Rule #10 – If no one will pay for it, it’s worthless.

Back in the 90’s one of the foremost principles of economics was on display when auction-site eBay encountered the Beanie Baby phenomenon.  eBay is a fantastic resource for valuing physical goods precisely because it demonstrates a pure economic lesson that beforehand had been hard for many people to quantify on a mass scale:  Things are worth what someone will pay for them.

There were newspaper articles and watertank conversations abound discussing how things like Beanie Babies couldn’t possibly worth $100 (or more) each.  This lesson extended to Pogs, comic books, coins, baseball cards, whatever.  People who didn’t collect or have interest in these niche goods didn’t understand the value of them.  However, a quick look at a random category on eBay did (and still does) demonstrate a lesson that is important to understand as you try and earn a living with a new product or business:  Things are worth exactly what someone will a pay for them.  Conversely, if no one will pay for the good or service, it worthless.

Some of you almost immediately must have thought, “Poppycock.  I don’t pay to use Google, and it’s not worthless!”  Of course not.  Google could charge people to use their search function and their other tools.  They would have fewer users, but there are plenty of people who would pay to use Google and its various services and tools.  As it turns out, their ad serving platform more than offsets the cost of giving you the search engine, GMail, Reader, etc. for free.  In the strictist sense, these products are “loss leaders”, getting you – the customer – through the door so you’ll buy something (click on an ad).   Google’s “product” for sale is AdSense.  And, in perfect economic fashion, keywords are worth exactly what someone will pay for them.  Funny how that worked out, isn’t it?

That said, what is your product worth?  Just as importantly, how will you extract that worth from your customers or clients?  I recently detailed why I think the advertising model is ridiculous, so it’s only fair that I give some ideas on how to generate revenue online that doesn’t include Ad-Sense code.   (Note:  I failed to mention in that prior post that another problem with the ad model is that unless you are doing able to sell the advertising independent of an ad network, you are going to likely lose a substantial cut of profits to Google, Federated Media, whoever.)

 Up Next – Making Money Online Without Using Advertising

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