Economics of Blogging 2: How I Make Money Online

by Darwin on October 5, 2010

People seemed to enjoy my first and only foray into the “how to make money blogging” genre when I outlined the real economics of blogging – not as glamorous as is often portrayed when someone’s trying to sell you an affiliate product to get you started, but it has worked out for me, so it can probably work out for anyone else under the right circumstances.  I had a few requests to share my experience and insights on monetization specifically, so here you have it – I’ll share:

  • How I Make Money Online
  • How Much I Make Online
  • Which Ad Networks and Methods Work and Which Ones Waste Time
  • Other ways to Make Money Online

How I Make Money Online

I make money through a variety of models and methods.  I’m a big fan of diversification and multiple streams of income.  Reason being, I’ve had catastrophic failures before in individual streams, like having my first blog wiped out by Google or having a high-performing ad network stop paying.  Now, I run a couple blogs, with Darwin’s Money being my primary project at this point.  But if something ever happened to it, at least I have a fallback.  I also get to cross-promote and up-sell advertisers that may have landed on one or the other.  So, here’s a breakdown of my key income streams at the moment:

  • Adsense – Google’s Adsense is the most popular and the immediate starting point for all new bloggers.  While many more experience bloggers eventually forgo Adsense in favor of selling their own products or other higher margin methods, it’s great to see that first income stream.  If you have decent content, ad placement, and of course, traffic, the income is relatively predictable and steady.  Even non-bloggers know what this is so I won’t spend any more time on it.
  • Affiliate AdsEver wonder why everybody loves to review ING accounts or credit cards? That’s because they’re affiliate links embedded in the articles.  Love ’em or hate ’em, affiliate ads are often a pretty steady stream of income for bloggers.  Basically, if someone clicks through a credit card link in an article I wrote, I’ll get say, $40.  I don’t do a lot of these ads but I have a couple here and there – maybe 1 in 20 articles is a review of some sort.  With a couple conversions of various products per week, I can reasonably make a hundred or more bucks per month.
  • Direct Ad Placements – Occasionally, an advertiser will contact me to ask for placement of a banner on the site, help get the word out about a new launch or some other means of direct advertising.  When I can, I try to lock in a deal for as long as possible, even by discounting the fee.  Contrary to how I might run a brick and mortar business, I really seek value capture immediately at the expense of future revenues in these models.  See, many people who contact me are just consultants or they have an ad budget today that will dry up next month.  If we agree to a monthly ad renewal, often times within a month or two, they terminate.  By offering a discount of say 10-15% for a full year signup, I lock in those revenues immediately.  Depending on the type of ad and duration, a deal might mean anywhere from $25 (monthly) to $600 (annual); it depends.  But by locking in just one deal per month, that’s a nice additional revenue stream.
  • Freelance – Writing for other websites is a decent way to make some money on the side, especially when your blog isn’t performing yet.  On one hand, some might say that this is effort and content you could be adding to your own blog instead of someone else’s, but I believe there is a law of diminishing returns for smaller blogs, so if I wrote 3 articles or 30 for this blog this week, I won’t get 10x the impact (revenue, traffic, etc.) in the end.  Freelancing is a good way to both get others to see your work (often a byline at the end), and also, to see how others write and learn about the standards you must conform to.  Freelance gigs vary by site and I don’t do a lot of it, but to stay diversified and networked with others, I do a bit each month.
  • Many I’ve Tried that Don’t Work – see below

How Much I Make Online

Well, if I start publishing my specific income each month, my wife’s gonna start asking for a bigger allowance :> !  But to not be a total cop-out, I’ve been officially earning 5-figures online for a couple years now.  That may sound daunting if you’re not making it now, and as I outlined in my first article on the economics of blogging, I started off getting less than a click a day regardless of how much effort and promotion I put in.  But, over time, you grow your audience, your network, your efficiency and your monetization.  We’re talking about $833 a month to make that happen and by diversifying income streams, it’s not that much of a stretch to get there.

Which Ad Networks and Methods are a Waste of Time (for me)

  • Amazon.com – I’ve always found this network to be virtually useless.  Amazon works for someone who’s running a techie site and they review products and put the links in each article or something, but in my experience, Amazon has been one of the worst performing networks for me.  Even if I do a book review and someone buys a $10 book, the 4% commission is a whopping 40 cents.  I make more than that on an Adsense click which doesn’t even have to result in a sale.
  • Kontera and other in-text pop-ups – Not only is the pay per click really low on these, it looks obnoxious and unprofessional.  When I see those underlined words with pop-ups upon mouseover on a site, I automatically think “amateur”.  The income is probably about 5-10% of the income per page view for Adsense in my experience.  Just not worth it.
  • Most Affiliate Products – Regardless of how compelling a story you tell or how useful a product is, if you don’t have the traffic and relevant audience, people just won’t click through, and even worse, they won’t buy.  The conversion rate is really low, especially from traffic from routine followers and social network traffic.  Why?  Because they didn’t come there looking for that.  An exception might be when you get Google Search traffic for a keyword related to the product.  For instance, if someone searches “$100 credit card signup bonus” and lands on your Chase $100 Bonus page (see example)…(like that?  It’s all about getting the most shots on goal), well then that may very well result in a conversion – because that’s what they were looking for.  Someone reading your RSS or coming in to read a different article from Twitter?  Not as likely.
  • Most Banner Ads – Oddly, even though banners are pretty loud and obnoxious and virtually every site has them, I rarely get clickthroughs from banners.  Most affiliate conversions come from a review with an in-text link to the site.

Other ways to Make Money Online

There are some other ways people make a complete killing online.  To date, I just haven’t had the time or inclination to pursue these measures, but they’re out there:

  • True Affiliate Marketing – You’ll see tons of ads out there selling you a book on “how to make money with affiliate marketing” which has to make you wonder if you’re late to the party, but for the people that pull it off, they basically write up a book, ebook, “system”, DVD, or whatever on something…anything.  Often times, they know nothing. But they basically produce a product for sale.  It might be crap, or regurgitated from wikipedia.  Then they sell it for what seems like a good price.  Just enough to get some sales, but not so cheap that it seems “cheap”.  Say, $24.95.  Then, they pay bloggers like me to promote the heck out of it.  It’s a revenue split, often 50/50.  I’ve never promoted one of these things, but for those bloggers who do, they often make a few bucks by giving up some of their page space, and perhaps reputation, while the original author sits back and collects the checks.  It’s a nice biz model if you can pull it off.  Usually though, these authors are experienced in this Affiliate Marketing genre and know all the ins and outs and have a network set up.  If it were this easy for everyone, we’d all be working in our slippers.
  • Sell an ebook – Similar to what I outlined above, some people make an ebook (basically, a big article, PDFd, and called an ebook) based very much on their core competency of their blog.  They may either sell an ebook or even give it away.  By giving it away, there’s still something in it for them.  There may either be affiliate ads in there, links back to their site, or just plain PR.  In the end, the goal is to add value by doing so.  I haven’t tried this out yet, maybe someday down the road.
  • Sell your real book – I have a friend that wrote an exercise and nutrition book and sells it online for $49.  Why people pay this is beyond me, but they do.  She’s making a killing.  She’s using the affiliate model above with the 50/50 split, and she also does book signings, conferences, etc. to promote it.
  • Sell your services – Many people list consulting and other online services in there online income statement.  I don’t do consulting or host a web service, but if you write a blog on web design and you’re a web designer on the side, what a great outlet to capture new contracts right?  Just drive people to your site and then funnel them to your real business.  Sounds simple, and it is – many people do this.

So, that’s it in a nutshell for Darwin.  If I had more time, I’d probably be trying to make even more money online and growing through more revenue streams but in the end, it’s only money.  I’m sacrificing enough by keeping a couple gigs going, but maybe in another life!  Hope that gives you a sense of the economic realities of blogging from a monetization standpoint and perhaps spurs some ideas!

Thoughts?

{ 13 comments… read them below or add one }

Financial Samurai October 5, 2010 at 9:10 pm

Darwin, tell me more about those Discovery Card type affiliate posts.

Do you choose them, or do they choose you? How do you sign up in the first place and such?

$40 for just one click, or does one have to sign up and open an account etc?

Thnx

Reply

Darwin October 5, 2010 at 9:13 pm

You’re pullin’ my leg! It’s all in the Yakeie forum LOL!
But yes, I forgot to mention names. cj.com, flexoffers.com are the big affiliate link houses I’ve seen. Some others out there but haven’t had much luck with finding good products, tracking, payment, etc.

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Financial Samurai October 5, 2010 at 9:15 pm

Ahhh, gotcha. Do you think there is a business model out there where I can just pay someone to write these articles? I can’t get myself to do them.

Thanks for your thoughts. I donno how to make money at all online so it is appreciated.

Cheers

Reply

Darwin October 5, 2010 at 9:26 pm

Oh I get it. because I schooled you on median vs. mean on your blog, you’re comin’ here to mess with me :>

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Financial Samurai October 5, 2010 at 9:34 pm

LOL, no. I really am that unknowledgeable on how you guys do it.

I’d like to try and make the big bucks like you guys, but there are so many options I, along with others appreciate this article.

Cheers

Jerret October 5, 2010 at 10:33 pm

Thanks for the followup. I think I sent you, what, 20 tweets of questions? Ha!

FlexOffers is good, especially on the Discover program. I find that a straight up link works best. I’m finding out real quick that most people have “banner blindness”. It seems counterintuitive but when I take down the banner blocks and put in a link, the link converts much better.

Take a look at QuinStreet.com also. It’s the same program that J.D. Roth runs as well as the DoughRoller (DoughRoller.net) I thought my blog would be to “newbieish” but they signed me up right away. They pay like Adsense, pay-per-click. From my experience so far, click throughs and payouts are about 2 to 3 times more than Adsense. Needless to say, I was pleasantly surprised.

Thanks for the great post! Keep em coming.

-Jerret

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The Financial Blogger October 6, 2010 at 8:41 am

Thx for sharing your thoughts on making money blogging.

I don’t know a lot of affiliate post or freelance because it’s a part of blogging I consider as “work”. I rather plug an affiliate link once in a while in one of my article. I have notice that if you just do a review, chances are you won’t convert much because of 2 reasons:
#1 competition is really high so you don’t get much chance of ranking in Google
#2 readers are tired of those kind of reviews and usually skip them because it’s the 40th ING account review they see ;-).

The key is to become more less obvious while pushing someone to click on the ad anyway… this is quite a challenge!

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Daniel October 6, 2010 at 9:11 am

I’ve had a lot of success selling text links, althought I know eventually that well will dry up. I’m approaching 5 figures for the year, with my first dollar coming in May, so it’s been lucrative for a small blog.

One of the things I didn’t see coming was freelance writing opportunities. I recently became a staff writer at Currency, something that wouldn’t have happened otherwise.

Eventually, I may have to put up adsense ads and add affiliate links in certain places, but with that I’ll need a crash course in both. But at least now I know who to contact!

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Aloysa October 6, 2010 at 1:16 pm

Very interesting and informative. I am not even close to making any money (not even thinking about it – yet) but I always wondered how people actually start a blog and suddenly a year later they are making money. Now it makes sense… Somewhat. 🙂

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Charles October 6, 2010 at 5:47 pm

I use flexoffers, cj, and google affiliate. Like you said, the conversion rate from these affiliate programs aren’t what they used to be and if I get 1 sale a month, then i’m jumping up and down with joy! I agree with you on Amazon. It’s been practically useless to me.

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Dividend Monk October 12, 2010 at 11:14 pm

I agree with your criticism of Amazon, but I still use it because I feel that it adds value to readers. Adsense completely kills it in terms of revenue comparison for most blogs, but still.

I’ve only sold 7 books, and for practically no money, but it’s a book that I truly recommend to readers so I’m glad that 7 people have hopeful benefited by it. If I can buy a package of tea with my Amazon money each month then that’s fine with me.

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Peter February 2, 2011 at 12:58 pm

Not sure how i missed this post when it came out, but wanted to comment on it now. I agree with a lot of what you’re saying – Adsense can be a great source of revenue for even newer bloggers, as long as they’re writing about topics that convert well for adsense. If they’re not it may take months or years to cash out. But to give an example, I am currently making 4 figures every month from adsense, and have been for over 2 years now. I also know that some of the bigger bloggers can easily make 3-4k month from adsense alone – if not more for some of the big dogs. So it can definitely add up to some big money.

Only place I’ll slightly disagree with you is on Amazon and CPM banner ads being a waste of time. While I agree that for most people they don’t work, if you do them right it can lead to some decent cash. For example, I never made more than a few dollars in a given month with Amazon, until I started promoting the Amazon offers a bit differently. I found that promoting it with list type posts like “top 30 christmas gifts” or “top 5 gadgets to give to a geek” that included affiliate linked images/etc tends to do a lot better than just a random link in a post somewhere, and also writing reviews of hot products or products in the news can do well too. The key is to get people clicking through your link, and then eventually someone who clicked through on a book will buy a laptop! I’ve gone from essentially zero on Amazon to more like $150-200/month for the past few months.

As far as CPM ads, most of them aren’t going to pay very well, or lead to much money. Most will pay you at most between .50 to $1.50 for every thousand banner impressions. The key is to find a more focused premium ad network that will be willing to pay you a higher CPM. Only problem is for a lot of premium networks you have to have some good traffic to take part – 50-150k impressions/month. Luckily I do, and the premium ad network I use now i’m bringing in anywhere from $500-1000/month for CPM ads after the network takes their 50% cut. Before that I was lucky if I made $80-100/month from CPM ads.

In any event, great post, and keep up the great work!

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Darwin February 2, 2011 at 4:02 pm

Good points. I’ve viewed Amazon with disdain because not only do you get perhaps a 2% clickthrough rate, but then, say only 10% will buy something, so it’s like a .2% payout of then, only 4-6% on the item. So a book review/sale post? Usually worthless. However, you do get the person that buys a huge item on the same sale. So, a guy buying that TV might turn into a $40 click. Like all things, with traffic comes more data – and more money. I agree list posts and top 10s etc must have better conversions; I just haven’t done a good job of posting up content like that.

On CPM, I’ve also found most of the top networks do want those higher traffic sites to pay the higher rates. Will be nice when I get there!

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