I had a conversation with a friend of mine yesterday. He asked me: How does a website make money?
And can you make a decent living with advertising, he continued. Here’s how I explained the whole web business to him.
The most important thing in web development is the domain name. Think of it as the importance of location in real estate. Investors in real estate say,”location, location, location”. Investors in domains would say, “name, name, name”.
Then you need to do some research and figure out if there are people interested in your website’s content. Enough people to make the venture worthwhile and the business sustainable. Many are interested in fashion, booking hotels and buying a car or house, but not that many are looking for cleaning their chimneys (I think).
Finally, you have to conduct another research about the advertising cost in that niche. Ads are quite expensive in finance, sports, real estate and photography for example but quite cheap for other industries. The reason of course, is the product’s cost; how much money a potential customer will eventually spend.
In finance, traders will risk big money, in sports punters will gamble their salaries, in real estate purchasing a property doesn’t come cheap and in photography cameras and accessories can quickly leave a mark on your wallet.
Companies make a profit taking a cut of that spending or, in some cases, their revenue is whatever the customer spends.
Therefore, they are searching for websites that are attractive to their potential customers and buy advertising space there.
To give you an example, you could build a website about loans. Many people are interested in loans at all times and loans are a very hot product for banks. Your website is the middleman who connects loan takers with banks who sell them. Loans being one of the main and most valuable offerings of a bank, you can bet they’ll pay mucho dollarios for securing the top ad spot in your popular website.
That is in a nutshell what web development business is all about. In the process of course, other industries are involved, such as marketing, content creation, web design and administration to name a few. But in the end, you need a good domain name, people searching for your niche and companies that sell relevant products to your audience.
Repeat that for a couple of websites and you’ve got yourself a web business. It then comes down to you to make it profitable by tracking expenses and revenue, as in any kind of business. Entrepreneurship 101.
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