What is Online Business?

In recent years, the expression ‘online business’ has become a widely used one. Not only because it is a new phenomenon, but also – and perhaps especially – because it remains an object of fascination for many. Online business is increasingly perceived to be the contemporary source of financial freedom. Some exploit its ‘fame’ as a means to rob people of their hard-earned savings, while others regard this activity as a money-making mystery.

So in essence, what is online business, and how is it carried out?

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A ‘Not-So-Good’ Definition

According to Wikipedia, online business (or e-business) is any kind of business or commercial transaction that includes sharing information across the internet.

Hmm, I beg to differ with that definition!

Such a definition actually presents ALL modern businesses as online businesses – which is inaccurate. After all, contemporary business transactions do generally include sharing information across the internet – including those by entities operating offline.

A traditional brick and mortar business which shares information with its customers (in the form of invoices or new offers) via the internet is obviously not an online business.

It is true that more and more offline businesses are having an online presence. It is also true that many prominent international companies based offline have online components in their operation. But that does not make them online businesses. Meaning, it is possible to carry out some aspect of business online without being an online business.

Having said that, let me offer what I believe is a more realistic definition of online business.

A Realistic Definition

From my experience and in my opinion, a simple, but realistic definition of online business is any business that is based primarily on the internet. If a business is based primarily on the internet, it is an online business. If it’s not based primarily on the internet (even if it conducts some activities on the internet), it is NOT an online business. As simple as that!

So the key thing here is where the business is based.

It must be noted that online business is not a mystical or magical activity as many perceive it to be. It is mostly business concepts from offline, applied on the internet. That is why most kinds of internet business have the same name and form as their offline equivalent, as you will discover below.

How is online business done?

The explanation provided above answers this question to a large extent.

Each type of online business has its specific way to operate, based on its offline concept.

Although online businesses reside on the internet, their principles of operation are the same as those of that type of business offline. Online business and offline business are both BUSINESS, involving the exchange of ‘something’ for money.

But people generally ignore that reality. In many quarters, online business is perceived as this strange activity that can not be fathomed, a perspective which is unrealistic.

Like offline business, you must have something to offer or sell. It could be tangibles, service, or – as it is done on the internet – information (referred to as ‘digital products’). The ‘thing’ to sell does not necessarily have to be your own. In the same way people act as middle men offline, connecting producers and consumers, some online business people – referred to as affiliates – do the same.

Or just how there are people who write, publish and sell books offline, there are those who do the same online, referring to their publications as ebooks.

Another example of how online business is done, is an entity that tutors students in a neighborhood or town. Such an entity could be created online with the same goal (tutoring students). Just that, with the one online, the students will not be physically in the presence of their tutors. Being in different parts of the world, they are all ‘brought together’ and tutored using the power of the internet.

Yet another example: people shopping online in the same way they would do downtown.

But because all of this is done virtually (on the internet), payment for the goods, services or information received is carried out electronically; i.e. by means of a credit card, a debit card, or some online payment solution (Paypal, Payoneer, etc.).

So, to get a better understanding of how online business is done, just refer to a business concept as implemented offline. And try to imagine the same happening on the internet, among people who are geographically apart, but virtually in one place.

An online business has technical as well as technological realities, different from an offline business, owing to the medium where it is operated – the internet. This is what is most challenging in online business, and it constitutes the reason why many people perceive online business as being mysterious. But in reality, it actually isn’t.

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Some differences

A big difference between an online business and one offline is obviously their audiences. An online business has the potential of reaching a global audience, while an offline business audience is generally limited to its geographical location – although very large offline businesses do have a greater reach.

When running an offline business, it is quite a challenge to get your offer (product, service, etc.) in front of so many people. You are generally restricted to a neighborhood, a city, a country, a region – a part of the world, unlike with online business where you are boundless, reaching people from all around the globe!

In addition to its global reach, an online business is so much easier to start than an offline business. Because you are operating in a virtual environment, most start-up costs are eliminated. For example, you do not need to create a product or rent an office space or hire workers. The internet has rendered all of that irrelevant to a large extent.

An online business also has more options as far as its offer is concerned. For example, online courses, ebooks and the like are all things an online business can sell, but which an offline business can not.

And last – but not least – is your ability as an online business owner to access your business from anywhere on the planet, as long as you have a smart device with internet connection. An offline business is usually fixed to a specific location.

Below is explanation regarding a few forms of online business and their offline equivalent for better understanding.

Common Kinds of Online Business

Ecommerce: buying and selling of goods and services on the internet. Without the ‘E’, we have ‘commerce’ – buying and selling of goods and services. And when the ‘E’ is added (Electronic Commerce), then the transactions are carried out by means of an electronic device, using the internet.

Business transactions are usually interwoven. As such, ecommerce – though a kind of online business – is generally fueled by products created offline. The companies creating the products are not necessarily online businesses, but an online store which markets / sells them certainly is.

 

Affiliate Marketing: a marketing practice whereby a person (or entity) earns commissions by promoting (or selling) the products or services of others. This practice, though widespread on the internet, is not just carried out online; it is equally an offline marketing practice.

(Online) Publishing: Similar to what happens offline, folks publish and sell ebooks (electronic books) on various online marketplaces.

(Online) Courses and training: Just how offline we have training centers where we can acquire various useful offline skills (driving, swimming, sewing, etc.), there are online training ‘communities’ where you can acquire relevant online skills (website development, search engine optimization, keyword research, etc.)

Dropshipping: a method of supplying in which the person / business involved does not keep goods in stock but instead transfers its customer’s orders and shipment details to the entity responsible for stocking (it could be the manufacturer, another retailer, or a wholesaler) who then ships (or transports) the goods directly to the customer.

More and more businesses are playing this ‘middleman’ role between manufacturers and consumers on the internet on a daily basis.

Conclusion

Although there are some differences between an online business and an offline business, both are forms of business based on the same concepts.

If you are looking to start an online business therefore, do not consider it as some ‘extra-terrestrial’ phenomenon. Instead, see it as normal business principles being applied to the internet for the same purpose – to make money.

With this knowledge, treat your (prospective) online business as you would a normal business, and not as a get-rich-quick scheme or some phenomenon that works randomly.

And if you’re already a business person, just apply your business skills and ideas online. What you may be lacking – and which you ‘ll have to acquire – is relevant online skills.

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Once you acquire the necessary skills, with hard work and persistence, you will have a successful (money-making) online business in the near future. Good luck!

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