The Truth About Making Money Online

I recently read this great article by Penelope Trunk posted on BNET.com and I thought of sharing it, because it’s a valuable one and I totally agree with what she shares. (Oh… and BNet Rocks by the way, check it out!)

Penelope makes a really important distinction between appearances and reality. What’s really behind these internet success stories? Read on…

People make money online, for sure. But it’s not the people you are thinking of.

Most small businesses are using the Internet in their business model, but in general, the Internet is a way to market products and a way to connect with people; it’s not a get-rich-quick scheme.

Internet marketing requires all the same tools as old-media markets. For example, you need great visuals, you need a great story, you need some sort of connection to the gatekeepers of big audiences. You also need a great designer — or a Web design firm that has a client list you like.

But most of the success you see online is a great looking front-end that disguises the real business going on behind the scenes. Here are the real ways that people are making money on the Internet.

1. Being great at SEO.

When the Huffington Post sold for millions of dollars, AOL bought not so much a news organization, but an SEO organization. It’s not that Huffington Post doesn’t have news, but the news is simply a way to give their SEO people something to work with. Huffington Post doesn’t have the best news, but they have the news most closely tailored to the keywords that people type into Google, so people feel that the news at HuffPo is the most relevant to them.

2. Write blog posts all day, nonstop.

The sweatshop labor of the 21st century is writing blog posts. Gawker Media, for example, has insightful, timely, non-stop commentary about popular topics online. But the type of person you need on staff in order to generate that type of content is a smart, organized, editorialist, with the ability to be on-call all day long. This is why profits are high at Gawker, but turnover is high as well.

3. Aggregate content.

Sugar Inc. doesn’t write content. The company aggregates it. Sugar is a set of sophisticated tools to move traffic around in a way that generates more traffic. Some people get traffic once, and they never see it again. Take a look, for example, at SavvySugar. The site is fine-tuned from a traffic management point of view — viewers will always click more than once.

4. Sell your family.

Rhee Drummond might be the person making the most money on the Internet right now, with her site The Pioneer Woman. That is, she is a privately held company, without investors, and she is one of the highest trafficked sites online. How does she do it? She markets her own family. Their lifestyle. Their dinners. She has made a celebrity of herself and her kids, and while it seems appealing to be Internet famous, few people would actually enjoy that on a daily basis, and probably the only reason she can stomach it is that she lives on a ranch so far from civilization that they have their own landing strip.

5. Make great landing pages.

Let’s say you don’t want to devote your life to generating online content. Let’s say you have some sort of widget you want to sell. In that case, it’s not really about how good the product is, but rather how good the landing page is.

You can only really sell something that people search for on Google. Because how else would they ever find you? So they search for your type of product on Google and then land on your page and then what? You have to make them want to buy. So you are actually building a business that relies more on your landing page than on your product.

What’s Next?

With the old model of the Internet in 1994, people paid the biggest salaries to the developers. I earned $100 an hour in the Fortune 500 writing HTML by hand. Coding was a mystery to most people back then, and I used to <nostalgia>dream in tags</nostalgia>.

Then, at the end of the millennium, content was king. The writers were making top-dollar online. That was when I pretty much canceled my syndicated print column, even though it had run in about 200 newspapers, because Yahoo Finance was paying me $2,500 a week to write one single blog post. More than all those newspapers were paying combined.

Today there is out-of-the-box software to replace everyday coding needs. And payment for content online has calibrated itself to where newspapers were 20 years ago.

So what’s next? All the business models working today have one thing in common: developing markets around keywords. Your business possibilities are not whatever you can dream up in your head. The business models today revolve around what other people dream up and type into Google.

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So think in terms of undervalued keywords, low-cost content, and traffic arbitrage. These are the ways people really make money online. The rest is just marketing offline businesses.