Online Business Systems | WEB PASSIVE INCOME

If you considering to start an online business you may have been wondering what online business systems are available and which?business system is best for you.

On Web Passive Income we focus on?online business systems which can be automated to create passive income. Our ideal business model should require as little work as possible to free the owners time up to focus on growing the business. We believe that the business owner should work on the business (spend time to develop the business) not in the business (doing the mundane tasks).

What is a online business system

A online business system is nothing ells than??a systematic sequence of activities with the aim to sell a product or service?

In principal?an online business?is the same as?running a normal?business with the difference that?most or all the mundane tasks is done on the net by computers.

In a? non online business each step within the business is controlled by rules?typically captured in policies?and procedures. For example:

Goods are received by a storeman. The storeman book the goods into the store by labelling it, add the product data in a computer,?the goods are then placed in a rack which is labelled with information which corresponds with?the information within the computers?for later retrieval.?While he is at it the computer keeps track of stock level and flag when new stock have to be ordered or in smart systems automatically order the goods.

An online business system work exactly the same with the difference that the rules are written in?code and the bulk of the work is done on a server.

There is no magic when compiling online business systems. All you need to is to sit down and draw a diagram outlining the logical flow through your business. Identify which information you want to capture in the process and what you want to do with the information.

The online business system can be as simple or complex as you like.

• The system may be as simple as having a sales page which directs customers to a?form where they fill in their details. The forms then directs them to a online pay gateway e.g. Paypal. PayPal returns a payment confirmation back to your site. Your site then places an automated order with an order, and pays the supplier.?The supplier then packs and ship the product to the client without your involvement.
• Other more complicated systems may include systems where the client contacts is added to mailing lists, which automatically sends out news letters or special deals etc.

The beauty of online businesses is that all of your marketing and administrative tasks?can be automated which would leave you with the?physical tasks if you have physical product. Smart online business owner will outsource these tasks as well which leaves them with only the high level management tasks.

Online Business?Options

Michal Rappa director of the Institute for Advanced Analytics at North Carolina State University?made a study of existing available business models (Business Models on the Web). He identified 9 types of online businesses.

• Brokerage
• Advertising
• Infomediary
• Merchant
• Manufacturer (Direct)
• Affiliate
• Community
• Subscription
• Utility

Each one of the business models can be implemented on its own as a focussed business system. It is not uncommon that combinations of these business systems are used by website owners to increase the web business profitability. Combining the different systems have the benefit that it increases the probability of realising a sale for different people response different to different methods of marketing.

Brokerage System

Brokers?brings sellers and buyers?in contact with each other?and facilitate transactions between them.? Broker earn money by charging a fee or they earn a?commission for each transaction?facilitated. Fees can vary depending on the type of transaction. A brokerage business system include;

• Marketplace Exchange ? this option acts as a outsources service and offers a full range of services covering the transaction process,?do market assessment,?negotiate on behalf of one of the parties, etc. Exchanges?can?operate independently or are supported by an industry.

• Buy/Sell Fulfillment ? This system takes customer orders to buy or sell a product or service like a reseller.

• Demand Collection System ? the patented ?name-your-price? model pioneered by Priceline.com. Prospective buyer makes a final (binding) bid for a specified good or service, and the broker arranges fulfillment. [Priceline.com]

• Auction Broker ? conducts auctions for sellers (individuals or merchants) e.g. eBay. The website acts a broker which?charges the seller a listing fee and commission scaled with the value of the transaction. Each Auction broker determines their own rules.

• Transaction Broker ? provides a third-party payment mechanism for buyers and sellers to settle a transaction. [PayPal, Escrow.com]

• Distributor ? is a catalog website that connects product manufacturers with?buyers.?This system?facilitates?transactions between?distributors and?trading partners.

• Search Agent ? a software agent or ?robot? used to search-out the price and availability for a good or service specified by the buyer, or to locate hard to find information.

• Virtual Marketplace ? or virtual mall, a hosting service for online merchants that charges setup, monthly listing, and/or transaction fees. May also provide automated transaction and relationship marketing services.

Advertising Model

The web advertising model is a web site which?provides content and services (mostly for free). Examples of these are:??email, IM, and?blogs. The free content is mixed with advertising?in the form of banner ads. The ads may be the major or sole source of revenue for the site owner. Typically the site owner create the content or may acquire?content from an external source. For the?advertising model to succeed the site owner needs a large number of visitors/readers or needs to be?highly specialized.

• Portal ? usually a search engine that may include varied content or services. A high volume of user traffic makes advertising profitable and permits further diversification of site services. A personalized portal allows customization of the interface and content to the user. A niche portal cultivates a well-defined user demographic. [Yahoo!]

• Classifieds ? list items for sale or wanted for purchase. Listing fees are common, but there also may be a membership fee. [Monster.com, Craigslist]

• User Registration ? content-based sites that are free to access but require users to register and provide demographic data. Registration allows inter-session tracking of user surfing habits and thereby generates data of potential value in targeted advertising campaigns. [NYTimes]

• Query-based Paid Placement ? sells favorable link positioning (i.e., sponsored links) or advertising keyed to particular search terms in a user query, such as Overture?s trademark ?pay-for-performance? model. [Google, Overture]

• Contextual Advertising / Behavioral Marketing ? freeware developers who bundle adware with their product. For example, a browser extension that automates authentication and form fill-ins, also delivers advertising links or pop-ups as the user surfs the web. Contextual advertisers can sell targeted advertising based on an individual user?s surfing activity.

• Content-Targeted Advertising ? pioneered by Google, it extends the precision of search advertising to the rest of the web. Google identifies the meaning of a web page and then automatically delivers relevant ads when a user visits that page. [Google]

• Intromercials ? animated full-screen ads placed at the entry of a site before a user reaches the intended content. [CBS MarketWatch]

• Ultramercials ? interactive online ads that require the user to respond intermittently in order to wade through the message before reaching the intended content. [Salon in cooperation with Mercedes-Benz]

Infomediary business system

Information about consumers and the products they consume it very valuable especially if that information is well research and analysed. Some websites specialises in collecting data through surveys, strategically placed advertisements etc.?The information is dissected and made available to third parties at a fee.

• Advertising Networks ? feed banner ads to a network of member sites, thereby enabling advertisers to deploy large marketing campaigns. Ad networks collect data about web users that can be used to analyze marketing effectiveness. [DoubleClick]

• Audience Measurement Services ? online audience market research agencies. [Nielsen//Netratings]

• Incentive Marketing ? customer loyalty program that provides incentives to customers such as redeemable points or coupons for making purchases from associated retailers. Data collected about users is sold for targeted advertising. [Coolsavings]

• Metamediary ? facilitates transactions between buyer and sellers by providing comprehensive information and ancillary services, without being involved in the actual exchange of goods or services between the parties. [Edmunds]

Merchant business Model

Website which specializes in wholesalers and retailers of goods and services. Sales may be made based on list prices or through auction (also known as e-commerce).

• Virtual Merchant ?or e-tailer, is a retail merchant that operates solely over the web. [Amazon.com]

• Catalogue Merchant ? mail-order business with a web-based catalogue. Combines mail, telephone and online ordering. [Lands' End]

• Click and Mortar ? traditional brick-and-mortar retail establishment with web storefront. [Barnes & Noble]

• Bit Vendor ? a merchant that deals strictly in digital products and services and, in its purest form, conducts both sales and distribution over the web. [Apple iTunes Music Store]

Manufacturer(Direct) Model

A?manufacturer may select?to use the??direct model?. With this model the manufacturer relies on the power of the internet to promote the companies brand? and to make sales. It is beneficial for companies to make use of?the direct model because it shortens the supply chain?, reducing the companies costs of sales.

• Purchase ? the sale of a product in which the right of ownership is transferred to the buyer.

• Lease ? in exchange for a rental fee, the buyer receives the right to use the product under a ?terms of use? agreement. The product is returned to the seller upon expiration or default of the lease agreement. One type of agreement may include a right of purchase upon expiration of the lease.

• License ? the sale of a product that involves only the transfer of usage rights to the buyer, in accordance with a ?terms of use? agreement. Ownership rights remain with the manufacturer (e.g., with software licensing).

• Brand Integrated Content ? in contrast to the sponsored-content approach (i.e., the advertising model), brand-integrated content is created by the manufacturer itself for the sole basis of product placement.

Affiliate Model

The affiliate model brings vendors and marketers together. Vendors can list their products on a affiliate site.?Affiliates get the opportunity to signup as a marketer/partner for a product. The affiliate then markets the product at the affiliates cost in return for commission when a sale is made. It is a pay-for-performance model ? if an affiliate does not generate sales,?there is?no cost to the merchant. The affiliate model is well-suited to the web, which explains?the popularity of affiliate marketing.

• Banner Exchange ? trades banner placement among a network of affiliated sites.

• Pay-per-click ? site that pays affiliates for a user click-through.

• Revenue Sharing ? offers a percent-of-sale commission based on a user click-through in which the user subsequently purchases a product.

Community Business Model

The community model relies on the loyalty of users. The users is the main contributors to the website or product. Income is derived from?ancillary products, services, donations, contextual advertising, and subscriptions

• Open Source ? software developed collaboratively by a global community of programmers who share code openly. Instead of licensing code for a fee, open source relies on revenue generated from related services like systems integration, product support, tutorials and user documentation. [Red Hat]

• Open Content ? openly accessible content developed collaboratively by a global community of contributors who work voluntarily. [Wikipedia]

• Public Broadcasting ? user-supported model used by not-for-profit radio and television broadcasting extended to the web. A community of users support the site through voluntary donations. [The Classical Station (WCPE.org)]

• Social Networking Services ? sites that provide individuals with the ability to connect to other individuals along a defined common interest (professional, hobby, romance). Social networking services can provide opportunities for contextual advertising and subscriptions for premium services. [Flickr, Friendster, Orkut]

Subscription Business Model

Users signup to a subscription service and?are charged a periodic ? daily, monthly or annual ? fee. Subscription fees are incurred irrespective of actual usage.?An advertising model is?often?combined with the subscription service.

• Content Services ? provide text, audio, or video content to users who subscribe for a fee to gain access to the service. [Listen.com, Netflix]

• Person-to-Person Networking Services ? are conduits for the distribution of user-submitted information, such as individuals searching for former schoolmates. [Classmates]

• Trust Services ? come in the form of membership associations that abide by an explicit code of conduct, and in which members pay a subscription fee. [Truste]

• Internet Services Providers ? offer network connectivity and related services on a monthly subscription. [America Online]

Utility Model

The utility model is based on?a ?pay as you go? approach.?Metered services are based on actual usage.

• Metered Usage ? measures and bills users based on actual usage of a service.

• Metered Subscriptions ? allows subscribers to purchase access to content in metered portions (e.g., numbers of pages viewed). [Slashdot]

Web Passive Income Recommendation

Affiliate marketing is the easiest type of online business system to start?and fits in with the Web Passive Income model. With affiliate marketing creating a money making stream is as easy as placing your affiliate link on your website. All other commercial activities is taken care of on the affiliate site. Affiliate marketing can be combined with the advertising model.

Advanced?webmasters which have developed an on demand services product can explore the subscription?models, and direct marketing models. This combination is good for marketing e-books and quality knowledge.

Infomediary business system and Merchant business Model requires a significant amount of the webmasters time to process the information and?sales. Unless the owner makes use of an automated system (may include human automation) Web Passive Income does not recommend these options.

The brokerage model , community base model, utility model, can be very complicated and unless these models are of specifically of interest to the webmaster should be avoided.

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