Although not many companies and individuals can attribute financial success of these proportions to their Web site, many Internet businesses are making money. According to ActivMedia, Inc., a marketing research firm that specializes in the Internet (located at http://www.activmedia.com), 33.3% of all commercial Web sites are profitable. And that figure is expected to rise during the next few years. In addition, Web commerce combined for a total of $436 million in sales in 1995. It should reach $24.4 billion in 1997, is expected to hit $46 billion in 1998, and may well reach $1 trillion in 2001.

Those numbers sound unbelievable, but consider that there are about 50 million Internet users with roughly 2 million more signing on every month. These Internet population numbers were previously unthought of, says Jim Daniels, founder and CEO of JDD Publishing (http://www.bizweb2000.com). "This unprecedented growth has opened up a whole new playing field for upstart entrepreneurs."

Daniels should know; he's one of them. Daniels publishes a free newsletter called "The BizWeb E-Gazette" that is sent via electronic mail (E-mail) every Friday to a growing list of 12,500 subscribers.

In February 1996, Daniels was a 10-year technician and service manager for a small telecommunications company in Boston, Mass. Upon receiving a modest income tax return, he decided to purchase a used 386 computer with a modem for a little more than $300. After all, he had heard about the Internet and was determined to eventually go into business for himself.

Once he got online, he began researching the Internet and Internet marketing methods. Daniels realized that he was one of several million people with the dream of forming their own Internet-based company. So he decided to take all of his research and put it in an inexpensive 40-page manual to help others. In doing so, he formed JDD Publishing to sell the manual.

Around Thanksgiving 1996, Daniels took a hard look at the profits he was realizing from JDD Publishing. His part-time income had surpassed his weekly paycheck, totaling about $750 a week. So he quit his day job. Since then, his income has increased steadily by about $100 a month and, with a new book entitled "Insider Internet Marketing," published in July, he's anticipating profits that will surpass $2,500 a week by this Thanksgiving. "Not bad for one guy sitting in his spare bedroom, huh?" Daniels says.

No, that's not bad. And with success stories like that, it's easy to see why so many people are exploring the Internet for business opportunities. Like any other business venture, though, you need to be careful when choosing where to invest your money.

Get Rich Slow.

Type the key words make money into any Internet search engine and you are bombarded with thousands of sites, many of them promising quick and easy ways to make you rich. Lists of low-overhead businesses that surfers can start abound on the Internet. Some of the listed start-up opportunities are family tree researcher, electronic book publisher, shareware seller, and online publicity agent. These are all businesses that work for some people. But they're not going to work for everyone who tries them.

Al Bredenberg, principal of the www. copywriter.com Web site and author of "The Smart Business Guide to Internet Marketing," says there are lots of people making money over the Internet. However, there are also lots of people losing money over the Internet, he says.

"There are lots of failures," Bredenberg says. "There are lots of people who try to get rich quick and it bombs out. I say ‘get rich slow'—or better yet, forget about getting rich and make a living, care for your needs."

Dave Taylor and Rosalind Resnick, co-authors of the book "The Internet Business Guide" from Sams Publishing, agree that reports of huge profits can be misleading. "The next time you read an article in a newspaper or a magazine about the money-making opportunities on the Internet, take it with a grain of salt," they say. "Divide any numbers you see by a factor of at least two. . . . There are real opportunities to make money on the Internet, but you need to pick your niches carefully. Don't expect an immediate payoff."

Who Makes Money?

So if it is possible to make money on the World Wide Web, you ask, what do you have to do to be one of the companies that sees black, not red, from its Internet-related marketing sites? As you can imagine, there is no easy answer to that question. But we can learn a lot by looking at some of the profitable Internet businesses out there.

As expected, the companies that make the most money from the Internet are Web-related businesses such as site designers, service providers, site consultants, etc. Aside from them, there are some general categories in which Web site money-makers may be placed.

Web Transactions.

According to ActivMedia, the vast majority of Web revenues (85%) are generated by product and service sales. In fact, three in five Web sites generate sales revenue and one in 10 sites is a "high volume" producer with $10,000 or more in monthly income. (The top end of this group, ActivMedia reports, receives a revenue stream above $1 million a month.) These high-volume producers account for 90% of all Web revenues today.

The big question, though, is what is selling on the Web.

Taylor and Resnick have published a list of "What's Hot" and "What's Not" in Web sales. Hot items include computer books and software, and Not items include lobster, T-shirts and teddy bears. "High tech sells better than high touch," they say. "And anything that appeals to a 20-something computer guy who lives life on the 'Net is probably going to do better than a warm and fuzzy product designed for family fun."

That said, let's take a look at some successful transaction sites.

Amazon.com. Amazon.com (located at http://www.amazon.com) is a successful online bookseller that boasts to be the earth's biggest bookstore. By browsing through the site, you'll have access to approximately 2.5 million titles, including most of the 1.5 million books currently in print and about 1 million of the most popular but hard-to-find books that are out of print. The store offers savings on more than 400,000 titles every day with 40% savings on feature books, 30% discounts on hardcovers, and 20% reductions on paperbacks. Amazon.com lets you order online with shopping cart software and allows you to choose various shipping methods. It can even gift wrap books to make special occasions easier.

Amazon.com (http://www.amazon.com) is a successful online bookseller that boasts to be the world's biggest bookstore. By browsing the site, you'll have access to approximately 2.5 million titles, including popular out-of-print books.

The Virtual Vineyards Web site (http://www.virtualvin.com) sells fine food, wine, and gifts. It also provides recipes, as well as winemaker and food producer profiles.

Massmusic.com. An online music superstore is also available. Mass Music, located at http://www.massmusic.com, has more than 185,000 titles, offers a free weekly E-zine (an electronic magazine), music accessories, and the option of CD, tape, or vinyl.

Virtual Vineyards. Founded in 1994 by Peter Granoff and Robert Olson, Virtual Vineyards (http://www.virtualvin.com) is a direct marketer of fine foods and wines over the Internet. By combining the expertise of master sommelier Granoff with Olson's computer background, the founders not only use the Web site to sell wine, but to provide in-depth information about the wines being offered and the people who make them.

Virtual Vineyards has three different "stores"—a Wine Shop, a Food Shop, and a Gift Shop. In addition to being a transaction site, this Web location is a source of interesting and credible information. It provides profiles of winemakers and food producers. The Food Shop's Demonstration Kitchen offers menu ideas, recipes, and wine recommendations for your meal. And if you have a question or need advice, you can make the request via E-mail and receive a personal response.

Advertising Revenue.

Finding Web page advertisers is another way that Web sites can make money, although these revenues are much smaller collectively than are transactions. Advertising can be found everywhere on the Internet in the form of banner ads, links, and buttons. According to market research firm Forrester Research, Internet advertising sales will reach $2.7 billion by 2000.

Netscape.com. The Netscape Web site at http://www.netscape.com is one of the biggest ad-supported sites. The page has highlighted Netscape Sponsors, provides headlines from news services and, of course, charges search engines like Excite, Lycos, InfoSeek, Magellan, and Yahoo! to place buttons on its home page.

Wired.com. Another Web site that provides links for its advertisers is Wired magazine's online location at http://www.wired.com. The site has a special advertiser's index that displays company logos and provides links to advertisers' home pages.

Online Subs.

The third and smallest way to make money from a Web site is through subscription generation. This is a little bit harder to do because the sharing of information is what created the Internet—and most of it is free. But, believe it or not, there are some information services that people will pay to read.

ESPN SportsZone. ESPN SportsZone, located at http://www.sportszone.com, is a good example. ESPN offers much of SportsZone's content for free, but the company will provide an in-depth specialized newsletter for sports fanatics. This newsletter costs subscribers about a dime a day. The cost is kept low because the site also generates advertising revenues through a "Sponsors" page that has advertiser logos and links.

Wall Street Journal Interactive. The Wall Street Journal also has an online edition called the Wall Street Journal Interactive, located at http://www.wsj.com. The online edition costs subscribers $29-49 a year, depending on whether they subscribe to the print edition or not. As with its print edition, the WSJ Interactive edition has a Front Section, a Marketplace section, and Money and Sports sections. Subscribers also can have their versions customized with the Personal Journal. And, like ESPN's SportsZone, the Interactive Edition also sells advertising.

Beware Of The Stumbling Blocks.

Although, as we've shown you here, there are companies on the Internet that are making money (and plenty of it), you need to keep your expectations in check.

Taylor and Resnick say the Internet is great for marketing, depending on the market you're trying to reach. However, it isn't as successful in generating actual sales. This will improve. But for right now, they say, there are five main reasons why Intern et sales aren't yet ready for prime time.

1. There is no directory to the mall. Because the Internet is a computer cooperative, rather than a for-profit online service, there is no one to organize all of the storefronts and cybermalls into a single online marketplace, Taylor and Resnick say. This is somewhat akin to walking into your local shopping mall and wandering around with no map or mall directory until you stumble upon a store that has something in which you're interested.

"Even if you're fairly Net-savvy," Taylor and Resnick say, "it is still much easier to order a pizza by telephone than by logging on to the Internet and typing http://www.pizzahut.com."

2. Comparison shopping is difficult. Although there are plenty of stores on the Internet, there is no way to browse them all at the same time. Comparing online prices and features is quite time-consuming. And, there seems to be discussion among some Web merchants as to whether they should publish their prices over the Internet at all.

ESPN's SportsZone (http://www.sportszone.com) is an online magazine that provides sports information for free. The serious sports fanatic, however, can subscribe to a customized edition.

Netscape's home page (http://www.netscape.com) receives advertising revenue from "sponsors" as well as from search engines. It's one of the biggest ad-supported sites online.

3. Mall security is lax. This concern isn't as real as it was even a year ago. New encryption technologies are making online ordering safer. But even with secure servers, there are many Internet users who compare the release of a credit card number over the network to shopping in a store so dangerous that it requires armed security guards and steel-fenced parking lots. Although they're told that ordering online is safe, they remember the horror stories, and they're just not sure they want to take that risk.

4. There aren't enough shoppers. Sure, there are 50 million 'Net surfers out there. But they mostly search for information and communicate with others. A majority of them don't shop via the Web at all.

5. It's not much fun. For many people, shopping is a fun, leisure activity rather than a nuisance or a hassle. "Despite its cool hyperlinks and flashy graphics," Taylor and Resnick say, "the Internet is not a cozy place to browse."

A Look To The Future.

Despite these stumbling blocks, great strides have been made in Internet marketing and sales. Resnick says, in a back issue of her online newsletter "Interactive Publishing Alert/Digital Direct Marketing Letter" (http://www.netcreations.com), that "as the Internet attracts a more mainstream population, the products and services that succeed there will become more mainstream, too. This means more consumer goods and more sales to women, minorities, and novice computer users.

"One of the big opportunities I see is selling products and services piecemeal through online order forms," Resnick continues. "Now that encryption technology is making it safe to enter credit card information through a Web browser, the Internet may turn into one big ATM machine that dispenses all manner of products and services."

JDD Publishing's Daniels agrees that the future holds even more promise for businesses to make money through the Internet.

"As new technology is introduced, new opportunities will arise," he says. "That's the beauty of this whole thing!"

by L. Johnson