How to Earn Money from Selling Digital Products

© | Bloomua

In this article, we will look at 1) digital products, 2) advantages and disadvantages of selling digital goods and 3) generating profit from the sale of digital goods.


Digital good are described as items that are “stored, delivered and used in electronic format.” These goods are intangible and are shipped electronically through online mediums such as email or download links following online payment by the customer.

There are many different types of digital products and services available to customers. These include e-books, music files, internet radio and television, streaming media, fonts, graphics and images, artwork and prints, subscriptions to online magazines, websites and membership sites, online ads, coupons, e-tickets, website templates, manuals, webinars and video tutorials, electronically traded financial instruments, software, games, virtual money among many others.


As with physical products, there are both advantages and disadvantages of selling digital goods online. Some of these are discussed below:

1) Advantages of Selling Digital Goods

Some advantages are shared by Jimena Diaz de Vivar. She owns a store on PrestaShop, an ecommerce marketplace. Her products include graphic design templates for themed parties. These include printables such as invitations, posters, napkins and food presentation items that can be downloaded.

  • Unlimited Stock – One key advantage of a digital product is that it will never be out of stock. This characteristic is unique to a digital item. As long as the product stays relevant to the customer and therefore in demand, it can be sold endlessly without having to worry about manufacturing and storage.
  • Low Costs – Though there may still be substantial costs such as research and development when it comes to digital products such as advanced software or games, there are other costs that are minimal or even non-existent. These include inventory costs, packaging, shipping, and storage and warehouse management.
  • Wider Customer Base – With a lack of traditional barriers such as customs and shipping costs, the area of coverage for a product can increase substantially. The distance of the customer from the creator of the product becomes irrelevant and millions of potential customers can be accessed easily.
  • Automated System – Since the entire digital product transaction is simpler, a good automated system can help digital products sell almost on their own. The order can come in at any time of the day and be processed and even delivered without having to wait for a human to step in.

Some other benefits include:

  • Fewer Errors – In shipping and delivery of physical products, there is always the chance of a lost or incorrect product. Correcting these errors can take time and be costly. Quite the opposite, in digital products such errors are extremely easy to fix. A wrong download link, an error in download are all errors that are easily fixed with a minimum of cost and time.

2) Disadvantages of Selling Digital Goods

As expected, there a few small downsides or challenges of selling digital products and services. These include:

  • Equipment Maintenance – All equipment involved in the creation and dissemination of the digital product needs to be kept in top condition to make sure there are no glitches in the system. This means the storage solution, the servers and the internet connectivity among other aspects.
  • Competition – The many advantages of this type of product means that there is always a chance that more and more people will have had the same or similar idea and will be in the marketplace vying for the customer’s attention and dollar. More competition will mean that no premium prices can be charged and instead, a creator may have to sell for under the actual value of the product just to cement the customer base.
  • Copycats – A digital product can be copied easily once it is sold. Whether it is an e-book or a graphic, the barriers to reproduction are very few and will just lead to more competition in the market.


There are thousands of people online selling digital products already. Many of these are products that are similar to any ideas that you may have. A carefully planned and executed strategy can help ensure that you are able to generate profits from your digital product regardless of the competitive landscape. Some important steps in this regard are discussed below:

1) What to Sell?

The first step in establishing a successful digital product is to decide what to create and sell. You may have a particular talent or passion that can be converted into a digital product that will be coveted by others as well. Half the battle of setting up a successful digital product business is to choose the right product to sell. The right choice could mean a profitable business while the wrong choice could lead to a loss of investment and revenue. Some key questions to ask about the final product include the following.

  • What is the demand and supply for the product idea? Study the market trends to assess the demand for the product and how well this demand is being met by existing suppliers. The ideal market would be one where there is high demand but inadequate supply.
  • Can you offer something more? If the market already has many suppliers, then the question to ask if whether you can offer something unique or something extra to the customer base. This unique aspect should help set you apart from the others in the competitive field.
  • Is your chosen product in a niche category? It is easier to find the right balance of high demand and low supply if you look at a niche category or specialized products that cater to a certain segment of customers. Less competition within suppliers will mean that it is easier to form a strong customer base and earn profits faster.
  • What is the ratio between cost of production and profit? The key question to ask yourself is whether you will be able to make a profit from your digital product or not. What are your expenses or costs of production and what is the potential price that you can realistically charge from a customer. If the return on investment is worthwhile, then your product is worth pursuing.
  • Does your product have longevity or is it a trend? Items that follow a trend are likely to be ideal for a short-term business. There may be other items which do not follow a particular trend and always remain in demand by either a wider audience or a niche market. This is a hard situation to gauge as some rare trends do end up becoming the norm. A market analysis and research can help in this regard. Some good places to analyze trends are online marketplaces that specialize in the sale of digital products.

Top 5 Digital Goods Sold on the Internet

With these points in mind, consider some of the most sold items on the internet.

1. Ebooks
Digital products - ebooks

© Flickr | Andrew Mason

By far, the most popular digitally downloaded item on the internet is the ebook. With an increase in electronic readers and new and diverse ebook readers and apps emerging, the demand for more ebooks continues to grow as the sales of traditional books fall. According to the International Digital Publishing Forum, readers in the United States spent $1.5 million on ebooks in 2002. This figure grew to reach $2 billion within 10 years. Ebooks are by no means the sole domain of top players such as Apple and Amazon. Instead, it is very easy for anyone to write, market and sell their own ebook. A good idea and an internet connection are all that are needed. According to Publishers Weekly, self-published books make up as much as 31% of all ebook sales on the Amazon Kindle store and only 16% of ebooks on the Amazon bestseller lists are from top five traditional publishing houses.

2. Photography
Digital products - photography

© pixabay | Hans

The second most popular item sold online are photos. over 70 million photos, vectors and illustrations are available for purchase on Shutterstock alone. In 2011, 58 million images were downloaded from the site and $120.3 million in revenue was generated. There are several other similar websites out there as well. The best way to make money is to have your on store so no other business takes a cut from sales. The challenge is to set yourself apart from others with your photos.

3. Software and Apps
Digital products - software & apps

© Wikipedia Commons | Valentyna Sagan

This is another lucrative area when it comes to digital products. Successful apps manage to generate enormous revenues through ad sales, in-app purchases or paid versions. The limitation is that apps are sold through existing app stores at the moment. Other similar products include templates, databases, Javascript plugins and many more downloadable products.

4. Graphics & Cliparts

Another good idea for online products is graphics and cliparts. These items are very much in demand even today but this product needs to be sold in high volume in bulk to achieve a decent living.

5. Tutorials and Lessons

Online tutorials, trainings and lessons are a popular digital service. Though there are many free options available as well, there is a big opportunity for paid options as well. Popular areas include health and workout videos, photography, writing, finance, entrepreneurship and technology. These instructional videos are often detailed and high-quality, making them worthwhile for a customer to pay for.

2) How to Create?

Once you have decided your genre and niche, it is now time to actually create the digital product. It is important here to get organized to ensure that you manage to successfully create a product instead of losing interest midway. Some basic steps to follow in the product creation phase include:

  • Plan – Beyond deciding what to create, this step should include time spent on collecting and compiling all your thoughts and ideas in one place. It is a good idea to use mindmaps or brainstorming to give depth to your chosen idea.
  • Create First Draft – Once the ideas are edited and organized, it is time to create a first draft. This applies to all types of products. Essentially, it is the first attempt to create any content. This step can help work out problems with the idea itself as well as with the method being used to create the content.
  • Polish – This is where the first attempt is dissected and studied to ensure that the final product is polished and ready to be finalized. It is important at this stage to be detached from the work and approach it with a fresh and open mind.
  • Edit – At this stage, it is good practice to have someone else take a look at your work to proofread or edit it. If there isn’t a big budget for this activity, you can ask a friend to trade the service for a favor or release it to some super users or key customers for a preview.
  • Package – Packaging in a virtual product can be as important as in a physical one. if you are writing an ebook, make sure it is in the right format to download and read, if it is a video, you need to design the right page to upload it on and ensure ease of access.

3) How to Sell?

With the product in hand, it is now time to sell it to the right customers at the right price.

How to Get Customers

The best product will never sell if it is not marketed to the right audience at the right time and in the right way. Marketing is a key element in gaining customers and is not as simple as it appears. Some good ideas to get customers include:

  • Teach – If you have some specific expertise or have learnt things along the way, it is a good idea to share this with your audience. This helps build credibility and trust which leads to people being more likely to buy what you sell later on.
  • Social Networks – Social networks are a great way to directly connect with the audience and build a community. This community can later be the recipients of your marketing activities. The right social network needs to be selected based on the type of customer that is being targeted as different segments are likely to use specific types of social media.
  • Advertising on Industry Websites – If your industry has dedicated websites or forums, it may be a good idea to advertise your digital product there to gain the right viewers.
  • Approaching the Right Blogs – There may be opinion making bloggers in your targeted customer segment. These bloggers can be approached and provided with samples of your product to gain reviews and create a buzz.

How to Price

Pricing is a tricky issue since the right balance needs to be struck between what return on investment you require to make the effort worthwhile for yourself and what value the customer attaches to the item and consequently is willing to pay for. Two key areas to remember while pricing are discussed below.

1. Value-Based Pricing. Instead of comparing to prices of similar products or services in the market, the right pricing idea is to understand the value that the product is creating for the audience. If the value attributed to a product is higher, then a customer will be willing to buy it at a higher cost. If there is no perceived value of the product, then it will not sell even if it is priced very low.

2. Tiered Pricing. Another valuable pricing strategy is to use tired or multiple pricing. This means creating attractive package deals for the customer. For example, in $30 the customer will receive an e-book with basic instructions while in $60, they will receive companion videos as well and in $90, a manual on how to teach this to other people.

Product Launches

Once the product is ready to sell, it is time to launch it with the appropriate fanfare. A good product launch should include:

  • The Right Timing – The right timing can make the difference between a success and a failure. It is a good idea to avoid holidays if your product is not related and plan around them if it is. Another aspect is to see when your target audience is the most active and willing to buy. This could be weekdays for some and weekends for others.
  • Creating a buzz – Another good way to secure a successful launch is to create a buzz leading up to it. This can be done by making the product available to a certain group of people before others and encouraging them to talk about it. Another way could be to make it available for a special lower price during the first few days or bundling it with some other exciting offers to encourage purchase.
  • Promotion within Your Network – Within the network that you are targeting, start creating excitement about a new product some time in advance. Let some hints through but keep people guessing.
  • Call in Favors – If you have been building mutually beneficial relationships within your community and network, it is now time to ask for help. You can do this by writing guest posts of bogs, asking bloggers to share what you are sharing on social networks and emails, asking others to donate something to be added to the purchase as well as testimonials.

4) Handling Theft and Piracy

This is an unfortunate side effect of selling digital goods online and is extremely hard to tackle. According to Nathan Barry, the founder of ConvertKit, an email marketing application, as well as the author of The App Design Handbook and Designing Web Applications,

“I don’t do anything to prevent my books from being pirated. Instead, I focus on the customers who have paid and will continue to pay for more products. It’s not worth worrying about something you can’t control.”

What he does do is to regularly go through Google search results and send takedown requests to Google for torrent and free download sites that show up before his actual website in these results. Once these are removed, it helps move the actual website to the top of the results and people are directed to it.

Some other ways of handling theft of content are detailed here.

Image credit: Flickr | Andrew Mason under Attribution 2.0 Generic, pixabay | Hans under Public Domain Dedication, Wikipedia Commons | Valentyna Sagan under the Creative Commons Attribution-Share Alike 3.0 Unported license.

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