e-shops. I will also offer ideas on how to finance your new venture, and share with you the successes — and failures — of some of my own ventures.