Cybernaut 

The Internet only crew

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In the beginning many businesses saw the Internet as an augmentation to traditional marketing, a virtual storefront to complement their brick and mortar establishments. They didn’t believe that people would ever buy something without seeing it and touching it, or that enough people would ever trust security enough to give their credit card numbers online.

There are a handful of visionary companies that have bucked that trend, and that exist exclusively in the online marketplace. It took a while for them to become profitable, but persistence paid off.

The most prominent online businesses are Amazon.com and eBay.

This year the Motley Fool ( www.motleyfool.com ) has chosen Seattle-based Amazon.com as the best e-commerce stock for 2007. Once a massive money-loser, Amazon.com survived the bubble burst of the late 1990s and handled $9.7 billion in gross sales in 2006 — $291 million U.S. of which was profit. Earnings are expected to increase 67 per cent this year, and another 38.5 per cent in 2008, largely because of Amazon’s ability to handle online sales for brick and mortar stores like Sears Canada, as well as the company’s continuous expansion into new markets and new products — you can even buy groceries at Amazon these days.

Also, the success of the company proves that the business model was sound from the beginning — eliminate virtually all the middlemen in the supply chain and you can offer unbelievable value and convenience to customers, even with the cost of shipping factored in.

Another dot-com back from the brink is eBay (www.ebay.ca), the online auction company. In the last quarter of 2006, the company reported a 24 per cent jump in profits over the previous year, totaling $346.5 million U.S. That’s their share of all sales conducted, which totaled $14.4 billion in that period.

The business premise remains simple — millions of people have things they want to sell, just as millions of people have things they want to buy. Unlike Amazon.com, eBay is all about being the middle man, skimming a small percentage of the proceeds while creating a dynamic auction environment that ensures that sellers get a fair price, buyers find what they’re looking for, and everybody stays home happy. As a side business, eBay revolutionized the way that people buy things online, using services like PayPal and VeriSign to act as financial intermediaries and escrow services. In 2002 eBay bought PayPal, which can now be used to buy just about anything online without giving out your credit card number every single time.

These are not the only successful online companies out there.

In the world of publishing, which as a whole is still struggling with how to embrace the online world, Slate ( www.slate.com ) is now in its 11 th year. This publication exists entirely online, and while it doesn’t make the profits of an Amazon or eBay, or even other print publications, it is considered an Internet success by the very idea that it’s still going strong after all these years. Although it once tried to profit as a subscription service, Slate abandoned that idea in less than a year and now are entirely dependent on ad revenues.

Although some of their material is second-hand, reprinted after appearing in other publications, Slate is credited with doing solid original and investigative journalism, as well as providing a fairly objective view of things. It reads like an alternative newsweekly, but without focusing on one particular city or scene. It’s also a daily.

Another example of a successful internet business is Tiger Direct ( www.tigerdirect.ca ), a high-tech wholesaler carries just about everything. Unlike most brick and mortar stores, which tend to have a limited selection of products, Tiger Direct has almost too much of everything to choose from. The best part? No patronizing sales staff working for commission.

The bottom line is that it is possible to make money online, providing your product is good, your business model makes sense, and you have some very patient investors.

Website of the Week – www.vanishingpointgame.com

Although the Vanishing Point Game was revealed to be a viral marketing campaign by Microsoft Vista, there’s no denying that this online/real world puzzle solving game is as compelling as they come. The winner will get a weightless, near space experience — The Ultimate Vista — and Microsoft is also giving away computers, Xbox 360s, Zune media players, and more.

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