How Blogs Make Money

When I started blogging in 2007, I really had no idea how bloggers actually made money online.  I could tell that they did.  Even a cursory glance at most blogs will reveal ads, including the ubiquitous Adsense ads.  But that was the extent of my knowledge when I first got started.

For beginners, understanding the potential ways to monetize a blog will help you (1) decide what topics to blog about, and (2) how to develop your blog (e.g., what do you write about, how do you market your blog, etc.).  So in this post, I’ll cover the 3 ways blogs generate income, followed by the one secret ingredient that many often neglect when discussing how to make money online.

Display Advertising

Display or contextual ads are often the first type of advertising that bloggers add to their sites.  The most common type of display advertising is Google’s Adsense program.  By placing a snippet of code from Google Adsense on your blog, you can present ads that are relevant to the content on the page. These types of ads are easy to add to a blog and present products and services that are relevant to your readers.

Bloggers typically receive a small fee each time a reader clicks on an ad. The fee can range from just a few cents to $20 or more. In some cases, you are paid per impression (each time the ad is displayed to a visitor) rather than per click.  While you may hear that not much money can be made from Adsense, don’t believe it. I’ve had months where Adsense revenue has more than paid my mortgage, and I know bloggers who make 5 figures a month with contextual ads.

In my case, Adsense represents about five to 10 percent of my income.  Since May 2007 through July 2013, I’ve made just under $150,000 with Adsense–

Google Adsense Earnings May 2007 to July 2013

Google Adsense Earnings May 2007 to July 2013

Note that I’ve blacked out everything but the total earnings to comply with the Google Adsense terms of service.

Affiliate Marketing

Affiliate marketing is nothing more than earning a commission by selling the products and services of others. When I first started blogging, I had no idea how much money could be made by affiliate marketing.  My first experience was with the Amazon affiliate program.

Through its program, you can earn a commission on just about anything that is sold on Amazon.  The commission rates start at 4% and go as high as 10%.  Adding an affiliate link to a post is simple.  But for me, I’ve made very little money with Amazon.  In fact, since May 2007, my total commissions with Amazon have been just $4,533.00–

Amazon Earnings May 2007 to July 2013

Amazon Earnings May 2007 to July 2013

Because I didn’t make a lot of money with Amazon, particularly at first, I just assumed affiliate marketing couldn’t generate much income (after all, the problem certainly couldn’t be me or my blog!).  Boy was I wrong.

For example, if you have a blog about cell phones, you can join many cell phone affiliate programs (e.g., Verizon Wireless, AT&T, Amazon Wireless). When a reader clicks an affiliate link say to Verizon in a review you’ve written about a cell phone, you get paid if your blog visitor buys the phone. Depending on what you’re selling, the fee can be less than a dollar (e.g., a $10 book from Amazon will net you $0.40 to $.60 typically) to more than $50 (e.g., a cell phone). Now just imagine you have a targeted site with great content that gets 10,000 visitors a day. Easy to do? No. But if you succeed, the biggest problem you’ll have is what to do with all of your cash.

To give you an idea, I checked my earnings from Commission Junction (one of the most popular affiliate marketing networks).  Since May 2007, I’ve generated commissions totaling $126,100.17 (this doesn’t include 2007 or 2008 because the reporting doesn’t go back that far):

CJ Earnings 2009 to 2013

CJ Earnings 2009 to 2013

And CJ is just one affiliate network I use.  There are many:  Linkshare, Google Affiliate Network (now closed), Card Syngery, ShareASale, ClickBank, Credit.com, Credit Karma, and Quinstreet.

The point is that affiliate marketing can be a powerful way to make serious money online.

Selling Your Own Product or Service

Some bloggers also make money selling their own products or Service.  For example, some write eBooks that help people solve a problem.  Some good examples include Chris Guillebeau of the Art of Non-Conformity, Darren Rowse of Problogger, and Mike Piper of the Oblivious Investor (he writes ebooks published on the Amazon Kindle platform).

Other bloggers build iPhone apps, WordPress themes (Copy Blogger’s Genesis theme is a good example), or WordPress plugins (Author hReview, for example).  For service professionals (e.g., realtors, accountants, attorneys), a blog can help generate referrals.

One final key point.  Many blogs make money using two or even three of the approaches listed above.  For example, Darren Rowse makes money selling his own eBooks on Problogger, but he also generates income with affiliate marketing.

The One Missing Ingredient

While the above three strategies encompass the ways you can make money online, they all require one important ingredient–visitors to your site.  Actually, it’s more accurate to say the “right” visitors to your site.  I’ll return to that in a moment.

If you were to search Google for “how to make money online,” you’ll generally find two types of results:  (1) get rich quick scams, usually trying to sell you something,  or (2) thoughtful articles that in some form or another describe the above three ways to make money.  What is often missing from the discussion is that a site without traffic is like a store without shoppers.  You can have the best looking grocery store in the world selling groceries at the best prices.  But if you don’t have shoppers, you don’t make money.

The same is true for a blog.  Targeted traffic looking for the information your blog offers is critical to running a profitable blog.  Generally, targeted traffic comes from search engines, although I’ve found that traffic from major media outlets (e.g., MSN Money, U.S. News, Yahoo! Finance) can be extremely valuable.  In contrast, social media traffic (e.g., Twitter, Facebook, Pintrest) tend not to be very valuable.  There are exceptions, but often these traffic sources can flood your site with visitors who quickly come and go without really engaging with your content.

I can’t stress the importance of traffic enough.  Those that are able to successfully market their blogs are the ones you read about who quit their jobs to blog full time.  Those who don’t are the ones you never hear about who often give up in frustration after a few months.