Because of my “real world” job, I constantly am struck by the differences in online and offline business, generally in how the online world moves in hyperspeed ,making offline business seem to be moving almost… slowly.
For example, my family is heavily involved in small industrial properties, so when we talk investments, it’s usually big figures and long time frames. For instance, an industrial property generally sells for around 13x its yearly gross income, whereas websites tend to sell around the 10x to 18x monthly gross income.
As another example, when you start a small business you are generally advised that it takes at least 1 year, sometimes 2 or more, before you can really expect the business to come into its own. With real estate, unless you’re extremely wealthy, it can take as much as 10 years before you’ve paid enough off the mortgage to really turn a profit from the rental income. But in the online world things move much more quickly, with sites often taking only a few months - if developed in an under-serviced market - to start to turn a profit and grow.
The cost of entry is also much lower, with franchises and equipment costs for real world businesses often costing a hundreds of thousands, if not millions, but online you can drop ship rather than carry inventory. Equipment costs can be just a few thousand dollars, and instead of spending tens of thousands on renovation costs, you can hire a programmer and designer to build you a site for anywhere from a few hundred to a few thousand.
Where am I going with this? Well right now I feel the internet is about where the offline economy was back in the 50’s here in North America, however because of the global nature of the internet, we don’t have thousands of cities all needing their own furniture store or landscaper on the internet. The world really only needs a comparative handful of sites or businesses to fill a niche.
Only a few years ago you could easily get online and find a niche or market to sell or market to, but now all the big niches are taken, with mostly the things no one has thought of yet still being open to newcomers. What concerns me about this is we have gone from a 50’s economy of a few years ago, to a modern economy - and with the search engines getting smarterm pretty soon the internet will no longer be the ultimate equalizer where Joe Internet User can, for a few thousand, compete with the big companies. It will become a scenario much like it is today, where much like from the real estate perspective where they aren’t making any more land on planet earth, the internet will also have more clearly defined borders.
All I can say is: if you’ve been thinking about doing something online, you’d better jump in now before there’s no more room left in the pool.
