Comparison between different types of internet businesses, comparison between different typs of home based e-business

It is obvious that the requirements of the four different types of e-businesses are vastly different in terms of the knowledge and commitment required, and also potential risks and profit. In this section, the different types of e-businesses will be compared with regards to (1) start-up costs, (2) running costs, (3) specialist knowledge, (4) technical knowledge, (5) time to profit, (6) risk (7) profit.

	Start-up Costs	Running Cost	Specialist Knowledge	Technical Knowledge	Time to Profit	Risk	Profit
Affiliate Programs	Low	Low to High	Low to High	Low to Medium	Very Long	Very Low	Low to Medium
Physical products • Auction Sites • Online Shop	Low Low to Medium	Low Low to Medium	Low Low to Medium	Low Medium to High	Short Medium	Low Medium To High	Low to Medium Medium to High
Soft Products	Low to High	Medium to High	Low to High	Medium to High	Medium	Medium To High	Low to Very High
Services	Low to High	Low to High	Medium to Very High	Medium to Very High	Medium	Medium to High	Low to High

The start-up costs are lowest for businesses that derive income from affiliate programs and selling physical products through auction sites. Online shops require expenditure in setting up a web site with a carting system and payment gateway. Web sites selling soft products or services may require to pay additional fees to third parties for use of their products or services e.g. resellers licenses for software, integration into airplane ticket booking systems.

There is little running cost for businesses selling physical products through auction sites. An online shop selling physical products may have to pay for web hosting, use of cart/shop-front system, and access to a payment gateway. Web sites offering soft products and services may have to pay extra because of the extra demand in web hosting resources and also recurrent reseller or rental fees for software or integration into other computer systems. Successful publishers earning money through affiliate programs often run web sites that require a lot of web resources. There are also substantial advertising costs involved in each category with the exception of selling physical products through auction sites. The advertising costs vary greatly and depend very much on the demand of the products or services offered.

For the purpose of this study, technical knowledge refers to competency with the technical aspects of e-business discussed in the previous chapter. Businesses that sell physical products through auction site do not require much technical knowledge except in using the auction site. Online shops require some degree of technical knowledge in order to be set up correctly although TURNKEY solutions may make the task much easier. Similarly, businesses that sell soft products may need to set up password protected directories or download areas and thus need some degree of technical knowledge. Web sites that sell services require the highest level of technical knowledge, as it may require the integration of the web site into other computer databases such as those for airline and hotel reservation, or use of complex technologies such as streaming video for adult sites.

For the purpose of this study, the time to profit is regarded as the time taken to reach a decent profit, it is not the same as time to profitability. Publishers may start to earn a little income from affiliate programs straightaway but it will probably take months or years before a decent profit can be returned as a long time is needed for a large volume of traffic to build up on their site(s). Businesses that sell physical products on auction sites can turn in a good profit straightway provided that the right products are available. Web sites that sell physical products, soft products and services will take a few months for medium volume traffic to build up if their site is listed on search engines and directories.

Setting up as a publisher and joining affiliate programs carry minimal risk except in terms of the time and money spent in setting up and maintaining and promoting the web site(s). There is very little risk with selling physical products through auction sites unless one takes in a lot of stock that could be left unsold. The risks are higher for an online shop because of the extra money involved in setting up the site and also the possibility of taking in stock that could not be sold. Similarly, selling soft products may involve the purchase of expensive reseller's licenses or development costs for a particular soft product. The situation is similar with services where one may have to pay expensive reseller fees.

It is very difficult to turn in a high profit earning exclusively from affiliate programs because it is extremely difficult to produce and maintain high volume traffic web sites. In the case of selling physical products through auction, the margins are generally much lower than those of an online shop, and the profit realized is somewhat unpredictable. The profits that can be obtained are higher for sites that sell physical products, soft products, and services as are the risks involved. The highest profits of all can be derived from adult sites but the competition is also the highest.

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Chapter 5 – Analysis and Conclusion

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