The Economics of Blogging – 5 Figure Side Job or Waste of Time?

Economics of Blogging is poorly understood by people who haven’t tried it, and even those who have.  To date, I’ve been hesitant to delve into blogging topics since this I usually stick to personal finance and investing topics.  However, given the reality that blogging does actually bring in a fairly sizable side income for me and many others like me, coupled with the fact that many readers are either bloggers or “lurkers” (you’ve been thinking about starting a blog for a long time, but have never taken that leap to get started), I figured I’d write occasionally on blogging in general and what kinds of experiences I’ve had.  You can see all blogging topics in my Blogging section or just subscribe to my RSS.

Today, I wanted to talk about the economics a blogging.  Every blogger has their own perspective, but here’s mine:

Reality Bites

Many wide-eyed readers try to jump into blogging because they’ve been reading about John Chow who can make $300K per year writing about his favorite restaurant or Problogger who’s the premiere blogger on blogging.  While some bloggers do rightly point out that it’s tough to make money online (or else everyone would be doing it), many of the “Make Money Online” sites make it seem a heck of a lot easier than it is.  Why?  Because they’re typically selling you a product on “How to Make Money Online”.  By tempering how hard it is to make money without their product with how much more money they can make you, it entices people to click through and buy something that’s probably over their head or they didn’t need.  I’ll save you the trouble.  I’m not selling you any products in this article and I’ll tell you upfront, it’s hard to make any meaningful money online.  If you delve into the world of online income from scratch, expect to make nothing for months and spend a ton of time with little to show for it.

Slow Start – Very Slow

The vast majority of people that start a blog give up.  They either don’t make any money, realize they don’t have the time or interest to commit to it, or quit for myriad other reasons.  The biggest driver for people to start blogging is surely money.  You’ll read this everywhere and it may seem rather cliche, but seriously, DON’T BLOG ABOUT SOMETHING YOU DON’T LOVE.  In all honesty, please don’t.  You’ll be wasting your time and that of your readers.  People like to say “3 months”, “6 months” or whatever, but the bottom line is, it will be several months until a new blog starts to generate meaningful traffic.  And regardless of how grand your ideas are on how you’ll monetize your site, it all starts with traffic.  Now, this can be altered by what your infrastructure is.  By that, I mean, do you already have a sizable Facebook or Twitter following?  Do you already have another blog?  Probably not.  But if you do, those mediums could kickstart your direct traffic a bit.  An underrated factor in blogging success is your online network.  If you’re like me and you started a blog without any clue, any network, any idea what to do…it’s going to be a long haul.  I did it, but I consider myself an extreme exception.

Gradual Success and Moments of Grandeur…Then Nothing

When you have the 40 or 50 visitors a day trickling in from all your efforts on leaving comments on other blogs, doing guest posts, getting your first google placing on page 3, you’ll start to feel a little better about all the hard work you’ve put in.  You’ll start extrapolating and saying, “Hey, I double my traffic from 20 per day to 40 per day in a month!  If I double my traffic every month for a year, I’ll be at 80,000 clicks a day!!!”, then reality hits.  The visitor count stays at 40, and even dips when you take a weekend off.  Then one day, it spikes to several hundred.  Something happened.  Perhaps one of your articles performed well in dig or a larger blog linked to you.  You’re ecstatic and start conjuring up all kinds of future projections again – then, back to 40 visits per day.

This is the cruel reality of building traffic.  It’s so unpredictable and it takes upwards of a several months until you have relatively predictable traffic that ISN’T reliant upon your tactical efforts like Twitter, Facebook, commenting on other blogs, etc.

Here’s a snapshot of a traffic pattern build from my older blog Darwin’s Finance for perspective:

It’s All About Google

As much as I hate to admit it, without Google search results driving traffic to their blogs, most would simply give up.  Direct referral traffic is what keeps bloggers blogging.  I’d prefer to write articles and have the traffic come to me as opposed to spending 50% of my time publicizing something I just wrote.  I’m a writer, not a marketer!  At one of my blogs, I had a single article bringing in 5,000 visitors a month.  Overall, probably 80% of my traffic was coming in from Google from the same articles month after month.  While it’s vexing to never know which post will perform well in Google and which ones won’t (95% of them for me), the few home runs are what keep you motivated.

Multiple Streams of Income

Passive Income, working in your pajamas, leaving the rat race…these are all the populist dreams propagating through the internet and television that don’t reflect reality.  While I do make decent money online, I don’t have delusions of quitting my day job – ever.  I view my online income as simply an alternate stream of income.  It’s extra money above and beyond what a family like ours reasonably needs to prosper.  This extra income goes toward everything from funding our childrens’ 529 plan to not feeling guilty about splurging on a getaway weekend with my wife.  If you could pick between making $75K per year in your day job or making $50K working and $25K blogging, I think the latter seems much more appealing.  Why?  You can grow that 25K much more quickly than the 3% annual raise (if you’re lucky) and if you were to lose your job, you’ve got a substantial backup income stream to supplement your severance, unemployment, job search or whatever’s going on while you bridge your career.  Putting all your eggs in that one employer basket is more risk than you need to take on.  If it’s owning some real estate, doing wedding planning on weekends, DJ’ing parties, or whatever else it is you can make money at on the side, multiple streams of income are always better than one, all other things being equal.

Blogging Isn’t a Scam – But Don’t be Fooled

You’ll come across hundreds of sites purporting to show you how to make money online, sell affiliate products, make money with article marketing, etc.  Most of this is crap, especially to new bloggers who don’t already have a broad network to tap and experience to cut through wasted effort.  However, starting from scratch and methodically building an online reputation and traffic over a long period of time is entirely possible.  I did it.  I can honestly say that I’ve never met a single friend, family member or co-worker who has ever (admitted to at least) made any money online or run a blog.  I’m a total self-starter.  I had a love of finance and investing, figured out that Blogger was an easy platform to start on and went to town.  From there, I started Darwin’s Finance and now I’m taking a different approach here with Darwin’s Money (with a couple projects on the side).  I can now conservatively state that I’m earning 5 figures annually with moderate effort.  I have a demanding full-time job, coach my kids teams, eat dinner together as a family, and do baths, thus, I do all my work from about 9PM-midnight a couple nights a week after the kids are in bed and a little on weekends.  So, it can be done.  But it took a long time to get here.  And I only got here because I enjoyed the topic.

The Economics of Blogging

OK, so back to the title – The Economics.

• It’s all about scale. While you can sell an ad or two here and there, most of your income is going to come from Adsense and selling affiliate products (notice all those credit card and online broker reviews?) – at least in the beginning.  Those sales increase proportionally with traffic like I said.  So, before worrying about which banner looks good on which sidebar and how to funnel people to your top performing page, bloggers should really be focusing on the boring but true goal of writing quality content and getting quality links into their site.  It’s that plain and simple.  Shortcuts and cheating will always fail – maybe you see some people getting by this way, but in the end, the quality content prevails.  After making some decent side income and becoming fairly large some bloggers take their business to the next level.  This may through sales of an ebook, a product, or going multi-author to build traffic and scale up even further.  Even top bloggers still often rely on Google Adsense and affiliate sales but they also tend to get more lucrative ad deals and find more diverse ways to generate income.

• The barrier to entry is quite low, essentially zilch.  Hence competition is fierce.  There are tons of bloggers entering and dropping out of your niche daily, so you’ve gotta be able to offer something different, a value, to readers.

• Your hourly rate will be less than the federal minimum wage for months.  This is the hard reality.  Because of the absurd amount of time I had put in during my first year in trying to figure out writing, coding, networking, SEO and all the other facets of successful blogging, even by the time I was making over $1000 per month, if I went back to the start, I had probably only made $15-$20 per hour.  It’s only a few years into it that I’m earning a higher hourly rate that’s actually worth my time given everything else I have going on in my life.  Weekly, I sacrifice sleep, reading, watching TV and just chilling out after a hard day’s work, which I wouldn’t be doing for that rate if it were going to be permanent.  Your hourly rate grows with time, as long as you stick with it.

More About My Blogging

This was just the tip of the iceberg, and after all, this isn’t a “make money online” blog, so I’ll cut it here.  But in a couple weeks, I’ll share exactly how I make money online, give you a sense as to how much I’m making and provide more pros and cons of the blogging world.  For all you lurkers out there, maybe it will entice you to either give it a shot – or move on to something that makes more sense for you personally.

Thoughts?

Tagged as: Economics of Blogging