Choosing the right product type to start an online business working from home.

In my previous post, I wrote an analysis on the pros and cons of B2B (business-to-business) vs. B2C (business-to-consumer) markets from the prospective of a micro-ISV.

In this post, I’ll try to explain the pros and cons of possible product types that someone can build to start an online business.
That applies to a single person (optionally, a partner can be added) that:

• He is a developer or have at least a good understanding of the Internet and its inner workings (applies to some product types).
• Works from home, full or part time.
• Uses the Internet exclusively to earn money.

Possible product types are:

Business-to-consumer

1. Consumer Web Site.
   Audience
   Users who browse the Internet for their personal interest (no business).
   Revenue model
   Ad placements (Google, Yahoo, MSN, others), affiliate programs (Amazon), etc.
   Examples
   Social networking, dating sites, general interest sites, forums, etc.
    
2. Home user application (web or desktop).
   Audience
   Home users.
   Revenue model
   Product sales, subscription.
   Examples
   Games, utilities, antivirus software etc.

Business-to-business

1. Line of business application (web or desktop).
   Audience
   Corporate staff using the Internet for the interest of their employers.
   Revenue model
   Product sales, maintenance contracts.
   Examples
   Accounting packages, project management software, etc.
    
2. Business Services.
   Audience
   Corporate employees.
   Revenue model
   Service fee, contracts.
   Examples
   Consultants, graphic artists, designers.

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Here are some thoughts on the major advantages and disadvantages of each product type for the beginner micro-ISV.

Consumer Web Site.

Pros

• Attracts massive traffic, which can be converted to revenue by many ways (ads, email lists, product sales).
• If successful enough, can be sold to a large corporation for millions.

Cons

• Needs extensive and often expensive, SEO and marketing efforts, which requires skill and experience to be done correctly.
• Have to deal with search engine idiosyncrasies.
• Overcrowded market.

Home user application (web or desktop).

Pros

• Larger market than B2B.
• Can also be sold to big corporations for a huge one time profit if successful (most small gaming producers start this way.).

Cons

• Customer support can turn into a nightmare for one person business (check comments on this post).
• Deployment difficulties (multiple computer configurations to support, inexperienced users).

Line of business application (web or desktop).

Pros

• Easier to sell if targeting a smaller vertical market. Good niche markets can still be found into the corporate world.
• Low starting expenses, initial sales can fund future developments.

Cons

• Smaller market than a home user application. A PC game can by far produce more sales than any business application out there.
• Building a successful business application requires a great  experience of how businesses operate. Lacking the knowledge of what businesses need is “recipe” to disaster.

Business Services.

Pros

• Most services require a direction communication between parties; therefore, corporations have a tendency to use the same consultants or service providers for as long they are happy with their work.
• Low starting expenses.

Cons

• Business owner must work to earn money, if owner is on vacation, revenue stops.
• It may turn to be too much work for a single person to handle.

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My choice:

Consumer web site or Business application.

The latter is easier to build, advertise and sell, but the high income potential of a consumer site is more attractive.
The majority of micro-ISV’s out there start their journey with one thing in the back of their heads:
Build something and sell it for 20 millions to Microsoft, Google or AOL.
In reality thought, is more feasible for a single person to create a small but useful business application and make a living selling it to small or medium size corporations.

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Please, feel free to post your comments, corrections and ideas.

Let’s create a viable resource for new micro-ISV’s to help them on their decision making.