I simply say that I'm in sales. Unless I'm talking to a good friend or a potential investor, people don't need to know what I do. Perhaps that's just me.

I tell people the part at which the transaction occurs.

'I sell research chemicals online.'

The aggregating, tracking, sales, design, etc... are interesting follow up discussions.

Well, what do you market? Instead of saying anything about "online", just say that you market X and that the online channel is your exclusive focus.

A lot of people make money online as "internet marketers" by engaging in some shady operations (or at least what society consider shady). Perhaps some of these people think that is what you're up to. So instead of saying "online business" just go ahead and elaborate on what it is specifically that you do. They're probably curious anyways. And if they're not, well then, they shouldn't be asking an entrepreneur what he does :-)

I've never known an entrepreneur who has this problem - the elevator pitch is pretty important and most entrepreneurs have it down and if they don't it's because they talk TOO much about what they're doing. People might not understand really technical stuff, but it doesn't sounds like you're doing any heavily technical stuff.

I usually say: I help build an online advertising platform. Nope, I don't buy and sell ads. I work on the platform which we license out to people in the business of buying and selling ads. It handles more than 8,000,000,000 requests (200,000+/s peak) and several TB of data a day. From there discussion turns to their questions about advertising or scaling.

Alternatively, I'll answer "Internet stuff, and some personal projects in my spare time".

At any rate, a lot of people will always be misinformed about stuff they don't know much about but which they hear a lot about. Technology is definitely one of those things, as is the ".com garage millionaire" thing, as is this new work-from-home-x-hours-a-week. I wouldn't worry about it, but rather think of it as a chance to educate them a little bit.

Was in the same position, making money online since high school and people ask 'what do you do?'

My answer really depends on what I want the reaction to be. Do I want to really explain what I do to this person and have a long conversation? Do I want them to just satisfy social norms and move on?

If the former, I would say something like I built such and such which does this and that. (Fill in blanks as appropriate).

If the latter, I would answer online marketing or software development. That generally kills it pretty fast if that was the intended goal and I read the persons interest correctly.

If I'm talking to someone I don't know I say I "sell software" or "run a software business". If it's a close friend and I want to communicate how successful the business has become I'll say "back in _ it made sense for me to start working on it full time." For anyone who cares to listen I'll usually talk about a couple products I'm proud of and their position vs the market or similar products.

How do you respond when people ask "does it make any money?" How do they react when you tell them that it does?

I think the problem here isn't necessarily etiquette so much as it is ignorance. Most people don't know anybody who works for themselves, and a little education will probably go a long way towards maintaining normal relations.

I say yes it makes money, it is my full time job. They just reply with "oh, well that's good, good for you". Instead of saying I run an 'online business', I've just started telling people I run a marketing company (which it is), and that seems to fix the weird looks and comments that I have been getting from family.

Right. Why would you focus on the fact that it's online? That's almost an irrelevant detail to "What do you do?"

You run a marketing company. Just say that.

I tell them what I do (website development) and follow up with a few examples of what I've been working on recently. Most people have no concept of what web development is, but saying that you built a system to report user statistics or to manage website content adds a lot of context to your job title.

What about "I run a software company. Like Microsoft, like Google. Only smaller but nonetheless growing."?

Most people won't think anything you are doing is "real work" until you are making a substantial income.

I make enough from my online business that it would be the same as me getting a full time job making 65-70. The thing is, many people that are not in the tech world have no idea how much money can be made online.

And, you may be able to grow your business 10x where a salaried person generally cannot.

Exactly :).

Depends on who is asking. My stock response is "I work for a web retailer". I generally only mention my ownership or role when it's relevant to the person or the context.