9 Online Business Models for 2022 (Types of Online Businesses)

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Online Business Models

Are you thinking about starting an online business, but don’t know which type is right for you? You’re not alone.

With so many different online business models to choose from, it can be tough to decide where to start.

In this blog post, we’ll outline 9 popular types of online businesses and give you a brief overview of each one. So whether you’re looking for ideas or just want to learn more about the different types of online businesses out there, read on!

Common Online Business Models

Of course, there are many different types of online businesses. However, most of them could be classified as one of the business models listed below.

1. Content-Based Websites Business Model

A content-based website provides its visitors with written information on a specific topic, usually in the form of articles or blog posts. Whether you want to call them blogs, authority sites, niche sites, or something else, they all follow a similar business model.

Content-based websites attract visitors who arrive at the site to read the content. The site owner may make money in a few different ways, including:

  • Display ads
  • Affiliate marketing
  • Selling digital or physical products
  • Publishing sponsored content

These websites may use different methods to attract visitors, including search engine optimization (SEO), social media marketing, email marketing, and sometimes paid ads.

Websites with different monetization strategies may have very different approaches, but in the end, all content-based websites rely heavily on the written content to drive traffic that ultimately produces income.

For example, a website that uses an advertising revenue model may take a much different approach to producing content and driving traffic than a blog that’s monetized by the sale of an e-book. However, the free content on the site is the cornerstone in both cases, and essential for the success of the business.

Most content-based websites have a constant need to produce new content to keep the traffic flowing and spark growth. As the site owner, you’ll either need to write a lot of content yourself or outsource the work to freelance writers or a content agency.

Those who drive the majority of their traffic through SEO also need to do a lot of keyword research to find words and phrases people are actually searching for and create content based on those keywords.

The Pros of Content-Based Websites

  • The model is relatively simple to understand and implement (simple, but not necessarily easy).
  • It’s an appropriate choice for beginners who are just getting started with online business.
  • Startup costs are very low and the business can be run on a minimal budget if you’re doing the work yourself.
  • Can be very scalable (and lends itself well to outsourcing) if you’re able to produce enough high-quality content.
  • It’s also duplicatable, so you can use the same strategy to build multiple successful websites.
  • There are many different ways to monetize a content-based website.
  • Even though there are millions of websites online, there are still plenty of underserved topics so you can avoid the heaviest levels of competition.

The Cons of Content-Based Websites

  • Producing high-quality content takes a lot of time and effort (or money if you outsource it).
  • You need to be able to produce a steady stream of new content to keep traffic coming in.
  • Because this type of business is easy to start, there’s nothing to prevent others from becoming your competition.
  • It can be difficult to stand out in a crowded market.
  • New content-based sites usually take several months or longer before they start making money.

For more, please read our Guide to Building Profitable Niche Websites.

2. Audio/Video Content Business Model

Here, we’re talking about podcasts, vlogs, and YouTube channels. Essentially, this is a content-based business as well, but the focus is on audio or video content instead of written content. With the popularity of audio and video content spiking over the past several years, this type of business presents a tremendous opportunity.

The biggest difference between an audio/video content business and a written content business is the time investment required. Producing high-quality audio or video content takes much more time than writing blog posts or articles. But since it takes more effort, fewer people are willing to do it. As a result, you may face less competition than you would face with a content-based site that produces written content.

This type of business is also unique because you could publish the content on your own website, on YouTube, or on popular podcasting platforms. While it’s ideal to have your own website, it’s not completely necessary.

Monetization options include sponsorships, the YouTube Partner Program (ads), affiliate marketing, and selling your own digital products.

Audio/video content can be more challenging to outsource than text-based content. This is partly because the show’s host is essentially the face of the business. Video or audio content produced by a lot of different people would likely make it more challenging to brand your business and build a following. As a result, you should be willing to create the content yourself if you choose to pursue this business model.

Audio/Video Content Pros

  • You can make a lot of money with sponsorships and the YouTube Partner Program if you have a large enough audience.
  • It can be more engaging and entertaining than written content, making it easier to hold people’s attention.
  • The demand for audio and video content continues to increase, and there are still far fewer podcasts and YouTube channels than blogs.

Audio/Video Content Cons

  • It takes more time to produce audio or video content than it does to write an article or blog post.
  • You’ll probably need to create the majority of the content yourself since it is difficult to outsource.
  • If you don’t have your own website, you’ll be reliant on platforms like YouTube or iTunes, which could change their policies at any time (making it difficult to predict the long-term sustainability of your business).
  • This type of business can be more challenging to sell compared to a blog/niche website/authority website. That’s partly because if you’re the face of the business, a transition can be difficult for the new owner.

3. E-Commerce Business Model

E-commerce businesses come in all shapes and sizes. For the purposes of this article, we’re talking about selling products on your own website or online store, selling on a major marketplace like Amazon, or even dropshipping (where you don’t hold any inventory).

Starting an e-commerce business is much more involved than starting a content-based site because you’ll need to choose a product, find a manufacturer or be able to produce it yourself, order inventory, and deal with fulfilling orders and shipping the goods to customers.

You’re also likely to face cash flow challenges, especially as you attempt to grow the business and add new products. You may need to pay for inventory several months before you start to generate any revenue from that inventory, so managing cash flow is a major part of the business. In many cases, taking cash out of the business and putting it in your pocket is more challenging with an e-commerce business than it is with many other types of online businesses that don’t involve a physical product.

The income potential for e-commerce businesses is outstanding. While content-based sites might make money in several different ways, product sales will account for close to 100% of the revenue for most e-commerce businesses.

If you’re hiring someone else to manufacture the products, and you’re using Amazon FBA or some other shipping and fulfillment service, much of the day-to-day responsibility will be out of your hands. That frees you up to work on big picture stuff that may help to grow the business faster.

E-Commerce Pros

  • Can be very profitable if you find a niche with low competition and high demand.
  • Some e-commerce businesses can be run with very little day-to-day involvement from the owner.
  • You won’t need to constantly create content as you would with a blog, niche website, podcast, or YouTube channel.
  • Marketplaces like Amazon make it possible to reach a massive audience very quickly.

E-Commerce Cons

  • More challenging to get started than other types of online businesses because you need to deal with inventory, shipping, and manufacturing.
  • May require more capital to get started since you need to purchase inventory.
  • Income can be very unpredictable since it often depends on seasonal trends.
  • If you sell on an online marketplace, the marketplace will take a cut of every sale you make.
  • Lower profit margin than many other types of online business.

For more, please read How to Sell on Amazon FBA.

4. Service-Oriented Business Model

Service-oriented businesses are often overlooked in favor of some of the other business models, but offering a service may be the most practical and realistic way to reach a full-time income online.

There are many different services you could offer as a freelancer, and chances you, you already have some skills or experience that could be put to good use for clients.

For example, if you’re a web designer, you could offer to build custom websites for small business clients. If you’re a graphic designer, you can offer design services for businesses or create graphics for bloggers and other content creators.

The opportunities are endless.

One of the benefits of starting a service-based business is that it’s often one of the quickest ways to get started earning money online. You can start offering your services almost immediately after coming up with an idea, and you can start making money as soon as you land your first client. That’s much different than the other online business models we’ve looked at so far that would take several months before generating any money.

Starting a service-oriented business is usually less capital intensive than starting another type of business. In fact, you could get started without spending any money at all.

Many people who are considering a service-based business fear that they won’t be able to find clients. However, there are many different methods you can use to find paying clients. You may have people you already know who would be interested in hiring you. Free ads on sites like Craigslist can also be extremely effective. Paid ads on Google and Facebook may produce an excellent return on investment. And once you’ve got some momentum, word-of-mouth and referrals will probably be the best method of all.

Service-Based Business Pros

  • Can be started very quickly with little to no upfront investment.
  • May be a great way to use the skills and experience you already have.
  • You can offer your services to clients all over the world since you’re not limited by geographical boundaries.
  • Many services allow you to earn an excellent hourly rate.
  • Can be done part-time or full-time.

Service-Based Business Cons

  • Your income will be limited by the number of clients you can take on at any given time (unless you hire others).
  • Can be challenging to find new clients, especially at first.
  • Requires good time management skills to juggle multiple clients.
  • Some of your clients may be challenging to work with.

5. Education/Course Business Model

If you have expertise in a particular subject area, you may want to consider starting an online course business. This is a great way to share your knowledge with others and generate income at the same time (it can be one of the most lucrative business models).

Thanks to platforms like Udemy and Skillshare, it’s easier than ever to create and monetize an online course. You can use one of these platforms or use a platform like Teachable that allows you to create a website and sell the course on your own.

When creating an online course, it’s important that you choose a topic that you’re passionate about and that you know quite a bit about. It’s also important to make sure there’s a demand for the course before putting in the time and effort to create it. You can do this by checking out other courses on Udemy and Skillshare to see what’s popular, or by conducting market research on Google and other search engines.

Creating an online course can be a time-consuming process, but once it’s complete, you can generate passive income from it for years to come. And best of all, you can offer the course to people all over the world without having to deal with any geographical boundaries.

Courses aren’t the only possibility here. There are other ways to build an education or information-based online business. Of course, writing and selling e-books would be another option. Membership websites and hybrid products that involve a course and a membership or subscription model are extremely popular right now.

Education/Course Business Pros

  • Can be a great way to share your knowledge and help others.
  • Can generate passive income for years after the initial work is completed.
  • Excellent income potential.
  • Relatively inexpensive to start.

Education/Course Business Cons

  • Can take a lot of time and effort to create a quality course.
  • You may have to continue to promote the course in order to generate sales.
  • It can be challenging to stand out in a crowded market.

For more, please read How to Make Passive Income from Online Courses

6. Software or SaaS Business Model

If you’re a tech-savvy individual, you may want to consider starting a software or SaaS (Software as a Service) business. This type of business model has become increasingly popular in recent years thanks to the rise of cloud computing.

With a software or SaaS business, you create a piece of software that people can use online. This could be a desktop application, a mobile app, or even a web-based app. Alternatively, it could be a plugin or add-on for another piece of software.

The great thing about this type of business is that once the software is created, it can be sold to an unlimited number of customers. And since it’s delivered over the internet, there are no geographical boundaries.

Possibly the main difference between the software and SaaS models is that SaaS typically involves recurring subscription payments. For example, email marketing services like ConvertKit and AWeber charge monthly fees. As a result, a SaaS business has the potential to generate significant ongoing and recurring revenue. On the other hand, software is often sold for a one-time upfront payment.

Because of the recurring revenue stream, SaaS businesses are particularly interesting to buyers or investors. Some buyers are looking specifically for SaaS opportunities over other online business models.

By knowing details like the churn rate, a buyer can buy a SaaS business with a high level of confidence that it will continue to generate a specific level of income over the next several months and even years. As a seller, this is ideal because you may be able to get a higher price for the business.

Software or SaaS Business Pros

  • The product can be sold to an unlimited number of customers.
  • No geographical boundaries.
  • Excellent income potential.
  • Recurring revenue is possible with this type of business.
  • SaaS businesses often generate a lot of interest from buyers and investors, leading to a high valuation.

Software or SaaS Business Cons

  • Can be a significant investment to get started, especially if you need to hire developers.
  • Requires ongoing marketing and promotion to generate sales.
  • May require a lot of customer support.

7. Affiliate Marketing Business Model

Affiliate marketing is a type of online business where you promote other companies’ products and services and earn a commission on each sale that you generate. Some of the business models we’ve already covered (content-based websites, audio/video content) can be monetized through affiliate programs. However, you don’t need to have your own website to make money as an affiliate, and this can be a business model of its own.

Many of the highest-earning super affiliates make money by paying for ad clicks and/or by promoting products to their own email list.

Affiliate marketing can be extremely lucrative for those who are successful, and there’s no need to create your own product or content to get started.

As the affiliate, you’ll have no responsibility for providing customer service or support. The company that’s selling the product will be responsible for support.

The commission you’ll earn from each sale or referral will vary from one product to the next, but commissions for digital products tend to be very high. In some cases, the affiliates earn a bigger cut than the company selling the product.

Affiliate Marketing Pros

  • No need to create your own product or content.
  • No customer service or support responsibilities.
  • Can earn high commissions.
  • Affiliate products exist in every industry or niche imaginable.
  • Can be scaled up. For example, if you have a successful ad campaign, you can increase your daily ad spend to make more money.

Affiliate Marketing Cons

  • High level of competition in some niches.
  • Many affiliates spend a lot of money on ads/traffic. You need to be good with numbers to be sure that your ads are profitable, or you could lose money.
  • You may have to test a lot of ads before you find the ones that are profitable.
  • In many cases, an affiliate marketing business is not a sellable asset.

8. Digital Products Business Model

The terms “digital product” and “info product” are sometimes used interchangeably, but there are so many other types of digital products you could create aside from info products like courses and e-books.

Printables like planners, organizers, and checklists are extremely popular and could be possible in many different niches. Other possibilities include spreadsheet templates, slideshow templates, website templates, WordPress themes, WordPress plugins, icon packs, Photoshop files, add-ons for popular software, audio files, photos, and much more.

Creating digital products can be a very fun and rewarding process, especially if you’re passionate about the topic. Once you’ve created the product, it can be sold an unlimited number of times with little to no additional work required on your part.

Some products arevery time-consuming to create, but others can be done relatively quickly. You could also outsource the product creation hiring freelancers at sites like Upwork and Fiverr.

If you have an existing website or blog, you could choose to create products as a way to monetize the site. Or, if you don’t have an existing site, you could build your business around downloadable products.

You can sell the products at your own site, or set up a shop at marketplaces like Etsy and Creative Market. Of course, if you create your own site, you’ll have full control and you won’t need to split the revenue with anyone. But existing marketplaces do make it easy to get started quickly.

Digital Products Business Pros

  • Can be sold an unlimited number of times.
  • No inventory costs or shipping fees.
  • Delivery is instant, so customers don’t have to wait to receive their purchase.
  • Can be automated with the use of an e-commerce platform or shopping cart software.
  • Many digital products have a high profit margin.
  • Can be done part-time or full-time.
  • Digital products could be created in just about any niche or industry.

Digital Products Business Cons

  • Some types of products take a lot of time to create, and there’s no guarantee that you’ll make sales.
  • The initial investment can be significant with certain types of products.
  • You’ll face lots of competition if you sell at popular marketplaces like Etsy.

9. Print-On-Demand Business Model

The print-on-demand business model is similar to the digital products business model in that there’s very little overhead cost and you can sell an unlimited number of products. The main difference is that with print-on-demand, the products are physical goods like t-shirts, mugs, tote bags, and phone cases. However, you don’t need to deal with inventory since the products will be printed and shipped as they are purchased.

There are numerous print-on-demand companies that will handle all of the printing, packaging, and shipping for you. All you need to do is design the product and upload your artwork. With marketplaces like Redbubble and CafePress, you don’t even need your own website.

If you want to set up your own website (which is strongly recommended for maximizing your income), you can use Shopify and easily integrate it with a print-on-demand supplier like Printful.

Print-on-demand is a great business model for creative people who want to sell physical products, but don’t want to deal with the hassle of manufacturing, inventory, and shipping.

In addition to the types of products listed above, you can also sell books with the print-on-demand business model. Thanks to Amazon’s Kindle Direct Publishing, anyone can become a self-published author. You’ll write the book, or hire someone to ghostwrite it for you, and Amazon will print and ship the book when a customer purchases it.

Print-on-Demand Business Pros

  • Very low startup costs.
  • No need to worry about manufacturing, inventory, or shipping.
  • Can be done part-time or full-time.
  • Excellent option for designers and creative individuals.
  • The design work can be easily outsourced if you prefer.

Print-on-Demand Business Cons

  • The profit margins can be low unless you sell high-end items like canvas prints and framed posters.
  • You’ll need to market your products effectively to stand out in a crowded marketplace.

For more, please read How to Start a Print-on-demand Business.

Which Online Business Model is Right for You?

Now that you know about the different types of online businesses, it’s time to decide which model is right for you.

Of course, there’s no need to limit yourself to just one business model. You could choose to sell digital and physical products or even combine multiple business models to create a more diversified income stream. The most important thing is to choose a model that you’re passionate about and that you can see yourself doing long-term.

Once you’ve chosen one of the online business models, it’s time to start planning your business.

Disclosure: Information presented on Vital Dollar and through related email marketing is intended for informational purposes only and is not meant to be taken as financial advice. Please see our Disclosure for further information.