Key Points: Finding profits online

One of the fastest growing opportunities for the small business owner is to build a web-based
enterprise. You'll need a bright idea and some clever marketing, reports Diana Clement

When David Paviour went shopping for a second-hand car he was surprised at the lack of any website listings from dealerships.

Paviour, whose background was in business and accounting, teamed up with IT expert Hamish Lusk, to launch Autobase.co.nz. The concept was simple: charge motor vehicle dealerships to advertise their cars on the website and provide a searchable website for consumers to save their shoe leather.

The website would be a one-stop shop to locate a car, finance it, check its legal status and history, read relevant news and more. Six months into the project Paviour and Lusk gave up their day jobs and focused on the business full time. They were able to learn from the experience of overseas websites and looked to expand their distribution offering affiliate deals.

That was six years ago now, and the entrepreneurial pair have been making a profit for more than half of that time.

Autobase.co.nz was a relatively early web pioneer in New Zealand when online businesses were in their infancy. This year thousands of web-based businesses are expected to follow their footsteps.

Many will get a foot on the web through the auction website TradeMe.co.nz. Last year around 250 businesses launched using TradeMe as their platform to sell goods and services. At current levels, says TradeMe business manager Mike O'Donnell, the company expects 1000 new launches by the end of the year.

Businesses using TradeMe include anything from former career women who have given up the corporate world and trawl garage sales looking for items to sell on, to companies that use it as a shop front to sell everything from jewellery to children's furniture.

Telecom's Tom Clancy says most of the recent growth has been more smaller businesses or smaller traders. "Certain categories have accelerated and are fairly mature now (travel, computing, consumer electronics and banking) while these newcomers (like the smaller traders, mom and pop shops) are working on their web presence and building up their transactions, engines, capabilities slowly," Clancy says.

``Research also shows that consumers have worked out what is best to order online and what they can just browse for information. For example, they will buy a CD, DVD, music, book or travel online but other things that require more info or even an emotional connection still need the actual touch and feel experience (for example - real estate and cars for the most part)."

Today's web entrepreneur could be tomorrow's millionaire.

Ten years ago names like Amazon.com and TradeMe didn't exist. Today they eclipse their nearest rivals in the terrestrial world. People click on TradeMe 1.3 million times a month, according to Nielsen/Netratings figures.

Farmers, a family name for generations, receives a paltry 31,000 page impressions on its website Farmers.co.nz in comparison.

Setting up a profitable web-based business isn't as simple as it may appear when you visit those that work seamlessly. There are many pitfalls for the unwary. One of the biggest mistakes, says O'Donnell, is setting up a site that doesn't work that well and then burning thousands of dollars on advertising.

Users will soon unmask substandard websites and move on.

You don't even need goods to sell on the internet. Information sells.

One enterprising kiwi, David Slack, set  up the website Speeches.com where anyone can build a speech for an occasion and print it out. Now he just sits back and watches money roll into his bank account from all corners of the world.
 
Some websites simply make money from advertising. They provide an information-rich or forum-based website that people love to visit, and then charge for advertising. Every time a user clicks on a page, the advertising revenue goes up.

Knowing where to get advice can be a problem. Every man and his dog wants to charge web entrepreneurs for advice. But you can also find plenty of that free in books and online to help you get started.