First and foremost let's begin with an understanding that there are only 3 ways that you can generate income in an online business. Each one of these has its place and purpose in you developing a successful (read profitable) online business venture.

Each one of these can stand on its own in creating income, but they are best understood as a progression in developing a steady flow of cash to your business.

Let's walk through each one so you have a better understanding of what they are and how they can work specifically for you.

Sell Traffic
Selling traffic is the process of driving visitors to your website and getting them to click on an ad (Google Adsense as an example) and/or by directing that traffic to an affiliate website as a lead that you get paid for (an example of this would be getting prospects to a mortgage loan site where they fill out an application).

You will normally find these types of ads on blogs, but you can also find them on some websites and social networking sites like Squidoo.

The way you make money with Adsense is quite simple. People come to your blog or website and click on one of these ads. You are then paid anywhere from 10 cents to 40 cents (or more) per click.

So looking at the example above in the Adsense unit, if you had 300 visitors to your website a day and 4% of them clicked on one of the ads above you would receive anywhere from $1.20 to $4.80.

Does it look like you are going to get rich this way?

Not likely.

But, if you had 50 sites (or blogs) that did this every day you would be earning anywhere from $60 to $240 a day. Not bad for a relatively passive income stream.

Sell Other Peoples Products
The other way you can make money online is by selling other peoples products which is better known as affiliate marketing. By being an affiliate marketer has several advantages.

1. You don't have to have a website right away.

2. You don't have to come up with ads or promotional material, most good affiliate programs supply that for you.

3. You can start generating income right away.

Now, the downside to affiliate marketing is this:

1. You are sending your prospects to someone else's website, effectively helping them build THERE list and not yours.

2. You are competing with hundreds if not thousands of other affiliates who are marketing the same product.

3. You are getting half of the income you would be receiving if you were selling your own product.

So, knowing that, is it still a good idea to get your online business started as an affiliate? You bet it is!

Sell Your Own Products
Why is it important to have your own products?

1. You can establish a brand that customers can come to trust.

2. You have products to cross sell.

3. You can build a huge affiliate base.

4. You have a suite of products to make yourself a professional force in the marketplace.

So, what type of products can you develop and sell to your customers. Well, a lot of that will depend on your market and your audience. This is where having a thorough understanding of your customers wants and needs is critical.

Here is a list of the different types of product offerings you should consider (again depending on your market).

1. Digital products; eBooks, CDs, DVDs

2. Services; Membership sites, consulting, coaching

3. Software; Web based, digital for desktop

4. Physical; Health and Wellness, tools, gizmos, etc.

With all of these you have many choices when it comes to creating the product. You don't have to manufacture these products in many cases. You can find companies that will allow you to private label an already existing product, you can also get PLR (private label rights) products that give you the right to put your name on them to "brand" the product as your own as well.

The other HUGE benefit of having your own products is the fact that you can keep more of the revenue since you now own it. That can make a big difference to your long term income possibilities as you grow your online business.

The bottom-line is this; you want to have an online business strategy that includes eventually selling your own products. This is a must if you truly want to develop a long term stable income for your business.