The Newest Ways To Make Money Online

In 2007, after working for small screen-printing companies for nearly a decade, April Wade, 32, and her boyfriend Justin Sellers, 27, decided to strike out on their own. Anchor Screen Printing, in Fort Walton, Fla., made custom T-shirts with designs created by local churches, schools, businesses and walk-in customers. Two months after opening, revenue was but a trickle and the twosome–staked with a $25,000 loan from a friend–couldn’t cover rent on their 2,000-square-foot store, which included a printing facility.

Then one of Wade’s friends told her about Etsy, an online brokerage that connects artisans with buyers. Wade and Sellers printed custom-designed T-shirts (some drawn by outside artists) and posted them on Etsy’s site. Good move. “We couldn’t have kept the business going without it,” says Wade. “It kept us afloat while we were building up our business.”

Over the past two years, Deadworry, the couple’s subsite on Etsy, has moved 5,000 T-shirts, cotton dresses and bags, generating $150,000 in sales. Etsy’s take: 3.5% sales commission ($6,000), plus a 20-cent listing fee for each item. Better yet: no advertising expenses. Etsy’s large audience–now 3 million to 4 million unique visitors a month, according to the company–handles that. “So many people are looking at it and they just see you,” says Wade. Etsy still accounts for about half of Anchor’s annual revenue.

The Anchor duo is part of a new wave of online entrepreneurs–those looking to supplement their income, as well as the 10.4% of the U.S. workforce scrambling to stay afloat while they hunt for a new job.

Established virtual marketplaces, such as eBay and Craigslist, laid the groundwork in the ’90s. Now there’s a new crop of vibrant sites catering to niche groups of buyers and sellers. Just two examples: Infochimps facilitates the sale of data sets (such as numbers on current cigarette smoking by sex and state), while Sittercity matches parents with babysitters.

Plenty of e-commerce sites flamed out in the dot-com bust of 2001. “The knock on new companies like these was always there’s not enough liquidity to create a viable market in something so small,” says Paul Kedrosky, a senior fellow at the Kauffman Foundation, a Kansas City, Mo., nonprofit that studies entrepreneurship. “Now you can find big marketplaces in small obscure areas, mostly because of how gigantic the online population has become. There’s more liquidity in small marketplaces now than large ones like eBay 15 years ago.”

Online commerce has remained relatively healthy, even through the recession. According to the Department Of Commerce, e-commerce sales in the third quarter ended in September hit $34 billion, up 1.8% from the same period last year. Meanwhile, total retail sales decreased 7.5%, to $920 billion during the same stretch.

While still small, Etsy is becoming a bustling bazaar. During the month of October, artisans sold 1 million items, generating about $17.7 million in revenue, 11% more than in September. “It’s hard for a generalized marketplace like eBay to get into these niche areas, because they can’t pull a community together,” says Steve Barsh, partner at DreamIt Ventures, a Philadelphia early-stage venture firm.

DreamIt, in May, plunked down $25,000 for a 6% stake of Notehall.com, a marketplace where students at 14 universities, including the University of Arizona, Purdue and Drexel, can sell notes and study guides for classes. Price: 25 cents per upload for notes; $1 for study guides. Notehall’s take: a steep 50% commission on every stale. Founder Sean Conway says Notehall attracts 65,000 unique viewers and handles about 10,000 transactions every month. Conway aims to expand to 50 universities by May 2010. (For a list of six new online marketplaces, see our slide show.

Bill Tai, a partner at Charles River Ventures, smells a renaissance for e-commerce. “Every other segment in the Internet has been remade except for e-commerce,” says Tai, who in 2007 invested $6 million in Glyde.com, a marketplace for used CDs, books and video games. “During recessionary periods, people get creative about getting cash and monetizing what they can.”

Indeed, the U.S. unemployment rate fails to capture what Kauffman Foundation’s Kedrosky calls “atomized” forms of employment. “I’m not going to say we’re not seeing horrifically high levels of unemployment,” he adds, “but our measures are wrong, and people have more opportunities than ever before to make money off the grid.”

How To Make Money Online

Fifteen billion smackers: That’s the value Microsoft recently slapped on Facebook when the computer giant invested $240 million for a 1.6% stake in Mark Zuckerberg’s online social-networking site.

You could seethe with envy–or you could chase your own fortune on the Web.

Some online businesses require only a few hundred dollars in equipment, while others demand significant hardware and perhaps even a warehouse. Some might make you rich; others might just cover beer money. And all involve various levels of time, capital and technological skill.

In Pictures: Eight Ways To Make Money Online

“Some people have dreamed about owning their own business and have not followed through because of the investment in resources,” says Jim Griffith, head of eBay University, for those aiming to set up shop selling goods at the online auctioneer’s site. “The Internet allows people to at least try without making a large initial investment.”

Army veteran Brandi Ramos of Springfield, Ill., did it. As a single mom in need of extra income, she started her online retail career peddling “big and tall” men’s clothing on eBay.

Three years later, Ramos, 32, makes a good living working online out of her 600-square-foot basement packed with hanging displays and baker’s racks piled with tupperware containing underwear and belts. Ramos aims to offer quick service, answering all e-mails within four to six hours. She claims to net $25,000 on $100,000 sales a year, and even earns a few bucks per order on shipping.

If managing inventory seems too big a chore, play virtual landlord and charge other retailers monthly fees (or per-transaction fees) for the opportunity to market their products on your site. Amazon.com nabbed 28% of its revenues this way in 2006.

Craigslist is another take on this model: The 25-person company, worth a reported $2 billion, charges businesses to post help wanted ads in San Francisco, New York and L.A.; it also collects fees for apartment listings in New York City. Total page views per month: about 5 billion.

Then there’s every pajama-clad blogger’s dream: producing content supported by advertising dollars. Selling advertising is how thousands of established online media outlets pay their electric bills. They charge advertisers two ways: by the number of overall Web pages (called “impressions”) served up, and by the number of people who click on the ads.

Setting up a blog requires not much more than a basic publishing program, a server and software to track ad clicks. The hard part, though, is attracting enough eyeballs to make it worth someone’s while to pay to advertise on your site.

To have any prayer of attracting large advertisers, sites need to attract at least 500,000 unique visitors per month, says David Hauslaib, publisher of Jossip.com, a media and gossip blog that counts Coca Cola and Sketchers among its advertisers. Sadly, even if you do generate enough traffic, the “click-through” rates on ads tend to be quite low–in the neighborhood of one half of 1%.

Subscription-based models are even harder to crack. Unless your site fulfills an urgent need (for tangible investment ideas, a potential mate, etc.), users aren’t likely to pay for the content.

One way to garner subscription revenue is to run a virtual marketplace. These sites collect by allowing buyers and sellers easy access to each other. Many of these marketplaces flamed out in the dot-com bust, but some persist. Mfg.com, for instance, matches equipment manufacturers with smaller component suppliers. Dating sites like Match.com charge subscription fees for access to their members. And H2Bid.com links municipalities with wastewater-equipment vendors.

As with tangible real estate, you can buy virtual plots (URL addresses), flip them and make a buck. GoDaddy.com sells unused domain names for under $10 dollars apiece. To attract buyers, run tests to determine how often certain key words are searched so that you can demonstrate the likelihood that your URL will show up in a Google or Yahoo! search. One tip: The best domain names are short, sweet, specific and easy to remember. (For more on this model, check out “Meet Noah Of The Internet” and “The Most Expensive Web Addresses.”)

As Internet usage grows, so too will the sophistication of online business models. Take 3-year-old Yoonew.com, which sells futures contracts on sports tickets.

Fans buy the right to take delivery of tickets if their teams make it to a coveted playoff game, perhaps months away. Given the uncertainty of the bet, those contracts sell for a fraction of the future market value of the underlying tickets. If your team makes it to the big game, you’ve locked in a cheap seat; if it falls short, you lose that insurance premium.

Yoonew makes money when the revenue it collects from selling all those contracts exceeds the cost of delivering a small number of very expensive tickets on game days. The danger: If ticket prices spike, or there are no seats available, the company could suffer a loss or alienate its customers.

Sure, you can make money online. But no one said it was easy.