Busting the myth of building an online business
If you want to build an online business, you must be tired of scrolling social media and repeatedly seeing the same content - people making money on a course, sometimes not even their own. It feels like another kind of a Ponzi/pyramid scheme, but it’s in the education space now.
To top it off they make it seem like it’s super-easy. And then there is this newest faceless Instagram account trend that is yet another money machine.
And although for some people doing it, these businesses are indeed generating money-making machines, it will be far from the truth for many of their clients. It’s a free market after all and the purpose of a business is to make money. I am not, however, a big fan of the current state of online business. For me, running a business means providing value, impacting someone’s life, and leaving a legacy. These businesses will fade as fast as they appear as there is nothing “tangible” behind them - no real mission besides generating as much money as possible, no long-term vision or real purpose. They repeat the same scheme: you go online, you pick someone’s digital product/course, you start creating content around it, targeting the niche you are provided with, you sell and make money on commission. When, of course, you can (or are lucky to) grow your audience by putting the effort into creating the content and tirelessly publishing it online for a longer period. Since your income is a percentage of a sale, you need to make quite a lot of sales to make money. But yes, if “I can do it, you can do it”.
The online education market is estimated to be worth US $279.30bn in 2029. It’s not surprising if we keep developing it the way it’s growing. A part of it becomes worrisome and makes me question the quality of that education as it is not education per se. It’s the money-making machines that just don’t feel right but people will still purchase, making those who got on the wagon even more money.
So how do those businesses work anyway?
The strategy is very easy. There is a product one promotes and sells. That’s what business is, isn’t it? It’s a game of selling.
How do they do it?
A bigger fish. There usually is a person who has been around for some time. They have set up their money-making machine and are scaling further by “recruiting” new “agents” to sell for them for a fraction of the sales they make. The bigger fish usually has a low price offer ($97-$297) so that many people can afford it. The bigger fish may provide the niche they want to target so that their agents (aka affiliates) know what type of content to create. They want their agents to be successful because more sales equals more money for them.
MLM-type of an association. The agents further recruit more affiliates and get their friends into the same scheme. The more people talk about each other, the more followers start getting interested, and the more known they seem to be. Being known generates a sense of trust that is essential to making a sale. The algorithm picks the content up as something people want to watch, so it pushes this content even higher in rank and displays it in front of more people. It’s the simplest economy of scale.
Marketing. Now it’s time for the affiliate to create a landing page with a description of the product they are promoting for the bigger fish. It usually is a one-pager telling people how this product has made the affiliate successful and changed their lives. And then after the convincing story, there is a signup form or a link to a low-ticket product. Because the affiliates usually receive the template, all those businesses seem to look exactly the same. Because the affiliates get their own affiliate links the bigger fish can track sales per affiliate automatically in designated systems.
Once that’s done it’s time to create an Instagram account. The name needs to be catchy as should be the description (usually following the same pattern).
Then one needs to buy some (thousands) of “followers” to increase credibility, pay for the Instagram-verified blue mark, and they are ready to go.
The affiliates add the affiliate links to their description. The profile description once again tells everyone of the enormous success of the affiliate with the product and the amazing transformation that has happened. Often the story goes like “14 months ago I was broke. Now I am a millionaire. You can do it too”. So you kind of feel like this magic $97 pill will be the solution to all your (financial) problems and you sign up. Who wouldn’t?Then there is the mass content production phase. Those accounts usually create the following: 1. educational content - they share some of the lessons learned about the business. It’s usually the same all over again. 2. entertainment content - they show themselves being somewhere on vacation, not working but making money. In general, they don’t work, right? Ok, 5-20 hours a week tops! But hey! it’s not working when you are having fun right? Want to do the same? Sign up. Comment [xyz] and they’ll send you a link to an exclusive webinar. And that’s another way in which they play the algorithm. When people comment, once again the algorithm picks up the activity on certain posts, understands it as engagement, marks it as interesting, and starts pushing it in front of more people. Remember. An algorithm is not an intelligent creation. It cannot objectively assess the current state and the quality of an engagement. It works on data, not on reason as we humans. It only sees the quantity - the numbers behind people interacting with a post. For an algorithm, the currency is the likes, comments, views, and shares. If it sees more of those, it learns and displays it in front of more people. Because those reels usually have a click-bite as the main and first thing one sees, the engagement rises even further. And the loop gets an engineered virality. 3. sales content - that’s when they sell directly to you. That’s the sole purpose of this content. They start by giving you some valuable content and the “right hook” you.
Last but not least in the marketing part: The “Playing on emotions” mastery. The emotional underlying manipulation that puts you into feeling guilty: “if you are not making a few thousand dollars in passive income, ask yourself WHY”. Of course, you want to do something about it. Why not “take the cure” if they offer it? Together with painting the picture of immense wealth that offer is so luring, you cannot resist.
Sales. That “rags-to-riches” story does sell. In the internet era, this is of course possible as the online world is not as capital-intensive as traditional businesses but those “businesses” I am describing here sell you the dream as long as you believe in that dream to buy. Every reel, every story leads to a sale. Whether it’s an educational, entertainment, or sales reel or story, it always redirects you to the affiliate link in the description. Sometimes the final price is presented as a discount after thousands of dollars worth of discounts because “the true value of the course is about a few thousand but you and only you get it at the reduced price”. And while for some of the course sellers this is true, that the value inside is worth the bigger investment, in this business model, you need to pause for a moment and think if it’s true.
Purchase. Lured by the low price and a big dream of becoming financially free (finally!!) you buy the digital product. You start going through it only to realize it’s so generic that it doesn’t really work for you. It’s pieces of information that teach you basic skills you can’t monetize because you lack the reasoning behind them.
You will not complain because it’s only a “few bucks”. Other buyers thought the same as you just did and a $97 product now generated $97*n in sales (let’s say 100 people bought - that's $9700!)
You can’t return it. It’s digital and there was fine print that the results are not guaranteed.
If it doesn’t work for you - well, they told you it requires strategy and work, consistency, etc, so it must be something you are doing wrong.
Upsell. Once they capture your email, they offer further “help” if you cannot implement the knowledge from the $97 course. If you haven’t yet noticed that this may not be the way to go, you buy once again. Your LTV increased. They made more money not spending a dime on marketing it to you.
Don’t believe me? Believe Instagram. The essentials:
a catchy account name
hundreds of thousands of bought followers (but are they really?)
blue Instagram-verified mark (for about $19)
(full disclaimer - although I do not have a catchy Instagram name, I did test how buying followers work and I do have the Instargam blue mark as well - you can have it too. It’s in the settings. So pretty much doesn’t mean anything these days since you pay for it… but majority of people just scrolling through their feed don’t really understand the mechanics behind it)
Let’s do the math to make sure you understand the system.
You are a bigger fish.
You have affiliates
Your affiliates have affiliates.
Those affiliates have further affiliates.
It becomes quite a network.
They all promote each other and your low-price product. That generates a scale effect and algorithms understand the content as interesting. Because they cross-promote the scale effect takes precedence.
The more affiliates you have, the more money they generate for you.
They hang out together to make it look big.
Now, you have a $10 product. Your “agents” promoted it to 10,000 people. In this type of low-ticket offer the conversion is very high. Let’s say 70% out of 10,000 people bought and generated $70,000. You pay your agents a 10% commission. you cash on $63k
What you can learn from these types of businesses?
Before you jump into these types of businesses, you need to ask yourself if it’s what you really want to do. You need to decide if it’s something that you would like to pursue just to make money or if you’d like to actually start a business you will be proud to put your face on.
You already know that these types of businesses are not my favorite. However, if you observe them, you can learn something from the overall strategy.
The truth is that all online businesses use the same strategy to start, grow, and scale their businesses and it’s worked for years. What they differ in is the essence of the execution - the value they promise vs. what they deliver. And those businesses are trained to execute the marketing and sales well. In the end, someone created that repetitive scheme that generates money, right?
I strongly encourage you to start a business if that’s your calling. But at the same time, I want you to be true to yourself about what it really is that you want to leave in the world.
Key Takeaways
Online business models often rely on low-price digital products and affiliate marketing schemes.
These businesses use emotional manipulation and promises of quick wealth to attract customers.
The strategy involves creating viral content, leveraging social media algorithms, and extensive cross-promotion.
While profitable, these models often lack long-term vision and tangible value for customers.
The online education market is growing rapidly, but the quality of some offerings is questionable.
Aspiring entrepreneurs should critically evaluate these business models and consider their true goals.
Successful online businesses can be built, but should focus on providing real value and leaving a positive legacy.