My favorite business model on the net remains eBay. They created a virtual exchange that can only exist on the Internet.
eBay leverages the power of the Internet to bring together millions of buyers and sellers across the world. The first Critical Success Factor ("CSF") for eBay, like with any exchange (e.g. NYSE), is therefore liquidity. Once a seller lists an item for sale, there are immediately thousands of buyers taking a look at it...
eBay's Feedback system, which ensures both a level of trust and loyalty among its community, is another CSF. Although it was initially created as an experiment, it has served the test of time. Just look all these powerbuyers and sellers that have emerged, with feedback ratings greater than 10,000 (items). It is likely that they will never switch to a different auction site.
Because eBay doesn't own any warehouses (and none of the expenses of traditional retailers), gross profit margins are typically 80%+. There are not many businesses, offline or online, that can match this performance. More importantly, the business is growing ... the CEO plans $3bn in revenues by 2005. And this in a time where consumer spending is supposed to be dampened!
So, if you want to make real money, study eBay. It works, makes tons of money, taken all the right steps and is here to stay.
Thanks to TenMinJoe for pointing out that eBay now also owns Paypal, which is basically a very clever bank. Paypal now (May 2003) has more than 25m members worldwide, and god knows how much in it's bank :-)