In a nutshell, Internet marketing is simply the practice of selling one's products and services online. It has its own set of tools and techniques, the most popular of which are search engine marketing and search engine optimization. There are also advertising-related Internet marketing tools such as banner ads, interactive advertising and pay per click advertising as well as content-related techniques such as blogging, blog marketing and articles marketing. Practices such as affiliate marketing, e-mail marketing, online freelancing and the like are also considered Internet marketing tools.

Aside from its role in e-commerce, Internet marketing also plays a vital role in other business-related endeavors such as customer service, information management, public relations and sales. With the continuous growth of the Internet every year, Internet marketing has experienced its own proportional growth, both in usage, popularity, availability, and importance.

During the Internet's infancy when the Web was dominated by simple text-based sites, Internet marketing was already in existence, characterized by the simple practice of disseminating product information. These days, Internet marketing has gone way beyond simply distributing information and now involves peddling business models, advertising space, software programs and countless products and services.

In terms of target audience, there are two basic models of Internet marketing: B2B or business-to-business and B2C or business-to-consumer. In B2B, companies direct their Internet marketing efforts to other companies. In B2C, companies try to sell their wares to consumers. B2C is the older of the two practices, while the more complex B2B model soon followed.

There also a third and more recent Internet marketing model known as P2P or peer-to-peer, and it's getting more and more popular every day. In P2P, individuals conduct their business with other individuals. An example is the practice of sharing files on sites like Kazaa.

Internet marketing can be practiced using different formats. For instance, on sites such as Priceline.com, customers can name their price for goods that they want. They start by giving a range of the prices they're willing to pay and the site gives a list of things that they can by for that amount. Meanwhile, other Web sites such as Hotwire.com allow customers to compare the prices of products so that they can get the best price. There are also the so-called auction sites like Ebay.com that allow prospective customers to bid for a host of products.

Estimates indicate that over one-third of US consumers already use the Internet to make purchases. What this tells business owners is that, if they're competitors are already operating on the Internet, they should hop on the Internet marketing bandwagon as well.

The Internet is especially useful for small and medium-size companies because it lets them promote their products and services using only a relatively small marketing and advertising budget. For example, you don't need a large sales force to sell your product on the Internet. Through Internet marketing, you can sell your products online and, in the process, spend only a fraction of the cost of advertising in traditional media outlets such as TV, radio and print.