15. Collecting payments online is easy
Payment gateways make life easy for the online seller. Or that atleast is theory. Practice like with everything else is slightly different. First you need to tieup a payment gateway. And if you are a startup or a small business, then your problems start there. Banks that provide payment gateway services demand a hefty deposit or a large enough transaction commitment that straight away rules out the option for smaller business. And options like Paypal are not really popular this side of the ocean.

By the way, have you taken online fraud into consideration? Or the cost of providing for security against online fraud?

16. Visitors will create all the content I need
There are quite a few websites that thrive on content that visitors create. Digg for instance is solely about links that users provide and comments that others provide. So does Stumbleupon and Technorati. Facebook, Flickr, youtube and Orkut depend completely on user generated content. All of them have fabulous valuations. Digg for instance had a valuation of over 300 million dollars, before it fell to around 200 millions due to the tough economic conditions. The problem is in the business model. Almost all of them are struggling to develop viable business models. The only viable business model seems to be that some one else buys them out for their user base or user stickiness. Digg in particular has had buyers (Google) walk away during the late stages of negotiations, and Kevin Rose now says that they have the best ever 12 month roadmap now!

Another fact to keep in mind is that for every user generated content site that makes it big, there are a few thousand others that bite the dust. Even as Youtube did a 1.65 billion dollar sale to Google, hundreds of video hosting sites bit the dust, unable to get enough users. For every Stumbleupon that succeeded, the number of those who stumbled along the way are simply too large.

Users will create content, but only a handful of sites have managed to get momentum from that.

17. I can pull all the content I need from other web sites
This is the other side of the user generated content coin. This can be as screenscraping, or as subscribed webservices.

My concern here is not just with copyrights or fair use. Pulling content from other websites is the surest way of ensuring that you loose search engine traffic.

Why?

So, think thrice about business models that relay on content from other websites.

18. Managing a web site is a 9 to 5 job
A website is not like your regular storefront that you shut down after business hours. It is more like an airport hotel that has visitors checking in and checking out round the clock and has maintenance work going on all all hours. Remember that visitors to your site can come at all hours and from all corners of the world. So, you cannot afford your servers to be down at any time.

Typically, you set up alert mechanisms that send you an sms when your servers are not reachable or when the applications running on them are slow or not responding. And this SMS can come at any time of the day. They do not respect any 9 to 5 schedules or weekends or holidays. I personally have lost count of the number of times I or others in my team have been woken up at night with an SMS saying that one or more of our servers are down or not responding as they should.

19. You can scale your business constantly
Most web based business plans that I have seen rely on constant and steep scaling of visitor numbers, page views, transactions, what ever.

Most of the time, this does not happen. Visitors to websites increase in steps and not in a steep growth line. Why? Because it takes time for people to get familiar with you site, because it takes time for you to get your search engine indexing right, because it takes time for people to start adding your pages to social book marks.

And finally because online browsing and buying habits have a seasonality to them, and you cannot always be the flavor of the day, even if you are dealing with alltime favorites like Bollywood or porn.

Comments (8)

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written by Ashish Kolarkar, December 10, 2009

Thanks for an eye opening article. The myths regarding internet and e-commerce are there from time immorial and they have to be addressed with real facts. You have done the right thing.

Although, I'm in the Banking computerisation catering to Regional Rural Banks and co-operative Banks, I was still not aware of certain facts (I was assuming freewares reduces cost). I wish in future you focus on right strategies of doing internet business especially payment channel econonics for small businesses.

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written by Sumi, December 02, 2009

Very thought provoking article.

I run a leather store and am exploring to go online now. I want to know the complete process involved, and also an appx indication of the cost in setting up an online portal. Can you please help. Where can I get this information?

Regards
Sumi

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Different Views.
written by Vivek Satoskar, July 26, 2009

Sir,

I differ from most of the points given by you. Post working in Hotels and Offline Travel companies I started my first website (online initiative) http://www.BestGoaDeals.com about 4 years back. From first month we broke even and there has been almost 200 % jump in revenues every year on this one website. Besides these we did launch 1 website on Goa tourism aspect every 3 months and each of these sites besides recovering costs have given substantial profits.....guess Online field for Specialist Travel companies there is huge potential and have better chances of growth and survival over the Offline Travel Companies.

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written by Ankur, April 23, 2009

Hello,

I am a regular reader of DARE magazine and regularly I post my comments.
Thanks a lot for wnoderful article.

I have one query, when you said Adsense is not the only way to earn money then what are the other ways that are really helpful?
Please let us know

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Great Article - Some more thoughts!
written by Mohit, April 22, 2009

Awesome article! Gives a lot of insight to anybody (novice or experienced) planning to start an online business.
I would definitely agree that building an online presence and selling online are two different things and they follow each other. To buy-sell online you need to have an online presence and you need to be continuously evaluating it.
From the customers perspective, he needs to have an uninterrupted experience when he comes at your website. He should not feel out of place or out of sync. What I mean here is that there would be negligible number of people who would type in your websites address in their browsers and come to your site. Most of the customers would be coming through some advertising/promotional/social networking channel. Keeping up the content in sync with these channels and managing them adds up to the cost/time/resources that you need to invest. For sure, a good and workable website needs a lot of thought, planning and vision.

Keep up the good work!

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written by Debarshi Datta, April 08, 2009

Sir
I am presently working in a consumer electronics MNC in sales and marketing profile and I do have plan to set up a website about the usability rating of the various consumer electroncs goods its not also on the paper as of now because I am confused about approching the business plan I would be thankful if you kindly guide me over this
regards
debarshi

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Re: Pramod - "when fortune 5m is...."
written by Krishna Kumar, February 04, 2009

Pramod, The article says at the very beginning.."These are for those who are planning to do business – as in sell or buy goods or services, including advertising -and not for those who just want a presence online".

But you do make some interesting points...

How many are looking at being the next big e-commerce site? You will be surprised by the number who are :). I have a folder full of emails from people intend on setting up the next big e-commerce site asking for advice or coverage.

Those with a small product or service -- they probably need paypal. Not many Indian small businesses have paypal integration. Part of the reason is that if you want to use paypal to pay in Indian rupees, you can't. ( https://www.paypal.com/in/cgi-bin/webscr?cmd=p/sell/mc/mc_intro-outside ). So, the transaction will attract foreign currency surcharges on both ends - the buyer and the seller.

Infact payment gateway integration is one of the biggest problems faced by Indian small businesses in doing online commerce

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When fortune 5M is considered - it's best doing online business
written by pramod, February 03, 2009

Dear Sir,

I totally agree to all the points, however my argument is that your points are relevant if one is considering to open the next eBay or homeshop18. Yes we would end up committing all the 19 mistakes. On the other hand how many are actually looking at the next big site or a eCommerce site?

Consider the companies I call Fortune 5 million - they need basic visibility. They have a small product or service to offer. They need some basic stats. They need PayPal (probably) to manage the transactions. Once in a year basic (even a css change) face lift. It's OK to have the site hosted on shared servers. They yet would do more business by a click than by a brick.

While i agree to the 19 points, i feel it's not too practical when it comes to the "Bottom of the Pyramid".

regards,
Pramod

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