Choosing a method to earn money online

As I understand it, whether it’s online or offline, there are basically just a few basic ways to earn an income: selling a product, selling a service, or selling information. All of them share things in common. At the end of the day, though, no matter which path I choose, I still have to provide something of value.

That implies a group of people–customers–that have needs. That need can either be something that already exists, like needing to eat, or something that is more or less manufactured, like the need to have an iPod. The good news is that just as before iPods existed, people didn’t realize they needed them, other types of needs can be created as well.

I’m going to consider the different ways to earn money online before choosing one to pursue initially. I’ll probably try them all at some point, but for now I need to sort out where to start.

Earning money online by selling a product

This one seems obvious, and of course it has the potential to be successful. Just look at Amazon.com. A good friend of mine from college has done just this on a much smaller scale for a number of years, and is doing quite well. He has very low overhead, and has pretty much outsourced everything. He has all of his products drop shipped directly from distributors, so he doesn’t even have to deal with the costs and hassles of carrying an inventory. It seems like a pretty good strategy.

As I see it, though, there are a lot of downsides, the chief among them the logistical issues of shipping a physical product to the four corners of the world. And of course there’s customer service and support. One aspect of my friend’s business that I don’t envy is he is quite literally chained to it pretty much every single day. He’s a small business owner, and without him, the business doesn’t function. From a lifestyle perspective, I’m not sure this would be the best fit for what I’m trying to accomplish.

Earning money online by selling a service

The flip side of selling a product is selling a service, a key distinction of course being that shipping, inventory and other things related to handling a physical product are no longer a worry. Ebay is a great example (looking at it from their perspective, not that of its customers). In the past I’ve been involved as both a buyer and seller of online services, and the business model can be pretty compelling. Especially with the ability to outsource work to lower cost parts of the world, a great deal of can be accomplished for a relatively low cost. From what I can tell, it seems a lot of folks are pursuing this method.

The negative of course is that there is still very much a business that needs to be run. Customer disputes need to be resolved. Assuming the business isn’t a one person show, the people performing the work need to be managed. And unless the service is pretty much cookie cutter, spitting out exactly the same thing time after time, then you also have to get into negotiating price, scope and delivery dates for each and every job. This method isn’t one I would like to pursue.

Earning money online by selling information

The final method is to sell information online, the business model pursued by the online edition of The Wall Street Journal. I actually subscribe to it, and while it costs about $100 a year, I find I read it almost every day and really learn a lot from it. I have no idea how many active subscribers they have, but I’d be surprised if they weren’t profitable.

A twist on this model involves providing the information for free, but having some alternate means to make money. The free newspapers available in cities around the world survive solely on their ad revenue. Judging by the popularity of online advertising on a lot of the sites I visit regularly, this is a popular approach.

The downside of this approach is that you actually have to create original content. For lots of people that wouldn’t be very attractive. As I actually enjoy writing, though, it seems like a good fit. Of course like all of the other methods, earning money online by providing free information subsidized by ad revenue will require ongoing effort. As my grandmother was fond of saying, there’s no free lunch!

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