Learn the 6 different types of online businesses

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Are you ready to start a business?

I was.  That's why I started an app development company when I first dove into entrepreneurship.  

My first app did really well, it hit the top 3 in the paid business category. Life was GOOD! Here's a screenshot of it below - keep in mind this was many years ago, so the UX and design wasn't nearly as nice as it should be :)


I got really, really lucky. This first app generated a lot of downloads and revenue and was eventually acquired (as a part of the whole company portfolio). Woohoo!

Times were good.

For a while at least.

And then I hit massive failure. I made 10 apps that did terribly and barely had users or revenue. That was really tough.  

But I kept pushing forward.

I knew I had what it took. Guess what happened?  I ended up making 4 that made the top 100 in different categories. Life was good again.

One of my apps, Hair Booth HD, even hit 75,000 downloads in a single day. Here's the proof below where it hit #27 on free entertainment apps!  (It actually peaked at #15 which was awesome)

Anyway, I've started a few companies since then and have learned a TON about online businesses. I only wish they taught this stuff when I was in school. Instead, I had to spend years learning it myself the hard (and sometimes expensive) way. 

One of the biggest questions I asked was “What type of business should I build?”

And one of the issues was that I didn’t even know what type of businesses could be built.

I wish someone would have told me about the 6 different types of online businesses.

So, in the spirit of paying it forward, here are the 6 types:

1. The Advertising Model - In this business model, people visit your website and see ads.  The ads usually show up under the main banner or on the side so that the content remains the #1 focus.  This type of business starts with great content.  Whether you're going to blog about fashion, business, love or whatever you're into, you'll need a ton of online readers to monetize well through advertising. 

The key to a successful advertising business is based on the following:

  • Focus intensely on writing or creating videos of great material that really adds a ton of value to your readers and viewers: Think about it this way:  What problem are you helping them solve when they visit your blog or YouTube Channel? 

  • Leverage proven advertising platforms: Once you build a steady stream of visitors, you can leverage advertising platforms like Google Adsense and Media.net to monetize!

  • Be consistent in generating great content: Make sure you consistently generate an output of great content. This will keep your audience engaged and also help ensure your platform has fresh material for people.

I used this model for a lot of my free apps in the Apple app store and made pretty good return on it. If you can get enough free users using your products enough, it's a viable revenue stream.  However, users tend to find it may distract from the user experience, so use it very wisely. 

2. The Affiliate Sales Model - This model is similar to the advertising model in that you'll need a lot of traffic to hit your website for this to work as well.  These visitors would then see your recommendations for products.  They would then click the affiliate link that you would provide for those products and once they purchase them, you would get an affiliate commission.  Commission Junction http://www.cj.com/ is an example of one of the top affiliate programs out there today! 

Here are some great examples of people that have been very successful doing this:

  • Pat Flynn from Smart Passive Income is the MASTER of this. He focuses on providing highly valuable, in depth content and then he makes recommendations on the products and tools he personally uses to build his own business. He includes links in his articles or in the “resources” section. As of today, he has made over $2M in just the last 12 months!

  • John Lee Dumas from Entrepreneur on Fire also implements this model on the “resources” section of his website. For example, he recommends that people use Bluehost for their websites and gets an affiliate fee for that.

3. E-Commerce - In this scenario, you sell virtual or physical goods online in an e-commerce store.  Examples include speciality stores (for example, suits, urban clothing, hiking equipment) to much broader stores like Amazon.com.  Competing in the giant "online" store model where you sell everything is extremely tough since you'd be hard pressed to operate as efficiently as Amazon given their scale.  However, you can more likely find a niche category that is often underserved and build out an e-commerce store for that. 

Here are some great examples of companies crushing it in the E-Commerce world:

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Warby Parker - This company did a fantastic job of taking high end, beautifully designed glasses directly to the consumer. By cutting out the middle men, Warby Parker was able to offer reasonable prices for extremely high quality glasses! According to Recode, Warby Parker is now valued at $1.75 Billion. That’s with a B, folks.

Dollar Shave Club - This company was hugely innovative because they were one of the first to offer a subscription service directly to the consumer. They also had a really funny marketing video that went viral. Check it out below!


4. The Premium Subscription Model - You could also charge users for a premium subscription. In their case, you could limit readers to a number of free articles, but then prompt then to subscribe to a monthly membership fee to have additional access to articles. I used a freemium model for my apps and that was the #1 source of revenue for my apps. I highly recommend checking out this business model for apps. 

Great examples of this include publications like the Wall Street Journal, Washington Post, LA times and more. For example, I really want to read this article about the Lyft IPO, but that content is gated and I have to pay to get access.

5. The Pay as You Go Model - You could also charge customers based on usage of a product.  For example, if you're doing selling a SaaS product (Software as a Service), you could bill customers based on their usage of their product.  Amazon Web Services is a great example of this.  Think of this like the PG&E Utiliy model.  

6. Freelancing - You could also freelance.  Whether it's freelancing work in the field of writing, design, consulting, coding, financial analysis, administrative work or any other services that people need, you can make a good amount of money doing that.  You can leverage sites like oDesk, eLance, Toptal and Fiverr to find work.

7. Consulting - I launched a consulting business a few weeks ago and host about 7-10 calls a week. I've been able to book 5 clients in just a few weeks of work and my last client just gave me the verbal approval for a $2,000 engagement!  I wrote a short book on how to land your first 3 clients here as well that you can download for free. Surprisingly, once you learn my framework, you'll see that there is a way to launch a successful consulting business!

Also, if you have an awesome skill and want to launch your own consulting business and need help launching, book a time with me here for a free 30 minute call to see how I can help!

Nelson Wang4 Comments