In the early days of e-commerce two ideas cropped up fairly early in discussions: online estate agents (real estate) and online dating. The pitfalls in these two soon become apparant. To my surprise, both have recently started to make money on the net.
Before I start rambling, I must just qualify that this is about the UK market. It may be that the markets operate differently in other countries, and i'd be happy to hear comments that say so.
When thinking of ideas for internet ventures one tack you can take is to look for enterprises where companies act as a middle-man from physical premises trying to sell something they can't show the customer in the shop: e.g. travel agents and estate agents because they can only describe what they want to sell you using brochures and human beings. So, the thought goes, "If I replicate the estate agency, but without any physical premises I can provide the same service but have much lower costs, my margin will be huge!".
The pitfall is that the costs are in marketing your agency. Estate agents spend a fortune on print advertising to build a reputation as well as sell houses. If I were to sell a house I would choose the agent that customers would go to, and customers would probably go to the one that's biggest. They demonstrate their size by placing double page advertisements in the local newspaper. Also, if you think of the physical premises as a giant billboard placed in the high street you can see that it is a marketing spend and not just sales. All this activity by the physical estate agents captures the sellers' attention and makes it harder for you to encourage them to sell their house on your site. You end up having to drop your prices to attract customers and there goes the margin!
Recently, I spotted http://www.rightmove.co.uk/. It has loads of properties for sale and would blow an independent out of the water. How has this happened? Well, take a look at the shareholding and you'd see that it is owned by some of the major (physical) estate agents. This was diluted slightly by a share flotation in March 2006:
Rightmove have positioned themselves well in the HIPS landgrab. "The main elements will of course be subcontracted to surveying businesses and the councils for local searches (but) we will assemble the pack and it will have a Rightmove badge on the front," Mr Williams said on the BBC News site. So, they won't have to do the donkeywork, but as the biggest name they will brand it as theirs and take the lion's share of the retail price.
Now that's how to make money from the net.