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Business Model Comparison
| The Brokerage Model Brokers create market places that facilitate transactions between buyers and seller. The Brokerage Model can take many different forms including: Transaction Broker: provides an independent payment mechanism that facilitates transactions between buyers and sellers. The market leader in this field is Paypal.com who charge a fee per transaction. However clever spin offs include the newly launched Stripe.com show there is plenty of scope for viable competitors. Auction Broker: conducts auctions on behalf of the seller, which enables buyers to bid for any given product / service. The auction broker charges the seller a listing fee, and a commission commensurate to the value of the transaction. The market leader in this field is eBay. However eBay got greedy with fee hikes and now they are hemorrhaging market share to competitors such as Bonanza.com, MadBid.com and ebid.net. Virtual Marketplace: provides digital store fronts for online merchants that often include relationship, payment facilities, customer and marketing services for the merchant. Examples include Amazon’s Merchant Services. Amazon may be the 500-pound gorilla but that didn’t stop new entrants differentiating by geography and scope. Consider Irish site DoneDeal.ie. They charge a small fee for a product listing in hundreds of categories, and their business is soaring. Search Agent: a search agent is a software service or ‘robot’ that aggregates information, and pinpoints items of interest according to specific criteria. A perfect example would be Hotels.com that finds the best hotels at the best prices. The Infopreneur Model The term ‘Infopreneur’ was coined by H. Skip Weitzen in his book ‘Infopreneur’. He describes an Infopreneur as ‘a person who gathers, organizes, and disseminates information as a business venture or as a value added service’. The Infopreneur Model refers to the creation and sale of information-based products. This would encompass everything from eBooks to content based membership sites. This is one of the most popular business model pursued by Internet marketers. It can be a great model to get started because the risks are low in terms of upfront capital investment. However a great deal of time needs to be expended in order to create the content, and furthermore to maintain it to ensure it is kept relevant and up to date. Applications of the Infopreneur Model include:
The Advertising Model The advertising model is deployed when a marketer creates a website that attracts visitors, and displays marketing messages to these visitors in the form of banner ads, text ads, direct response ads, video ads or some other ad based content. The bait used by the marketer usually involves content, a service, or a mix of both. Content-based marketers using the Advertising Model would include sites like Rotten.com and YouTube.com. Service based sites using the Advertising Model would include sites like Gmail.com, POF.com, and Facebook.com. The advertising model is most successful when the volume of viewer traffic is large or highly targeted. Different applications of this model include:
The Merchant Model The Merchant Model refers to wholesalers and retailers of goods and services. Examples in an Internet Marketing context would be PLRwholesaler.com, which specializes in building a virtual warehouse of PLR products that are sold with private label rights. Other applications include:
The Affiliate Model The Affiliate Model is the most popular business model used by Internet Marketers. Product / service vendors offer commissions based on a % of sale value, for all sales generated via that marketer’s affiliate link. It’s a WIN-WIN solution because the vendor has ZERO costs other than giving a commission on sales that would not have been made anyway with out the affiliate’s efforts. From the affiliates perspective they get ‘hands-off’ commissions without the need for customer service, monetary risk, or even the risk associated with starting a new business venture. Applications of this model include:
Preview: The first Incomizer model we will discuss later is a specific slant on the Affiliate Model. The Subscription Model With the Subscription model users are charged a periodic fee to subscribe to a service. These subscription fees are usually monthly but can also be daily, weekly or yearly. A great example would be dating sites such as Match.com. Subscription fees are incurred irrespective of actual usage rates. Furthermore it is quite common for subscription and advertising models to be combined. Applications of this model include:
Preview: The second Incomizer model we will discuss later is a specific slant on the Subscription Model. The Utility Model The Utility Model or ‘on-demand’ model is based on metering usage i.e. a ‘pay as you go’ approach. Unlike subscriber services, metered services are based on actual usage rates. Applications of this model include:
The Community Model The viability of the community model is based on user loyalty. Users have a high investment in both time and emotion. Revenue can be based on the sale of ancillary products and services or voluntary contributions; or revenue may be tied to contextual advertising and subscriptions for premium services. The Internet is inherently suited to community business models and today this is one of the more fertile areas of development, as seen in the rise of social networking. Application of the Community Model include:
Ok so now that I have skimmed through some of the most lucrative business models being used online, I hope that your creative juices are starting to flow. There is no reason why you can’t create a viable Internet Business leveraging any of these business models. I reckon 90% of Internet Marketers are focused on both the ‘Affiliate Model’ and the ‘Infopreneur Model’. Yet the potential in some of the other models is mind-boggling. You don’t even need to have a completely new idea. All you need to do is find a business model that has an active target market, list all the features of the top 5 competitors, and put together a new business that has a ‘best of breed philosophy’ with the best features from all 5. Common Systems Let us now examine a couple of the most common systems used by Internet marketers as extrapolated from each of the aforementioned business models. Blogging and Authority Sites Blogging and Authority Sites are systems extrapolated from the ‘Infopreneur Business Model. After a spate of Google updates blogging / authority sites are siphoning off quality traffic from the search engines. The only downside is that there is a huge amount of work involved in creating and sustaining a quality authority site. You will need to be very well versed on your topic, write quality content regularly and continually split test pages, track clicks, and optimize your site for SEO purposes. This represents too much work for the ‘maximum return, minimum effort’ Incomizer model. Single Sale Product launches e.g. eBook, WordPress Plugins Single sale product launches represent another system extracted from the ‘Infopreneur Business Model’. With the explosion of niche forums such as ‘Warrior Forum’, ‘JVzoo’ and ‘Forum Special Offers’, marketers now have highly responsive platforms within which to execute big product launches. The advantages are highly responsive customers bases, large number of affiliates ready to promote, and a lot of money to be made in just 24 hours. The disadvantage with this ‘perpetual launch model’ is that you’ll never get ahead. You won’t have finished one launch, when you’ll be already thinking about the next one. It’s also getting very costly these days with professional sales copy costing anything from $1500 to $25,000 to get written, affiliates demanding upwards of 100% of your front end commissions, and the need to put up big prizes to draw in the BIG JV partners. Worse still you are only ever really guaranteed one sale from each customer, with no assurances they’ll ever buy from you again even if you capture them onto your list. So this model certainly doesn’t fit the ‘maximum return, minimum effort’ model. Membership Sites Membership sites are extrapolated from ‘The Subscription Model’. Membership sites are one of the better systems out there because they enable you to do the work one time, and get paid for it over and over again. However ‘content membership sites’ require a huge amount of work in order to create and maintain. Content is volatile depending on your niche. The IM niche is forever in a state of flux. Information that’s cutting edge today, can be obsolete tomorrow. This means that ‘content membership sites’ are NOT hands off like many people believe. The attrition rate for content membership sites is also high i.e. the vast majority of members only stay paying members for a few months, and then cancel their membership. The average is 50% - 70% of paying members, quit within 3 months. It is a full time job trying to get new members to join, as well as continuously updating content. So despite the advantage of recurring income this model does not fit the criteria of a ‘maximum return, minimum effort’ Incomizer model. Cost Per Action CPA CPA is a neat model for complete newbies to start earning their first commissions online. In effect companies will pay you a commission for sending traffic to a page and getting them to take a particular action e.g. sign up for free samples of a new health tonic. In effect you need to spend you time driving traffic to CPA offers. Traffic generation is a full time job, and not aligned with our ‘maximum return, minimum effort’ model. Google AdSense Sites Many marketers focus exclusively on creating mini sites that have Google AdSense ads embedded in the content and the margins. They try hard to blend the AdSense Ads into the site design, to make it look like actual site content. In effect a ‘trick to click’ strategy. Google is sending far less traffic to these ‘thick on ads, thin on content’ style sites. If you are trying to make money with this model you will be forever writing content, doing SEO, and driving traffic from multiple sources to your sites. A misfit for the ‘hands off passive income model we are looking for. Review Sites Review Sites represent another system extracted from the ‘Infopreneur Business Model’. Product Review sites (sometimes referred to as Sniper Sites) revolve around the philosophy of trying to get your sites on page one of Google for ‘buyer keyword phrases’ pertaining to upcoming product launches. The idea is that a large percentage of customers pre-validate their purchase decision by Googling the keyword phrase ‘product name review’. So if the product was called ‘Video Marketing To Page One’ then review site marketers will target phrases such as ‘video marketing to page one review’, ‘buy video marketing to page one’ etc. The logic is that if they write a review that has embedded affiliate links, potential customers land on their site, they click the links, make the purchase and the marketer earns a commission. This business model made a lot of marketers, a lot of passive income over the past decade. However with the latest Google Updates, review sites thin on content are getting hammered. Much better to build an authority site with quality content if you want to pursue this style of system. Right now it has fallen out of favor with Google, and requires too much work to sustain for our philosophy of ‘maximum return, minimum effort’. Affiliate Marketing (extracted from The Affiliate Model) No matter which system you choose to make money online, it will always have elements of ‘affiliate marketing’ embedded. Every type of Internet Marketer uses affiliate marketing to create multiple revenue streams. However no one should rely 100% on Affiliate Marketing as to do so would ensure you never reach your full money making potential. Having your own products gives you leverage that opens doors, can get you in with the big players, enables you to leverage armies of affiliates to make you passive income and so much more. Affiliate Marketing is one of our Incomizer Models and it will be discussed in the next chapter. I’m now going to detail the two Incomizer Models which will enable you to realize our philosophy of ‘maximum return, minimum effort’. Source: Incomizer | |
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