Online Marketing Lesson 2: 6 Core Business Principles


Doing business online is different from doing business offline. You will need a whole new set of skills and a different mindset. That being said, the core business principles behind an online and an offline venture are the same.

Before we proceed to the technical part of the training program, it is important to review these principles, to make sure that you will make best possible use of the knowledge that you will gain ahead.

Principle 1: Vision

If you want to succeed, both professionally and personally, you need to start with the end in mind. Unless you have a clear vision of what you want to build, you won’t know what tasks are important, what opportunities you should follow, what strategies you should use and so on.

Consider two men that want to create an online business. The first one doesn’t have a clear vision about what he wants to achieve, he just knows that he wants to “make money online.” The second man, on the contrary, has a very clear vision: he knows that he wants to create an SEO company to help clients from around the world to improve their profitability via search engine marketing.

Now I ask you: Should the first man create a blog? Maybe. Should he create websites optimized for Google AdSense? Maybe. Should he make websites for affiliate programs? Maybe. As you can see, with no clear vision, it becomes very difficult to know what one should and should not do.

Answering these same questions for the second man is much easier. Should he create a blog? Definitely, because it will help him to interact with potential clients and to showcase his expertise on the topic. Should he create websites for AdSense? Not at all, that is not how he is going to make money. Should he make websites for affiliate programs? Not at all, this is not his business model again.

Seneca, the famous Roman philosopher, once said: “When a man does not know what harbour he is making for, no wind is the right wind.”

Before starting anything, therefore, make sure to draw your vision down, as clearly as possible.

Principle 2: Value

No matter what online projects you decide to pursue, they will always need to create one thing if you want them to be successful: Value.

If you decide to write a humour blog, you will need to create value for your readers by making them laugh and by entertaining them with your blog posts. If you decide to start a web design company, you will need to create value for your clients by delivering designs that are worth the money they will pay. If you want to make money with affiliate marketing, you will need to create value for people by making it easier for them to find the products and services that they are looking for.

Some people believe that it is possible to make money by deceiving others, by selling hope and so on. On the Internet, this is particularly true, with all the “gurus” that promote and sell their secrets to make millions of dollars while working two hours a day….

Those are nothing more than scammers, and while some of them manage to make money on the short term, over the long run they all fail. You can’t fool people for long.

Unless you create value, you will be building a sandcastle. It will stand up for a while, but as soon as a bigger wave comes, it will fall to the ground.

Having a strong value proposition also makes it possible for you to charge the right price, and to operate with healthy margins.

Make sure you will create value for people, and the rest will follow naturally.

Principle 3: Profits

Just as offline business owners confuse revenues with profits, online entrepreneurs tend to confuse traffic with profits. This is the logic they follow: build a website, work until it is getting a huge amount of traffic, figure out how to monetize that traffic.

While this might actually work if you get lucky, it is definitely not the best route to follow. There are plenty of cases of websites and Web 2.0 companies that went bankrupt despite having millions of monthly unique visitors. How so? Simple: they couldn’t monetize the service efficiently, and sustaining the servers and the staff was consuming far too much money.

Traffic is certainly vital on the Internet, but it should be seen as a means to an end, and not the end itself. Just think about it: would you rather have a website that receives 500 million unique visitors monthly and that makes $5,000 in profits, or a website that receives only 20,000 unique visitors monthly but makes $50,000 in profits?

As soon as you start working on the idea for a new website or company, you need to figure out where the profits are going to come from. Here are some of the questions that you might want to ask yourself: Who is going to gain value from my service or product? Who is going to pay for it? How is he going to pay? Will my costs be lower than my revenues?

Remember, you are ultimately aiming for profits, not traffic.

Principle 4: Strategy

Overnight success stories from around the web might lead some people to think that all you need is a good idea and a bit of luck to strike it big. Google is perhaps the most blatant example. Two Stanford graduates decide to create a search engine based on a new algorithm; they put it online, people like it, and bang, Google became one of the most valuable companies in the world, making its two founders instant billionaires.

I am sure it is an inspiring story, but did it really happen that way? In reality, No.

Most people discovered Google in 2002 and 2003 (at that time, Yahoo! was still the most popular search engine around the Internet), but Larry Page and Sergey Brin started working on the project almost 6 years prior to that.

They worked hard developing the algorithm that took into consideration the number and quality of backlinks that a web page had, and they also laid down a carefully designed strategic plan to outrun their competitors (e.g., Yahoo!, Hotbot and Excite) and to be able to profit from the services they would provide.

There are three main elements that you should include in your strategic plan: analysis of the competitive environment, appraisal of your own resources, and your goals.

Competitive Analysis: This is the analysis of the external factors. If you understand the arena where you will be competing and different players involved in the game, you will have much higher chances of achieving your goals and ultimately succeeding. Your strategy must always take into consideration those factors. Consider a Formula 1 driver that needs to choose what tire he is going to use in the race. He will only be able to make the right choice if he analyzes both the atmospheric conditions and the characteristics of the circuit.

Resources Appraisal: This is the analysis of the internal factors. You need to evaluate what resources you have at your disposal, your strengths, weaknesses, and how you can combine all of them in a strategy that will work towards your goals and objectives. Back to our Formula 1 example, tuning the car before a race is extremely important, and drivers that know their driving characteristics and strengths have a big advantage in this area.

Goals: Goals help organizations and individuals to focus their energy and to define priorities. They also serve to monitor the performance of certain activities, making it possible to revise and adapt the overall strategy along the way. Remember that your goals should be measurable (else you will never know when you have achieved them), realistic (else you won’t have the motivation to pursue them) and consistent over the long term (else you would risk dispersing before reaching them).

Here is a quote from Sun Tzu, the famous Chinese General, that summarizes the previous point well:

“If you know your enemies and know yourself, you will not be imperilled in a hundred battles; if you do not know your enemies but do know yourself, you will win one and lose one; if you do not know your enemies nor yourself, you will be imperilled in every single battle.”

Principle 5: Action

While strategic planning is important to any successful venture, being able to take action based on those plans and to implement the crafted strategy is even more important.

Putting it another way: strategic planning is necessary but it is seldom a competitive advantage because most people are able to do it. Taking action and making things happen, on the other hand, is a rare ability, and the trait of successful entrepreneurs.

On the Internet, the business environment changes much faster than in the offline world, meaning that you will not only need to act but to act fast.

Fortunately, testing and implementing decisions on the web is both easier and cheaper. We will cover this later in the program, but with the right tools and techniques, it is possible to test any market or business idea with a couple hundred dollars, and we are talking about real testing with real statistical meaning.

Overall you just need to make sure that you are entering the game with the right mindset. Don’t let perfectionism paralyze you. Try things out even if they are not as good as you would want them to be; put your website live and start promoting it; experiment with different revenue models and so on. Sure, you will make a lot of mistakes and will inevitably need to adapt your initial strategic plans, but that is the only way to go.

In the industrial age the “Ready, aim, fire” motto was true.

No longer.

In the digital age, the best approach is “Ready, fire, aim.”

Principle 6. Perseverance

As mentioned before, there are many stories of supposedly overnight fortunes being made on the Internet. Behind most of them, however, there is an immense amount of hard work by the people involved.

Most of those entrepreneurs tried and failed with many ideas and businesses before hitting a home run, too.

Let’s consider the Wikipedia example. People that don’t know the real story could wrongly assume that Jimmy Wales woke up one day with this insight to build an online encyclopaedia where every user would be able to submit and edit any article, right?

In reality, his initial idea was completely different. It was called Nupedia, and he wanted it to be an online encyclopaedia written, reviewed and edited by experts. He thought that this would ensure the high quality of the articles. Nupedia would still be free for the users, and Jimmy Wales was expecting that experts from around the world would spontaneously volunteer and write the articles, so as to serve a noble cause. It turned out that they didn’t.

Nupedia was a complete flop, as the number of articles on the site was limited and was growing slowly. Jimmy Wales didn’t give up, though. Instead, he brainstormed with Larry Sanger (the second employee of the company) how they could solve the problem. Larry suggested the use of a wiki (a website where all the users can create and edit all the pages), and that was the birth of Wikipedia.

The takeaway message is simple: you will need to work very hard no matter what, and it is very likely that you will fail a lot before finding a venture that will make you a millionaire or make you achieve whatever goals you might have. But as long as you have the perseverance to keep moving forward despite that, and to not give up no matter what, you will already have an incredible advantage over most of the people out there.

Action Points

  1. Spend some time thinking about your vision. In other words, what do you want to build? It doesn’t matter how long it will take for that vision to materialize, or how difficult it might be, you need to know what your website or company will look like when it is complete. Once you have that vision clear, it will be a matter of getting busy and making it happen.
  2. Grab pen and paper or use the word processor on your computer, and write down the different ways and models that you could use to create value. Remember that you are just brainstorming, so don’t censor your ideas. Write down whatever comes to your mind. In order to get started you could think about things that people want or need, and see if you could provide them somehow.
  3. Now think about how you would be able to generate profits out of the activities you outlined in the above point. You want to answer the following questions: Who is going to gain value from my service or product? Who is going to pay for it? How is he going to pay? Will my costs be lower than my revenues?
  4. Select the most promising ideas and draw a simple strategic plan for them. As we learned in this lesson, you will need to perform an analysis of the external factors (e.g., who are the competitors, the customers and the market forces), the internal factors (e.g., what resources do you have available, what are your strengths, weaknesses and so on), and figure what your initial goals would look like (e.g., how many readers or clients you would need to have, how much money you would need to make on the first year and so on).

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