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This is not a how to post about different methods of making money online.  However, if you are thinking of different ways of making extra money and you’ve thought about venturing online to try and earn some money, this post is a good place to start.

Over the last couple of years, I’ve tried all different methods of making money online and discussed them all here on this blog.  I’ve tried out creating my own e-books, starting an ecommerce site, affiliate marketing, blogging, etc… 

During my ventures, I’ve found that most methods of making money online fit into 4 broad categories.  This post is intended to review those 4 categories of making money online.

Why is it Important to Know these Categories.

When I first started trying to make money online, I just started trying different things that I read about without a clear idea of where I was headed.  I started blogging and just writing about different niche ideas.  I wrote some ebooks and published them on Amazon.  While I did make some money initially, my strategy was scattered.  Because of that, I had to learn hands on and then figure out my direction.  However, it took me longer to start making any real money because I did not understand the fundamentals.

I imagine many people have the same problem.  And many people who aren’t familiar with how an internet business works don’t understand the very basics of making money online.  I bet every blogger has had the experience of talking to someone outside of the internet and explaining how they make money on their blog.  I am often greeted with an expression as if I was talking about voodoo when I try to explain how to make money online.

However, the key is to understand that it’s not magic.  That it’s a business like any other.  If you have a good basic understanding of the different categories of online money making, you can craft a strategy from the start that gives you the best chance of using the internet to make money.

The reality is that the internet is just a tool.  Making money online is just a broad strategy that uses this tool to your financial benefit.  But in order to use this tool efficiently, you need to understand and plan the proper strategy.

That’s why it’s important to start with a firm understanding of the basic categories of making money online.

The 4 Categories of Making Money Online

Over time, I’ve found that almost every method of making money online fits into 4 broad categories or a combination of these 4 basic categories.  Each of these categories have their own individual strengths and weaknesses.  Understanding which basic category of online money making your plan fits into will give you a basic idea of the best strategy to use when you are starting out.

Let’s review these categories.

Creating and Selling Your Own Product

This is a very direct method of making money online and the closest analogy to simply starting your own business. 

Quite often, I find that this is an overlooked method of making money online.  What I mean is that of all the categories of making money online, I think this is the least hyped.  Perhaps this is because it has the appearance of requiring the most amount of work, whereas the most hyped methods are the get rich quick schemes.

Frankly, each method of making money online requires hard work.  Creating your own product is no different.

Actually, many people may not realize, but if you create your own product, you don’t even need to create your own website in order to sell it.  In some ways, you can simplify the process of making money online when you have your own product.  You can have someone else sell it for you.

For example, you can write your own ebook and sell it as a digital ebook on the kindle.  Amazon handles all the marketing and delivery of the product for you.  If you have some specialized knowledge or you are a creative writer, this can be one of the simplest ways to start making money online.

You can also write software, create video tutorials and other digital products and post them up on ejunkie or clickbank and have other people sell the products for you.

The advantage of this method is that you maintain control over your own product.  However, that also means that you have to deal with dissatisfied customers, returns and refunds as well. 

Eventually, you will want to create your own website and promote the product yourself as well.  However, if you are creating your own product, I recommend focusing on creating a good product first and hold off on marketing until you have a finished product.

Others may disagree, but I think if you are creating your own product, you don’t need to create your own website at the start.  Focus on creating your product first before you try and sell it.

Selling Someone Else’s Product

Or as it’s popularly known:  Affiliate Marketing.  In this case, there is already a finished product, so your basic strategy is to start at the marketing stage.

The difference here is that the quality of the product is out of your control, so you should take the time to learn about the product in order to make a proper recommendation.

Many people like this method because it starts off at the marketing stage, so they don’t have to worry about creating their own product.  While you can do affiliate marketing through social media without creating your own website, I would recommend creating your own website in order to be more effective.

In this scenario, you are in control of the marketing strategy.  Rather than having others sell the product for you, outsiders are now your competition.  You have to build up your own reputation and draw the customers to you.  You are in charge of convincing people to make the purchase from you, rather than some other person.

If you decide to go this route, you will need a good strategy from the beginning to start building up your online reputation.

In this case, your focus will be on studying your competition and your niche and planning the best method to building your online presence. 

Selling Advertising Space

I would say that this is the first method that comes to mind for making money online for the uninitiated.  People who are unfamiliar with online business think that making money online is all about slapping together a website and throwing up a bunch of ads while the money starts to roll in.

Of course, this stereotype is perpetuated by those get rich quick schemes that we see all over the internet.  Nothing is further from the truth.

In my mind, making money by selling advertising space is probably one of the hardest methods of making money online.  (I’m including in my definition of selling advertising PPC, PPA ads, link shorteners, etc… basically anything having to do with advertising)

The reason this is the hardest method of making any real money online is that you need to have a ton of traffic in order to make money through advertising.  Whether you are using PPC banner ads, adsense or selling ad space on your website, you need an online presence in order to make any real money.

It’s easy enough to put an adsense code on a website and sit around waiting for the pennies to roll in.  However, if you have no traffic, your ads will sit there forever without generating any money.

So, you’re left with trying to build up a ton of traffic to your site.  So, you are still practicing your seo and social media traffic generation strategies.  Even then, you won’t see any real money unless you are getting thousands of visitors a day. 

Building up a website to try and make money through advertising takes a ton of hard work and time.

The other thing is that these days people are becoming ad blind. Banner ads and even contextual ads often go ignored on a website. This makes it even harder to make money with this method.

Newbies who get caught up in those get rich quick ads that try to put together a blog to make money through online advertising are really setting themselves up for disappointment and potential failure.  I would be willing to bet that the high rate of failure of new bloggers is due to this misperception.

That’s not to say that this is not a viable method of making money online.  However, I believe that it’s a method that’s better suited for an established website rather than a new website.

Selling Your Skills Online

In my mind, this is a method that’s closest to holding a job.  Depending on your skills, you can demand a lot of money, however you are essentially trading your time for money and it’s a limited commodity.

The benefit of making money through selling your skills is that it allows for a lot of versatility.  You can be a freelance writer, web designer, programmer, or simply sell a class on your area of expertise.

Now if you have a very unique skill and a strong reputation, you can demand thousands of dollars for your time, so it’s still a very good way to make money online.

Also, it’s a very quick way of starting to make money online.  You can simply take an existing skill and start taking freelance work. 

You can find many side projects through various job boards and websites such as fiverr and start making money right away.  You don’t even need to create your own website to get started.

Because this method has a very easy barrier of entry, I do think it’s a good place to start and earn a few extra bucks.  However, keep in mind, that you are basically trading your time for money if you go this route.  I would recommend this as a stepping stone to support some of your other online ventures.

Unless, you have a very unique skill and/or a strong reputation, you won’t get rich with this method. 

The other way that I often see this method employed is actually on the tail end of an online marketing strategy.  Often you’ll see online marketers build up their online reputation, perhaps using other methods to sell and make money online.  Then they will leverage their reputation they’ve built up to offer training to others for a price.

Conclusion and Final Thoughts

As you can see, each of these 4 categories involve different strategies for making money online.  Before you start your online money making business, think on which category or combination of categories your business falls into.  Starting out by giving your overall strategy some thought will really help out in developing a plan for making money online.  It can also save you from making some missteps along the way.

About Richard  (301 Posts)

Richard is a full time professional, husband, father and blogger juggling all the responsibilities of life and running a blog. Richard enjoys writing about life and online money matters.