I love this question because it’s the type of question folks who ask me what I do for work ask. It’s a question from someone for whom blogging and online publishing is totally foreign.
Contrast it with “how do blogs make money?” That’s phrased by someone who knows something about the business because it presupposes that blogs do make money. Folks who ask “where does the money come from” are curious as to what’s going on behind the scenes. Same question, phrased differently.
I’m writing this post because it’s a question I’m asked often by folks I know outside of the blogging world. If you make money blogging, you no doubt have been asked the same or similar.
I’m going to write this post in the same way that I would answer someone asking me this question in person.
Where does the money come from blogging?
Let’s pretend somebody just asked me this. Here’s what I would say (and have said):
Blogs are no different than your online magazine. Think Martha Stewart, HGTV, People, etc. In fact, niche sites and blogs are more or less online magazines in many ways. Online magazines make money from showing ads. Visit people.com and you will see banner ads for all kinds of products. The advertisers pay People magazine… through middle entities which I’ll explain in more detail below (aka programmatic advertising).
So a blog that has readers, aka traffic, offers something of value to advertisers, especially advertisers whose customers visit that blog. For instance, winter jacket retailers advertise on Outside magazine website because many of Outside’s readers buy winter jackets for pursuing outdoor activities in winter. Therefore, it’s worth paying Outside magazine to show the banner ads.
It’s the same with any blog with traffic.
At this point, folks ask “so how do you get in touch with advertisers and persuade them to advertise on your site?”
I explain that I don’t have to sell ad spots to advertisers. If I did, it wouldn’t work. It would be far more hassle than its worth. Most ad agencies don’t want to mess around with some blogger with 200K monthly visitors. I doubt they care to mess around with a blogger with only 1 million monthly visitors.
I then explain that there are middle entities that do this for bloggers and publishers. They’re called ad networks. The ad networks attract a large pool of publishers and bloggers and then have the website traffic volume to attract advertisers. At the heart of all this is Google which reigns supreme in the online advertising business. Most businesses that pay for ads online, do so through Google ads. Google then offers up the tech for publishers and ad networks to display those ads on sites.
What makes it so great is that the tech used is essentially an instant auction for every ad spot on every site. It’s referred to as programmatic ads. It’s remarkable when you think about it. All advertisers set bid prices for their ads targeting all kinds of keywords. The highest bidder for any particular ad spot wins the spot and their ad is shown. There could be 100 advertisers bidding for a single ad spot yet within a fraction of a second, the tech awards the spot to the highest bidder.
The ad spots are typically priced based on a rate paid per 1,000 ad impressions or pay per click. Google offers both options. More and more ad networks distill both into paying per 1,000 impressions.
The money paid by advertisers is split three ways. Google gets a cut. The ad network that provides the ads to publishers with a simple piece of code gets a cut. The publisher/blogger gets the remainder. The blogger’s cut is typically around 75% but can be higher.
Ad networks worth their salt don’t solely rely on advertisers through Google. The good ones form their own direct relationships with ad agencies. This way they can negotiate higher rates and cut out Google from the equation. That’s more money for the ad network and publishers.
As you can tell I’m a huge fan of using programmatic ads to make money from my blogs. It’s passive. It’s easy. It’s lucrative.
Each month, Google pays out the various ad networks’ share. The ad networks collect from their direct to advertiser sales. Then the ad network pays the publishers on a set day each month. With Mediavine, it’s the 5th of the month. With AdThrive, it was the middle of the month. I have a hunch that there are times when advertisers don’t pay the ad network all that quickly so an ad network may be out of pocket for some time which is why ad networks should have a ton of cash on hand.
Years ago I used ads from another ad network. They ran out of cash because one of their largest advertisers didn’t pay them. The end result is the ad network could not pay publishers. It was a disaster for everyone. I ditched that ad network as soon as they ultimately paid me out. I suspect they lost a lot of publishers because of that disaster.
Programmatic ads are NOT the only option for blogs to make money
Bloggers also make money with what’s called affiliate marketing. A more accurate term is “referral marketing.” Affiliate marketing is when a merchant pays the blogger a percentage of all sales referred by the blogger. The referrals are made and tracked via links on the site.
For example, if you visit Outside website and click a link to Patagonia and buy a Patagonia jacket, chances are Outside earned a percentage of that sale. The percentage can vary widely depending on the merchant and type of product.
Amazon is one of, if not the biggest affiliate options for bloggers. Most bloggers get an affiliate account with Amazon and can then earn a percentage of all sales resulting from referring website visitors to Amazon.
How are the referred sales tracked?
Again, this is the beauty of the internet and technology. Merchants who offer an affiliate program, provide bloggers with unique links to products that include a tracking code. That tracking code tracks referred visitors and any resulting sales. It’s all done via technology and automatically.
Most merchants pay bloggers the commissions owed once a month.
Some bloggers take affiliate marketing to the next level with email marketing
If someone is particularly interested in the blogging business model, I’ll delve into email marketing just because it also is so cool. I ask them if they’ve ever been asked to give an email while visiting a website? Every person has so they’re familiar with that. I explain that many bloggers do this because sometimes there’s far more money to be made emailing their visitors than monetizing the actual website. I quickly explain this by saying that with email, you can contact all those people as often as you want for years to come. Moreover, folks who take the time to sign up and stay signed up are usually your most valuable readers.
At this point they get but then ask “but how do you make money from the emails?”
I explain that the most common way for bloggers to make money from emailing readers is by promoting products with affiliate links. A blogger can do a short or long write-up about a product they believe will resonate with their readers. Readers who click the link to the product in the email and buy will put a percentage into the blogger’s pockets.
For example, suppose a blogger who blogs about food has 100,000 email readers and that blogger promotes some food subscription service. If the service pays $15 for every sign-up and 100 people via the email sign-up, the blogger pockets $1,500 from one email. Do that every day and you can see that email can be very lucrative. Better yet, if the food subscription service pays a recurring monthly commission for all those referrals, that blogger can earn revenue for many months from just one email.
Like programmatic ads, affiliate marketing is a thing of beauty.
What about selling ad spots directly to advertisers and ad agencies?
Sometimes folks I talk to ask whether selling ad spots directly to advertisers is a viable option. My response is that usually it’s not but once in a while if the merchant is willing to pay a very high rate, it is. It’s rare I do this just because it’s a hassle.
I then say that huge sites with lots of traffic do sell ad spots directly because it cuts out all the middle folks and so they earn quite a bit more per 1,000 visitors. In order for this to be worth it, the website needs tens of millions of monthly visitors because that site needs a sales team. Often these sites are owned by a large media entity that owns several high-traffic websites. Their sales team works to sell ad spots directly across all web properties.
What about asking for donations?
Years ago donate buttons on sites were common. Not so much anymore just because I don’t think they’re effective and there are such great alternative options to earn money from a blog.
I should say I’ve never tried a donate button on my sites so I don’t know. If it was the most lucrative option, I’m sure they’d be on more sites so it’s safe to assume it’s not effective. Heck, I’m a publisher but I wouldn’t bother donating to a site. My thinking is if you want to make money, put up some ads.
What about selling subscriptions, does that work?
Once in a blue moon someone will ask whether selling subscriptions to premium content works similar to the New York Times. My response is that it won’t work for most sites. Most people expect content to be free. Only the most lauded sites in the world can make a payment gateway work. They must be able to offer some seriously good content.
I then say that while payment gateways aren’t a good option for most bloggers, selling courses, which is a form of premium content, can be an excellent option to make money from a blog. However, it must be a blog that’s about a topic where people are willing to pay to learn more. My Fat Stacks course is a good example. People are willing to pay to learn more about what I do to run a successful blogging business. Since people are willing to pay, I’m happy to sell the premium content in the forum of a course.
Few folks inquire much beyond this. At this point, I hope they have an okay understanding of where money comes from blogging. I usually wrap it by saying that in order to make a decent living blogging, the blog needs quite a bit of traffic especially if earning from programmatic ads. Since programmatic ads are usually paid per 1,000 impressions, you need a lot of impressions in order for the ad revenue to add up.
Less so for successful affiliate marketing sites and sites that successfully sell paid content.
Regardless, no matter how a blogger monetized their blog, it’s a numbers game that usually boils down to the simple maxim that more traffic equals more money.
Jon Dykstra is a six figure niche site creator with 10+ years of experience. His willingness to openly share his wins and losses in the email newsletter he publishes has made him a go-to source of guidance and motivation for many. His popular “Niche site profits” course has helped thousands follow his footsteps in creating simple niche sites that earn big.