Note: this article has been superseded to a large extent by Chapter 2 of Database Backed Web Sites
Asking "How do I make money on the Internet?" is like asking "How do I make money on the telephone?" The Internet is a communications device; use it to communicate with people and maybe you'll make some money. Ignore it and you'll be about as prosperous as a company that doesn't answer its phone.
An example of a good commercial site is www.fedex.com. They took an internal database containing information that customers need (i.e., "the location of package #2389156") and made it available to everyone on the Web. You can nose around for their press releases if you like, but basically the entire site is functional. Does the site sell anything? Not really.
Examples of awful Web sites are too numerous to list, but prime candidates include
[In fairness to Ford, it should be pointed out that the GM site, which came out about six months later, is even worse. EDS built it, presumably for zillions of dollars.]
The Internet is a 26 year-old community. Businesses with billions of dollars that discover the Net and decide "let's see if we can make a quick buck off this Net thing" are probably not going to endear themselves to anyone. The people who will prosper are those that figure out how to provide a useful service that people in the community value.
What if one of the manufacturers set up a truly interactive Web site? A consumer could send in a question like "I want to take pictures of trees but they seem to converge at the top of the photo" and the response would be "you need a perspective correction lens". The consumer probably didn't know that such a lens existed but might be very happy to pay $600 for one. Not enough people will ever want or need a perspective correction lens to warrant a full page ad even in a specialty magazine. The Web should allow Canon or Nikon to put exactly the right equipment in the hands of the consumer, resulting in much higher revenues for themselves and much better pictures for the consumer. Whichever company figures out how to use the Internet to help its customers take better pictures could probably pull substantially ahead of the other in market share.
[I wrote all of the above before Canon actually brought out its Web site. The result is far lamer than even I could have expected. They really deserve to go up there in the pillory with Kodak and Ford. Do they even have the owner's manuals for their cameras so that you can look up obscure features if you're planning a purchase or if you have a camera and can't figure out how to use it? No. In short, they have nothing that you couldn't find in their print materials and, in fact, less.]
Communications and databases change a lot of business models. For example, most people would say that AT&T's best chance of making money is collecting profits from long distance service. Consider, though, that Joe Consumer uses an AT&T Universal MasterCard, an AT&T cell phone, and AT&T long distance service at home. Because of his cell phone calling pattern, AT&T knows that Joe drives by three travel agents on his way to work every morning. Because of his home long distance, AT&T knows that he dialed three airline companies, two SCUBA diving equipment retailers, and two Caribbean government tourist offices. Because of his MasterCard records, AT&T knows that Joe spent $7500 last year on travel. How much do you think those travel agents on Joe's route to work would pay for his name, address, and phone number? Probably a lot more than AT&T will make on Joe's long distance service.
The above scenario is merely suggestive and presumably privacy considerations will prevent some of the most obvious money making schemes, but information about how consumers are using information is going to be a publisher's biggest asset. This information can be sold to advertisers, used to deliver custom pages with articles and ads of special interest to each reader, and used to refine content to make a publisher more competitive.
A publisher that just puts up a bunch of static pages and doesn't try to figure out who is reading what is doing better than a publisher that isn't on the Web, but not by a whole lot in terms of getting business experience for the future.
The simplest way of figuring out who is reading your Web pages is to require registration. Aside from being inelegant, this probably cuts your readership in half because (1) users back out when they find they have to hassle with a form, username, and password, and (2) search engine robots won't be able to get into any of your pages so someone who uses InfoSeek or Webcrawler to search for "Costa Rica" won't find any of your pages on the subject.
A more subtle approach is to generate a session key ever time a new reader comes to the site and use the Netscape Magic Cookie protocol so that the reader's browser continues to tell you who is looking. Then come up with a contest or some other optional means whereby the user identifies himself and you can map all of the previous activity in the session back to that person. This requires some database and logging sophistication, but it is being done by some of the most forward-looking publishers (I know because I wrote their code).
However, I don't know anyone who has successfully attracted impulse buyers over the Web. People apparently find that strolling through a mall, bleak though that may be, is a less bleak and depressing activity than browsing commercial Web sites.
Despite its non-commercial nature, I can use my own site as an example. I get over 100,000 hits/day. The photograph at right is viewed by at least 500 people/day. If people will make a donation to a local charity (explained in the gift shop section of Travels with Samantha), I'll send them a print. To a first approximation, 0% of the people who see this image on the Web make a "purchase" decision.
I know what you're thinking: "Wake up and smell the roses, Greenspun, you're a bad photographer." I'd be perfectly prepared to accept that except that perhaps 5% of the people who see a nicely framed 20x24" print of this image choose to buy one on the spot (and the frame alone is $250).
A minor exception to this rule is that advertising and magazine art directors sometimes buy my photos after seeing them on the Web. Presumably their professional skill enables them to imagine how an image they see on screen would ultimately look in the pages of their publication.
My site actually does make a lot of money. I just don't get any of it. The manager of the Hotel Milvia in Costa Rica tells me that his nine-room hotel gets two or three bookings/week because of a recommendation in my travelogue. The businesses mentioned in photo.net all report thousands of inquiries from my readers, many of them leading to immediate sales.
Again, the lesson here is that you can sell people what they already want. People who read my Costa Rica story are about to go to Costa Rica. People who read my "where to buy a camera" page are very likely about to buy a camera.
[Note: If you absolutely desperately must make money on the Internet, I recommend starting a Web software company; I hear these Netscape guys are doing pretty well, for example.]
Like it or not, "banner advertising" seems to be the leading way to make money on the internet (perhaps only second to developing web sites). See http://www.ca-probate.com/comm_net.htm for evaluations of dozens of different banner advertising networks, brokers, exchanges, and related resources.
-- Mark J. Welch, March 7, 1997