8 High Profile Cyber Business

Fifteen billion dollars: That's the value Microsoft slapped on Facebook when the computer giant invested $240 million for a 1.6% stake in Mark Zuckerberg's online social networking site. You could seethe with envy--or you could get started building your own fortune online. Here are eight basic business models (none requiring the brains of a Google software developer) to get you going. Be warned, though: Some are riskier, and demand more IT skill, than others.

Virtual Futures Market

As Internet usage grows, so too will the sophistication of online business models. Take 3-year-old Yoonew, which sells futures contracts on sports tickets. Fans buy the right to take delivery of tickets if their teams make it to a coveted playoff game, perhaps months away. Given the uncertainty of the bet, those contracts sell for a fraction of the future market value of the underlying tickets. If your team makes it to the big game, you've locked in a cheap seat; if it falls short, you lose that insurance premium. Yoonew makes money when the revenue it collects from selling all those contracts exceeds the cost of delivering a small number of very expensive tickets on game days. (The danger: If ticket prices spike, or there are no seats available, the company could suffer a loss or alienate its customers.)

Domain Flipping

As with tangible real estate, you can buy virtual plots (URL addresses), flip them and make a buck. GoDaddy.com sells unused domain names for under $10 apiece. To attract buyers, run tests to determine how often certain key words are searched so that you can demonstrate the likelihood that your URL will show up in a Google or Yahoo! search. (For more on this model, check out "Meet Noah Of The Internet" and "The Most Expensive Web Addresses.")

Tip/Warning: The best domain names are short, sweet, specific and easy to remember.

Domain Directory

Simply corral a bunch of related Web sites and charge their owners annual fees, or per-click fees, to post their listings. High-end example: Business.com, basically Yellow Pages for the Internet.
Tip/Warning: While this may sound easy, the bigger the online parking lot, the trickier the technology to support it. Business.com, for instance, requires a content-management system, search technology and a way to track ad clicks.

Content Provider (advertising model)

This is every pajama-clad blogger's dream. Selling advertising is also how thousands of established online media outlets pay their electric bills. They charge advertisers two ways: by the number of overall Web pages (called "impressions") they serve up, and by the number of people who click on the ads. Some small fries are surviving: Jossip.com, a media and gossip blog, counts Coca-Cola and Sketchers among its advertisers. The trick: attracting enough eyeballs to make it worth someone's while to pay to advertise on your site.

Tip/Warning: The "click-through" rates on ads tend to be quite low--in the neighborhood of one-half of 1%. To have any prayer of attracting large advertisers, sites need to attract at least 500,000 unique visitors per month, says Jossip publisher David Hauslaib.

Content Provider (subscriber model)

If you create truly valuable content, you should be able to charge for it, right? Targeted newsletters and pornography sites can, some yielding operating margins of 30% and higher; many other media outlets resort to selling advertising (see next slide). Dating sites like Match.com--a cross between a subscription-based content provider and a virtual marketplace--charge subscription fees for access to their members.

Tip/Warning: Subscription sites fill an urgent need--for tangible investment ideas, a potential mate, etc. General-interest content generally doesn't cut it with subscribers online.

Virtual Matchmaker

Matching buyers and sellers online sounded like a great idea back in the late '90s--until a lot of these Internet brokers went bust, still, online marketplaces persist. EBay runs online auctions and takes a cut of the final selling price. Other marketplaces simply charge buyers and sellers monthly fees for easy access to each other. Most are niche plays. Examples: Mfg.com matches equipment manufactures with smaller component suppliers, while H2Bid.com links municipalities with wastewater-equipment vendors.

Tip/Warning: Transparency adds value, so offer users the ability to rate the people they do business with. Also, auctions require more sophisticated software than basic online retailing.

© Andrew Park/Shutterstock

Virtual Landlord

You can move merchandise online without paying rent on a warehouse. Just play virtual landlord and charge other retailers monthly fees (or per-transaction fees) for the opportunity to market their products on your site. Amazon.com nabbed 28% of its revenues this way in 2006. Craigslist is another take on this model: The 25-person company charges businesses to post help wanted ads in San Francisco, New York and L.A., and also collects fees for apartment listings in New York City. (Total page views per month: about 5 billion.)

Virtual Store

This is one of the oldest online business models, and one that left many dot-coms in ruins when the Internet bubble burst in 2000. High-end goods (custom suits, fancy cars) are tough to peddle online, but some commodity items, from books and T-shirts to hotel rooms and mortgages, work nicely--if you execute well. Beyond an easy-to-navigate Web site, you'll need a warehouse to store the inventory, as well as "fulfillment" software so customers can complete the transactions. If you don't want to deal with the IT side, set up shop on eBay and let them handle the technical issues. Some of the best eBay retailers (affectionately called "Power Sellers") pull in more than $100,000 a year.

Tip/Warning: Retail is a cut-throat business, online and off. Target a niche and offer over-the-top customer service.