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How Do Blogs Make Money?

Credit: 401(K) 2013

Credit: 401(K) 2013

When I started blogging years ago, I never thought about making money. Back in 2005, blogs were just starting to get popular but no one thought you could make any money off them. As a result, until a small trickle of income appeared through Adsense, I never investigated how to turn it into a business. It was a hobby, I treated it like a hobby, and it wasn’t until later that it became a business.

In the years since, as people learned I worked on Bargaineering as my full-time job, they would ask me how it made money. The simple answer is always “advertising,” since it fits most people’s understanding on how offline publications made money. The reality is that it’s a little more nuanced than that.

Advertising, Affiliate Marketing

The most obvious way that a blog can generate a livable income is through advertising, affiliate marketing, and mechanisms similar to both. This method leverages your existing traffic, both organic search and regular readership, to generate income from third parties. When you put a display banner on your site, the advertiser will pay you a set amount per thousand impressions. When you put an affiliate offer on your site, you get paid when the visitor performs a specific action such as a click or an application or an approval.

All of these methods fall under the general heading of “advertising” but unless your blog is getting a lot of traffic, display advertising is not going to be your best approach. Action based commission, whether it’s someone buying something or applying for something, is going to offer higher pay per thousand visitors.

Businesses are always looking to increase their reach and tap “new” markets. If you can reduce their risk, by being paid based on an action they want, they are more likely to advertise with you regardless of how small you are.

If you look at personal finance blogs, you’ll see that most rely on affiliate marketing or some other advertising relationship where they are paid per action. Even the largest blogs, who reach nearly a million visitors a month, will often rely primarily on affiliate advertising. As you get into larger and larger sites, those who reach tens or hundreds of millions of visitors a month, you will begin to see a lot more display advertising. (though smaller sites may use display advertising to supplement their income in less appealing advertising slots)

Where do paid posts come in? I consider them advertising but if you don’t disclose that you’ve been compensated (and nofollow the links), you run the risk of Google penalizing your site. I feel that most blogs won’t get to the point where they’re generating five or six figure incomes for their owners through advertising and affiliate revenue. For those sites, selling blog posts is a great way to make supplemental income. If you think your site can generate a full time income for you, I would avoid doing paid posts at all costs (same goes for guest posts, an algorithm can’t tell if you did it because you’re nice or did it because you got paid). If it’s a hobby site, take the money and run.

Become an Expert, Guru

When you show display advertising, you’re effectively being paid when your visitors leave. If you have a Google Adsense banner on your sidebar, you get paid every time someone leaves your blog. While there’s nothing wrong with that, and Bargaineering was paid well whenever someone left, you may not want that.

The other way you can earn an income from your blog is using it to solidify or grow your reputation. If you can generate income from writing books, producing courses, or the speaking circuit, you may want to use your blog to grow your following.

My friend Ramit Sethi is one of the few personal finance bloggers who used his site to increase his prominence as an expert and leverages his readership to sell courses and information products. He wrote a New York Times bestseller (I Will Teach You To Be Rich), has produced several very informative courses, and all of that leveraged his army of fans.

Not all “experts” reach the star power of Ramit – plenty are content living in the lower stratospheres and use their blogs to get paying freelance writing gigs. With an easily accessible body of work available for all to see, I’ve seen plenty of bloggers get hired to write for corporate blogs or magazines.

I am less knowledgeable about this approach since I didn’t take it but I do know that it’s just as lucrative.

Which Way is Better?

Both have positives and negatives. For an advertising based blog, you rely heavily on search traffic to generate income and there’s always the fear that competition will overtake you. On the plus side, it’s a somewhat passive activity in that your site will generate income without your direct input. It’s not entirely passive since you need to maintain the blog, continue linkbuilding, doing research on keywords, and the like.

For the guru/expert approach, you need to be actively involved in your community at all times. You can certainly take breaks but the readers are there to learn from you. To interact with you. Without you, the site loses a lot of its value. It’s more active than an advertising based blog but it also has a wider moat. It’s hard for others to compete with you and take “business” away from you if you are the expert. Other experts can enter the mix but you generally aren’t competing head to head – people can visit multiple websites in a day. ๐Ÿ™‚

From an exit perspective, as in selling your business, it’s easier to sell a website when it’s not linked to a person. It’s not impossible but it’s hard to imagine a person or a business buying a business like Ramit Sethi’s until it gets so large that the brand is “I Will Teach You To Be Rich” rather than Ramit (my guess is that it needs to be set up more like the Rich Dad Poor Dad empire).

Those are just two of the more popular methods of generating income and they’re not mutually exclusive. I pointed out that I didn’t go the guru route but I did leverage my blog to get a few freelance writing gigs. There are a million ways to make money off your blog, which could be the subject of a future post, and the only thing that limits you is your creativity.

I expanded on this post to include a list of the different ways bloggers make money with examples of each.

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Jim

In 2005, I founded a personal finance blog (Bargaineering.com) that became successful enough that I quit my career as a software developer in the defense industry. It is my goal to share everything I learned so that you can do the same - build an online business that let's you pursue your passion.

13 responses to “How Do Blogs Make Money?”

  1. Kathleen says:

    Wow Jim. This: “If you think your site can generate a full time income for you, I would avoid doing paid posts at all costs (same goes for guest posts, an algorithm canโ€™t tell if you did it because youโ€™re nice or did it because you got paid). If itโ€™s a hobby site, take the money and run.” is the reason I just decided to stop accepting sponsored posts! I love coming across things that support my decision. ๐Ÿ™‚ Thanks!

    • Jim says:

      I think it’s really up to each blog owner and there’s not a one size fits all. Who am I to dictate what is best for someone else, you know? If an advertiser wants to pay $50, am I supposed to say “say no on principle, it’s against Google law!” $50 is a tank of gas. $100 is groceries for a week. That’s real money that makes a real impact on a family’s budget. On the other hand, if you are working towards something even bigger, don’t let the potential derailments distract you.

    • Cap says:

      By the way Jim didn’t elaborate on the guest post part, but I’m pretty sure he meant more in those lower quality guest post pitches every blogger has by now received – topics/articles that have been spun 1000x over.

      If some top notch writer wants to throw a piece on my blog/site/domain or whatever and its something of value, then sure why not? Obviously, its time consuming to evaluate all of these pitches/offers, but unless you’re established, swapping guest blog posts is still probably one of the more surest way to reach audience (whether through real readers or just out-right link building).

      • Jim says:

        I was being very broad and didn’t want to get too deep into the weeds but you’re right. It’s one thing to get a blog post from a real person you know that links to a site that you consider high quality. It’s different if it’s a stranger linking to some shady looking site.

  2. Billy Murphy says:

    Learned of you through Steve Chou. Interested in seeing what you end up doing with this siteโ€” look forward to reading!

  3. Roger says:

    Nice work Jim! I was wondering about this very question a couple of weeks ago (I’m just starting to get back into the blogging game). Btw, nice work on the Experian interview – Ashish passed it along to me!

  4. Your Daily Finance says:

    People get caught in the quick money and never get the chance to make the real money online. I agree though that money is money and every little penny helps these days. You have people where 100$ would make a big difference for them. I tend to try and work on several sites and see what works best. Never put all your eggs in on basket is my thing. If you can get targeted traffic you dont need as much of it as just getting random people visiting. Nice post Jim. Looking forward to seeing what you do with this site.

    • Jim Wang says:

      I agree, quick money is a classic problem many people face in a lot of industries. The trouble with any business, especially online blogs, is you never know if it’s one that will last six months or six years.

      Thank you for the kind words, I look forward to seeing what you think of what I do with this site. ๐Ÿ™‚

  5. Aloha Jim,
    Mahalo for the info about your journey into blog income! What an awesome story, so glad for you and your family. The “great thing” is stupendous!
    Not sure if I will ever be able to monetize my blog – I have a feeling that it is too general, too much, and home-sy. It is also a “do as I learn” and I am rather slow in learning. For now, I post because I enjoy writing and sharing. However, anything is possible, so I keep plugging and writing and learning.
    Congrats on your newest blogsite!! Mahalo for sharing,

    Aunty

  6. […] How Blogs Make Money, I separated bloggers into two categories – advertising/affiliate bloggers and expert/guru […]

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