How Web sites Make Money

I wish I had known the answer to this question years ago when I started designing websites back in 1996. I wasted my time designing sites for other people or just for fun completely oblivious to the fact that I could generate my own income or at least plant the seeds for awesome future cash flow.

Web sites are great for creating cash flow with minimum maintenance. Websites make money usually in one or a variety of the following ways:

• Selling physical products / ecommerce – EBay is the pioneer of online selling but there are millions of stores, large, small and tiny on the Internet.  The best strategy for a small timer is to pick a very narrow niche and specialize in it. With access to the entire world through the Internet you can sell a large amount of a very specialized product, what is commonly referred to as the ‘long tail’.
• Selling digital products – Some online marketing specialist make a killing selling educational information products, software and other digital products. If you can sell to a market the margins are huge as there is no cost of physical production or delivery.
• Promoting affiliate products – This is the crossover between advertising and selling. You promote other people’s products, physical or digital, and receive commissions on sales.
• AdSense and contextual advertising – This is the easiest way to start generating income from a site but it’s usually not the most profitable. The general strategy here is to build as much content as possible to capture search visitors, place AdSense and other automatic ad placement software  and grow clicks on ads.
• Banner and direct ads – Larger websites can make good income selling direct ad and link placements. This can be more profitable than AdSense because it cuts out the middleman.
• Directory listings – Some types of sites charge a monthly fee for being listed in their directory or listings of business and services
• Subscription payments – Websites with special services can charge a subscription payment for using private areas or special paid options. Often the site will offer a free version of their service and a bonus paid version.

These are the most common ways how Web sites make money.