How Do Blogs Make Money?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. 🙂
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.
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