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How to Fail at Online Business - Neglect Niche Marketing Dr. Ralph F. Wilson Web Marketing Today - Jul 17, 2008

Tony from New Jersey called me the other day. He wanted to build an Internet business and needed help promoting his site. What product or service do you want to sell online? Nutritional products, he said. A multi-level marketing program.

I paused. Though I have friends who have made excellent money with network marketing, it's not my cup of tea. What's more, MLM programs that use the Internet as their primary marketing vehicle (as opposed to a product distribution vehicle) run into a fatal flaw. Here's what I told Tony.

1. Internet Competition Is Fierce

Competition on the Internet is tough! All the low hanging fruit was picked long ago. There is no "easy money" to be made (except by marketers who already have an effective online sales approach). For every type of business there may be 10 or 10,000 competitors -- or more. There is so much "clutter" that it's difficult for anyone to find you unless (1) you show up high on the search engines or (2) you purchase Google AdWords ads for important keywords. However, since so many people are competing for both search engine position and PPC keywords, only the top competitors can succeed. E-mail marketing to find new customers usually requires illegal spamming, unless you are able to find, rent -- and afford -- a targeted e-mail list through a list broker.

2. Geographic Distance Doesn't Limit Competition

With most traditional businesses, competition is limited by driving distance. You might have two or three competitors within driving range, but that's manageable. However, businesses that want to extend their reach beyond their local area find that only language, country, or cultural barriers function to limit competition on the Internet. For example, from the USA I am willing to purchase products from English-speaking Canadian businesses, but seldom from the UK, and never from Spanish language sites in the American southwest.

3. Niche Marketing Is Key

Because of the competition, the only way small businesses can compete is nichification. That is, they must clearly identify a niche market and design a website to reach that particular market. For example:

The key is to select a niche that has enough demand to generate adequate revenue, but not so much competition that advertising costs are excessively high.

4. Most Internet Franchises Are Doomed to Failure

This brings me back to Tony. Most Internet businesses stemming from a franchise model are doomed to failure -- unless the franchiser scrupulously limits the number of franchises in a specific Internet market area -- country, language, culture. Most don't. It's well known that multi-level marketers succeed primarily by continuously recruiting more dealers in their downline and only secondarily through the sale of products to their own customers. Thus, if the Internet is to be the primary marketplace, multi-level marketing and store franchise businesses nearly always present newbies with a losing proposition.

Tony didn't really want to hear this, but he thanked me anyway. If this helps you or your business to avoid a bad decision, you'll thank me too. To succeed online: nichify!

• Ken Evoy's Site Build It! system (http://sales.sitesell.com) is far and away the best overall system I know of to help you (1) determine what online business you should go into, (2) guide you in developing a content-rich site, (3) direct you in how to promote and monetize your site, and (4) provide a hosting platform and a specialized set of tools to do all of the above.
• Research Guide to Online Niche-Finding: Methodology and Software, by Ralph F. Wilson (2005) is available in both e-book and printed formats. www.wilsonweb.com/ebooks/niche-finding.htm