01Mar How to Make Money Online
Lesson #13: Making Money Online While You Sleep
Finally – the lesson that you have been waiting for since week one: how we are actually going to MAKE MONEY with our website. Up until this point I have asked you to simply have faith that when the time was right, we would get to profitability. Well, with our site fully designed, and now being filled with content, the time to talk about making money is now.
This lesson will overview all of the various ways that money can be made online, and it will also discuss the idea of how economics works on the internet. In the next two lessons, we will detail and setup very specific ways that our sites will be profiting.
Ways to Make Money Online
This section will present each of the primary ways to make money online. Whether we are talking about billion dollar corporations like Google or our $200 per week sites, they all generate revenue by one or more of these basic sources.
Make Money Using Banner/Display Advertising
Banner ads are probably what first comes to mind when you think of advertising online. They are the graphical ads that you see on many websites. Typically they are sold on a CPM basis. CPM stands for Cost Per 1,000 views (roman numeral M). Something like: you receive $4 from the advertiser for every 1,000 times their ad is viewed on your site. They can also be sold on a flat weekly/monthly rate too.
Example: Techcrunch.com. This site has many banner ads across their pages. It is a very popular technology blog that charges around $7,500 per DAY to advertise on their site.
Make Money by Digital Product Sales
Selling digital products is just beyond the scope of this course. This is when you create something like a piece of software or a book and offer it available for immediate download. It involves some complexities, like finding a way to accept payments and deliver the product but much easier than physical products.
Example: Many eBooks are offered as a digital eBooks that is instantly downloadable.
Make Money by Physical Product Sales
Selling physical products is not for the faint of heart and certainly not something that this course covers. It typically involves a warehouse, distribution channels, big budgets, advanced websites and more. By far the most complex way to make money online.
Example: Amazon.com. They make money by selling and distributing real-world products to people around the world.
Make Money using PPC Advertising Networks
PPC stands for Pay Per Click (also known as CPC – Cost Per Click). This type of advertising displays text links that charge the advertiser each time a visitor clicks on their ad. Rates will often vary in the range of $0.30–$2 per click, but can be higher or lower depending on the niche. Google has a program that lets you register to easily display this type of advertising on your site, more about this in the next lesson.
Example: Google.com. Do any search and look along the top and right where it says Sponsored Listings. Google charges a varying amount each time that someone clicks on one of those ads. Advertisers are not charged until/unless the visitor clicks through to their website.
Affiliate Marketing: Affiliate marketing is similar to referrals or finders fees in the offline world. This is when you send a visitor to an advertiserʼs website and you receive a commission if they make a purchase. Your commission can be either a flat amount or a percentage of their total order. Typically you sign up and get a custom link that will tell their computers to track the sale to your account. Can be very easy and very profitable. Our sites are designed to make money from this source.
Example: Amazon.com has an affiliate program that people like us can sign up for. If you refer a visitor that buys one of Amazonʼs products, you will receive a commission, typically about 8% of the total order amount.
The last two (CPC Ads and Affiliate Marketing) are the ones we will be primarily using for our sites, at least in the beginning. Of course, there are many variances within each of these categories, but every website that makes money will make it from one of these general sources.
Another note on ad types: it is very common for websites to mix their revenue sources. For example, Amazon.com also sells banner/display ads too, even though their primary business is physical product sales. Our sites will do the same thing: displaying both affiliate programs and CPC Ads to maximize our revenue.
The Economics of Making Money Online
I chose to add this section because I think too often people see the internet as some type of magical, mysterious genie that will give them all the money they need with no work. True, this course does offer you strategies to make money while you sleep, but the same laws that apply to the rest of the business world apply here, too. To illustrate this, we are going to compare the website we are creating with a McDonaldʼs franchise…
Real World Economics
It may seem that the internet lives in itʼs own bubble. That the money, products, resources, advertisements, etc. are all just “digital” but it is crucial for you to understand that the internet is backed by real world products and services preformed by real people. (And when you see the real checks in your mailbox, this will become even more apparent!)
For example, you have a website and Amazon.com advertises on it. Someone visits your site, clicks on the ad to Amazon.com and purchases an iPod. The customer receives a real-life iPod, Amazon receives profit from the sale, and you receive a commission from Amazon. Win-Win-Win. This entire system was created because a real person bought a real music player. Since you are just getting a commission for showing the ad, it is easy to overlook this process and think that Amazon.com just paid you for the digital ad space on your site, seemingly for “nothing”. In reality, Amazon paid you because you sold an iPod to a real person. The distinction seems minor, but always keep that in mind.
Always remember that you are selling metaphorical hamburgers and french fries to real people in your “McDonaldʼs” on the web. There is no difference.
Supply and Demand
You may be familiar with the idea of supply and demand, and how this affects prices. If your McDonaldʼs restaurant had 100 hamburgers in stock and there was 1,000 people in line, you could charge insane prices. But if you needed to get rid of 1,000 hamburgers and only had 10 customers, you would be practically giving them away.
When supply > demand prices will be low. When demand > supply, you can raise prices higher.
How does this apply to our simple website? The prices your site will earn for each sale or each click will be directly related to supply and demand. Using our last example, when consumers are willing to buy a bunch of iPods, Amazon can afford to pay you much more than when iPods just arenʼt selling as well.
In a larger sense, there isnʼt too much you can do about this, but you can position yourself to protect against lower demand. The best way to do this is to ensure that you have multiple streams of revenue (which we will be getting to in the next lessons).
Leverage means that you can do a lot with a little. Leverage is the concept that makes the internet an exciting place to make money. Leverage is the reason that I can offer you strategies to make money while you sleep. Letʼs look at how internet business offers us leverage:
Time leverage is perhaps the biggest advantage. Let me explain how business works online. Because your website is up 24/7, even while you are sleeping, you can profit from it no matter what you are doing with your time. Once your site is up (and you spend minimal time maintaining it), you are free to do whatever you want and your site will continue to profit. If you are ambitious, you can spend your time creating another site, and another, while all of them are making money all the time. See how you can leverage your time? If this was the McDonaldʼs, you would be working 12 hours a day to keep your restaurant in order and when you went home at night, the restaurant would be shut down, unable to make you any money.
A second area of leverage is resources. The system that I am teaching you takes minimal money and minimal skills to create. It is a system that, with a little effort, you can create for under $20 and profit $200 per week or more. Try getting that kind of return with a McDonaldʼs franchise.
The final area of leverage is geography. With our restaurant, we can only serve local customers. With the internet, we can reach billions of internet users world wide. This leverage stuff is powerful and it is the single factor that makes the internet fundamentally different (and in my opinion, better) than the McDonaldʼs franchise.
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