Blog Economics: A Look From Inside

Although I have been blogging for four years, I didn’t write much about the economics of blogging. As I prepare to close the books for this year, I thought some of you may be interested in a look from inside. If you read blogs, you should know what’s happening on the other side. Then you will understand why bloggers do what they do. If you never thought about it much, some of these may be a surprise.

I’m by no means a professional blogger. I have a very busy full time job. I blog as a hobby. Helping others blog is itself a cottage industry, complete with blogs (of course!), peer discussion forums, all kinds of tools and services, books, gurus, consultants, and even conferences. For the most part, I haven’t paid much attention to the trade although I’m fully aware of their existence. The real pros will probably tell me I’m doing it all wrong.

Like a small magazine

A blog is like a magazine, except it’s published online, usually one article at a time, usually free of a subscription fee.

The discovery challenge

There are practically no entry barriers to blogging. Anyone can start a blog for free. Every day, thousands of articles are written on every subject. Nobody is going to sift through thousands of articles a day to find the best.

For a blog, getting discovered is a big challenge. I’m sure there are some great blogs somewhere out there I don’t know about. Too bad, unless someone points them out to me, I’m not able to find them.

For this reason I’m grateful you all found me. If you think I do a good job, the best gift you can give to me would be letting more people know about my blog.

Paid by advertising

Like a magazine, a blog earns money from advertising.

Earning money from the blog isn’t my motivation but I don’t mind getting the money either. Find any article in any newspaper or magazine, the salaries and benefits of everybody involved come from advertising. I think my articles are better than some of them; that’s why you read my blog, right? I don’t see why I shouldn’t be paid for writing better articles.

This year, the money I received from this blog, plus money from selling my Explore TIPS book, puts me above the federal poverty line. For a hobby, it’s not insignificant. Compared to other bloggers in the same space who quit their jobs to run their blogs full time and created jobs by hiring other people, I have nothing to brag about.

One-off visitors click on ads, not regular readers

If you are a regular reader, you subscribe to the blog in a RSS reader or by email. There are no ads there. Even when you come to the website, you don’t click on ads. Ads are primarily for people who come from a search engine; they do 90% of the ad clicks.

I have a tip jar. In an entire year, I received three tips for a total of $50. I very much appreciate the tips, much more for the thought than for the money. It’s extraordinary to give money to a stranger on the Internet.

Best articles don’t earn the most money

If I put in a lot of effort on an article and it’s unique and most helpful to the readers, it’s not going to be the one that makes the most money for me. The article that made the most money for me this year is one I wrote and forgot about quickly. I’m sure you don’t remember it either.

If making money is a main driver, a blogger will want to write more articles for the Google search engine. It doesn’t matter what’s in the article as long as the Google search engine likes it.

Traffic drives everything

It’s a numbers game. The more people come to a website, ideally via Google search engine, the more ads get clicked and the more money a blog makes. The money a blog generates goes up and down with traffic: weekdays more than weekends; spring more than summer.

If you really want to help me, send me traffic. Forward my articles by email.  “Like” them if you are on Facebook.

Affiliate links

When I review books, I include affiliate links to Amazon. They are harmless: if you buy off those links, Amazon pays me a small commission and you pay the same low price. This blog earned 2% of its money from affiliate commissions this year.

Apparently I’m missing the real gold mine. Affiliate links for signing up credit cards, bank accounts, brokerage accounts, peer-to-peer lending, insurance, tax prep service, credit monitoring, etc. pay much much more in commissions. To give you an example, an Amazon purchase off an affiliate link pays $1-2; an account signup can pay up to $100 a pop.

Just putting up banners or links on the side does nothing (I tried). To be effective, the blogger has to write about these affiliate advertisers in the articles. When Mike at Oblivious Investor pointed this out, affiliate advertiser Ally Bank promptly kicked him out of the program.

It’s not all hard sell: some accounts offer a signup bonus; if someone signs up, he or she gets the bonus and the blogger gets a commission. Still, I haven’t warmed up to the comfort in doing the pushing.

The economics of blogs are like that of other media — newspapers, magazines, radio, TV — if there aren’t ads, people producing the content won’t get paid and some of the content you like won’t be produced.

That’s not saying I write strictly for money — far from it. It’s just if I’m writing anyway, I might as well get compensated. Advertisers will always advertise. It’s just a matter of where. Google search users will always click on ads. It’s just a matter of where. When I put on my hat as a reader, I’d like to see more ad dollars flow to more helpful sites.

Economists call it two-sided markets. Enjoy the free content. Thank the advertisers and visitors who click on ads.

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  1. Sam Seattle says

    This info is very interesting. Thanks so much for sharing, and for writing quality articles. Yours is the best personal finance blog.

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