What e-businesses need to know in order to make money online Part 1

This is not a how to get rich overnight guide. This is a text to get your wheels spinning in the right direction and get you to a position where you'll understand what is it that you can offer to the world and charge for it. As the old Japanese saying goes, I'm not going to give you a fish, but teach you how to catch it yourself.  

The lure of making easy money is as old as money itself. Ages ago, easy money was getting two sheep for one goat, then it meant getting 3 silver coins for 3 copper coins, more recently, easy money was getting a good interest rate on your deposit, then stock investments and so on. Nowadays, more and more people see the Internet as a digital El Dorado. But how much of the internet is just digital, and how much of it is actually El Dorado?

In 2009, online stores in USA generated a combined gross sales of $144 Billion. UK stores generated about the same (78bill. UK Pounds). So only these two markets generated about 300 Billion Dollars of sales. That's one third of Obama's initial plan to save the world economy. That is as much USA spends on their military budget (I think). So, is there money on the internet? YES.  Is the interned a digital El Dorado? You bet!

But as with any other fortune quest, the trick is to find the way to the gold, and so it is with the internet. Don't think that starting a blog or a website  will make you rich. It will only make you disillusioned, disappointed, and you'll give up the idea altogether.

Making money on the internet almost follows the same logic as with any brick-and-mortar business. You have to offer something that others would pay money for, so you have to offer value. No value-no visitors; no visitors-no money. That's as simple as 2+2=4. So, the first thing each online money maker needs to ask is "What do I have that others would pay money for?" The answer to this question is as limited as your imagination. The "having" spans form old shoes to ideas of green energy and anything in between. Remember the $300Bil. that people spend online in a year? They all parted with their cash because they wanted something they valued. Online spending hubs like eBay, Amazon, TigerDirect etc all offer goods and services that people need and are ready to pay for it.

Here are a few laws of Economics that will get you thinking in the right direction:

1. The more people need what you've got, the more you can charge, and the more you'll make. (Eg. Air on Mars).
2. If what you offer can be found at each corner of each street in each town, chances are you'll have a very hard time selling it. (Eg. Air on Earth). 
3. When you have something of value but you're not the only one selling it, you have competition. ( Eg. Bell and Verizon services)
4. In a competitive market you MUST figure out a way to be competitive, however:

• Price is NOT the best way to be competitive (Eg. cheap para-shoots)
• Quality is NOT the best way to be competitive (Eg. high quality disposable gloves)
• Service is NOT the best way to be competitive (Eg. outstanding undertaking service)

There are other Economics 101 advice, but for starters this is enough. These four laws are just an expansion of Supply and Demand, and Quality of Service issues that make or break any money-making endeavor.

Let's expand on them a bit.

The law of Supply and Demand is what causes oil prices skyrocket, and the same law is what ultimately caused the financial meltdown of many companies (Enron's shares devalued because everybody wanted to get rid of them while nobody wanted to buy them. The same goes for Lehman Brothers and many others). So, suppliers define the price of what they offer in relation to demand. When demand grows, prices grow. When demand falls, prices follow. These fluctuations power many speculative activities such as stock markets, money markets (ForEx), wheat and barley trading and so on. The bottom line with Supply and Demand is that you cannot just make up a price and expect that the market will follow. If you place a high price, people won't buy. If you place a too low of a price, you've decreased your profit margin and hurt your business. So, the policy of pricing should follow the market, so each business that needs to set a price must know it's target market in detail. Allow me to take one of my blogs for example. 

Quality of Service is (or at least should be) most obvious in two upscale neighboring restaurants. If the newly opened restaurant wants to draw attentions (i.e customers), it's manager must gather up a great team of waiters and cooks so that the food prepared and served is of great value to the customers so they'd be willing to pay for it. If the food is outstanding but waiters are too slow distributing it, and treat customers in an unwelcoming manner, the value decreases and less people will want to leave their money in this new restaurant. In the same way, if the waiters are great with the service but the cooks make barely-eatable food, the value again decreases and people will not take their business to this restaurant. In case if the waiters and cooks are outperformed by the other restaurant's teams, this new restaurant will have to lower prices in order to draw customers, but in this way the manager is changing the business model, and reluctantly abandons the upscale market and focuses on the mid-class customers.

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