Making money with the Internet, the basics

I’ve always thought that making money online is really a numbers game, but it isn’t complicated. Most of it is common sense, but a quick overview is always useful. I’m talking about marketing your own or others products here. Anything else, such as freelancing, surveys, viewing ads, writing posts, is not marketing. It’s work.

Websites tend to generate profits either directly, by selling a product, or a service, or passively – perhaps by allowing paid advertising, promotions, and the like.

This is true for almost everything online. For example, behemoths such as Amazon mirror a traditional store model. There’s a range of products, that a visitor can buy directly. There’s a profit on each item, just like a bricks and mortar store, but apart from all the neat tricks such as recommendations, ¬†customer interaction, allowing other people to sell on your store (for a small price), and the subtle push to make impulse purchases (by storing your details, having a quick one-button checkout) it works just as , say, a Walmarts would.

eBay and Paypal offer a storefront and they charge fees to list your item, big blog networks such as Gawker will do promotional posts, run joint ventures with other companies, and display ads, and services such as Mailing List providers and Web Hosts will charge a fee (often recurring) to use their services.

What everything needs however customers, and on the Internet this translates as visitors and hits. Getting as many customers, to the right product, is essentially what marketing is all about.

Not all these visitors will buy from you. Through some simple tracking on your site you can see how many hits/visitors there are, and how many of those actually buy. That’s your conversion rate. This rate is bolstered by two things. Obviously, have a great product and a great site that sells it well is one, the other is the type of visitors you attract.

Let’s take a fictional example. You have a book to offer all about fishing. The site is a simple sales page, just one page, that acts as an advertisement. ¬†You get 100 visitors a day, and sell 1 book per day. That’s a conversion rate of 1%. To increase this, you can get more visitors. Or you can ensure that more of the visitors are not just random hits, but people actively looking for your fishing book.

You can get quality visitors by making your site show up in search engine results for relevant terms (such as “fishing tips”, “how to catch carp”, ” fly fishing for beginners” etc). You can advertise directly, perhaps by buying ads on fishing sites. You can advertise passively by joining in discussions on fishing forums, or perhaps even pay others to sell your book for you, for a cut of the profits (affiliate marketing). Any kind of marketing to attract visitors will use carry some kind of Cost per Acquisition (CPA), unless it’s free.

Increasing profits is down to the price. Is it better to sell 100 books for $2 each or 10 for $20 each? This is a simple balance on paper, but price can prove to be a very careful balancing act. People might feel your book is low quality at $2. Perhaps $20 is too much. Perhaps it’s such a niche subject you’d struggle to get visitors in bulk, or perhaps there’s so much competition the lowest price might be the best strategy. In order to make a profit you have to take into account how much it costs to sell the item. If your book costs you $5 per copy to print, for example, or if it’s costing you $100 to attract those 100 visitors ($1 per customer), you have to incorporate them as overheads into your sales price.

In short:

Visitors / Conversion x price = profits

More visitors, a higher conversion, a higher price, more profits…

Get the right product with a website that sells it effectively, and get the right customers, then you can start making profits. Increase any of the figures and watch the cash roll in!




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