Most people misunderstand what the internet actually is. They see it as a place to build businesses, when really, it’s just the world’s most powerful marketing channel. Once you realize this, the hierarchy of internet businesses becomes obvious.
The Fundamental Truth
The internet doesn’t create value. It distributes attention. Every successful internet business ultimately answers one question: what are you marketing? The businesses at the top of the food chain market their own products. The ones at the bottom market other people’s products.
The Hierarchy
Tier 1: Social Media PlatformsSocial media platforms sit at the apex because they’ve achieved something extraordinary: they market themselves. Facebook doesn’t need to advertise Facebook. TikTok doesn’t buy Super Bowl ads for TikTok. The product markets itself through network effects. Every user becomes a marketer, pulling in their friends, creating content that attracts strangers, generating engagement that the platform monetizes.
These businesses own:
The product (the platform itself)- The distribution (viral growth mechanics)- The audience (billions of users)
The monetization (ads sold to everyone else)
They’ve built self-hosted marketing machines that compound infinitely. This is why they’re worth hundreds of billions.
Tier 2: SaaS and Product Businesses
One level down, you have businesses that own their product but use the internet for marketing and distribution.
A SaaS company builds software, then uses content marketing, SEO, social media, and paid ads to find customers. They’re self-hosted in the sense that they own what they’re selling, but they’re renting attention from platforms and search engines.
The key advantage: they capture the full value of each customer. A $100/month SaaS subscription is pure margin after customer acquisition. They’re not splitting revenue with anyone except the platforms they advertise on.
Successful SaaS companies eventually build their own moats:
Brand recognition that drives direct traffic
Network effects within their product
Content libraries that generate organic search traffic
Customer bases that refer new users
At this point, they’ve moved closer to Tier 1 territory. They’ve built self-hosted marketing through reputation and word-of-mouth.
Tier 3: Dropshipping and E-commerce Arbitrage
Dropshipping sits in the middle because it’s half self-hosted, half rented.
Dropshippers own the marketing (they run the ads, build the store, create the brand), but they don’t own the product. They’re middlemen capturing the spread between wholesale and retail.The problem: their margins are thin because they’re renting someone else’s inventory. A 20% margin on a $50 product means $10 profit, but customer acquisition might cost $30. They’re constantly fighting to make the math work.The successful dropshippers evolve. They take winning products and manufacture their own versions. They build actual brands with customer loyalty. They become Tier 2 businesses by taking control of the product side.But in pure form, dropshipping is limited because you’re just marketing products anyone else can market too.
Tier 4: Affiliate Marketing and Content SitesHere’s where most “internet businesses” actually live, and why they struggle.A traditional blog monetized through display ads or affiliate links is pure rented infrastructure. You’re marketing products you don’t own, on platforms you don’t control, to an audience that could disappear if Google changes its algorithm.You get:
3-10% commission on affiliate sales
$3-20 per thousand pageviews on display ads
Zero customer relationships
Zero recurring revenue Zero control over your income
The math is brutal. To make $10,000/month, you need roughly 500,000 pageviews with ads, or you need to drive $200,000+ in affiliate sales at 5% commission. You’re a digital sharecropper.
Why The Hierarchy Matters
The further down the hierarchy you go, the more you’re dependent on other people’s infrastructure:
Tier 1: You ARE the infrastructure
Tier 2: You own the product, rent the attention Tier 3: You own the marketing, rent the product
Tier 4: You rent everything
This explains why outcomes are so different. A Tier 1 business can generate billions with the same traffic that makes a Tier 4 business $50,000/year.
The Smart Play
Here’s what successful operators understand: you use lower tiers to climb to higher ones.
Smart bloggers don’t stay in Tier 4. They: Build an audience through content (Tier 4)- Launch their own digital products or courses (Tier 2)
Eventually build SaaS tools for their niche (Tier 2)
Use their content as self-hosted marketing for their productsThey’re using the internet as it was meant to be used: as a marketing channel for something they actually own.The same applies to dropshippers who evolve into brand owners, or affiliate marketers who create their own competing products.
The internet is the most powerful marketing tool ever created. But it’s just marketing.If you’re using it to market other people’s products, you’re leaving 90% of the value on the table. If you’re using it to market your own products, you’re capturing real wealth. And if you can build something that markets itself, you’ve won the game.The hierarchy isn’t arbitrary. It’s a direct reflection of how much of the value chain you control. Own more, make more. It’s that simple.
Stop thinking about “internet businesses” as a category. Start thinking about what you’re marketing, who owns it, and how much of the value you’re actually capturing.
Everything else is just details.