Money from Nothing?

October 14, 2012 12:38 PM

Ideas, theories, facts, about how online sites are making money when I no longer see banner advertising or Google ad links -- old stand-by methods from five years ago seem to have evaporated?

This is more of a general question really.

I'm curious as to your ideas, impressions or theories or, if you're an 'expert': explanations as to how money is being generated online. I don't mean like Amazon.com, etc. but sites that are hugely popular but display next to nothing re ads.

How does, say, a site like Boing Boing, make enough money to pay a staff and bandwidth costs, or sites like Salon, Gawker -- I see ads there but is that really generating enough cash flow to keep a writing staff going, pay rent, bandwidth, artists, editors, etc.?

posted by zenpop to work & money (14 answers total)

Boingboing has rather a lot of ads, it seems to me. Metafilter runs on the same model, and we do just fine with relatively few and relatively subtle ads. That business model ain't dead yet.
posted by restless_nomad at 12:47 PM on October 14, 2012

Well that's good to know. So you're saying restless_nomad that there is decent click through on the ads?

I didn't mean to imply I'm not seeing ANY ads, but so few I can't equate that paltry amount with substantial cash flow.
posted by zenpop at 12:51 PM on October 14, 2012

Many of those type of sites pay their content generators nothing or next to nothing.

They also keep overhead low by not having a formal HQ to pay rent on.

Often the editors are also the back-end web designers, or at least have a degree of familiarity so that the site pretty much runs itself except for periodic maintenance that they pay a freelancer to do.

The biggest cost is bandwidth, and it's easily covered by advertising or, in certain cases, other products they're selling to businesses rather than consumers (for instance the classic story of how social networking got so profitable -- the humans generate tons of raw data that can be sold to marketing firms). In addition to that, a lot of smaller bloggers generate products that are sold to consumers -- for instance ebooks, merch, or consulting services (for example lots of travel bloggers lead tours and design trips, lots of fashion bloggers will do personal shopping and styling, etc).

Keep in mind, too, that advertising goes beyond banners at the top of the screen. Gawker and similar sites do sponsored posts, and there are a TON of different ways to generate ad revenue without specifically selling what we're used to seeing as ads online.
posted by Sara C. at 12:54 PM on October 14, 2012

Sites that deal with products can generate quite a bit of revenue through Amazon and other affiliate programs. You review a Gadget, you link to buy the Gadget on Amazon, and when people follow that link and buy things - even things other than the Gadget - you get a cut.
posted by Tomorrowful at 12:57 PM on October 14, 2012 [1 favorite]

Generally speaking, most online editorial operations only have a few actual "staff", as in full-time people with benefits, and rely mainly on either (unpaid) volunteers or (paid) freelancers to provide the content.

And they don't pay much. I worked for a place that was fairly well-known externally and it was well-known that if you dared ask for a raise, you'd get turned down and then sent packing with your things a few hours later. Part of the reason I wound up changing fields was I didn't want to consider myself "peaked" at 23 making $30,000 a year.

Judging from what I see on BoingBoing, they use a combination of ad networks (they use Google Ads, Mediaplex, and Doubleclick, among others), and paid placements (the Boing Boing music Presented By State Farm and the occasional post on things like Internet Explorer) with what look like direct ads (the Shanalogic and Unbored links).

The way it works for editorial sites (again, generally speaking) is...Google Ads pay a relative pittance, but if you have a fair amount of traffic, you can charge more for your audience since advertisers like targeted, especially sites with a good reputation, a lot of traffic, and a clear demographic.

For example, advertisers might pay a few cents per click to have their ads show up on "sites that are more or less about clothing", but if you run a highly-trafficked fashion blog with a good reputation, they will pay a lot more to buy ads directly on your site.

Or if we take Metafilter for example, ReallyCoolNerdGadgets.com (made up site) might pay a few cents to show up when people search for "iPhone 5", however, looking at the DECK Network (what MeFi uses for ads), they'd pay more to show up on sites like LaughingSquid, Metafilter, etc., which is a better fit for "nerdy people with money to spend on cool gadgets". (Obviously I can't comment on MeFi's cashflow specifically).

Then you get into things like affiliate income, which is pretty interesting. It sets a cookie on your web browser, so if you click on my affiliate ad and don't buy, say, my Really Cool Gadget, I still get a cut when you go buy cat treats or DVDs or something for a certain amount of time, since they assume my link drove you to the site. The particulars vary by site and program. Amazon is pretty popular because they have everything.

It's not a whole lot on an item-per-item basis, but if you put cookies on 10,000 people doing Amazon shopping, you can make a reasonably substantial return. I have some side projects I do that make a few hundred bucks a month on relatively low traffic because of affiliate income, to the point it's not even worth the hassle of doing banner ads/Google ads.

On the more bloggy side, if you have good traffic and are lazy, you can do simple text ads. Text ads on TheBloggess start at $100/month, and $100 a month is a bargain for a blog with that kind of traffic to the point that I called a friend of mine with a product for that audience when The Bloggess posted she had some extra inventory open. "SPEND THE 100 BUCKS THIS IS A BARGAIN OH MAN!" That's not counting her other income like speaking, book sales, etc.

So, circling back to BoingBoing, they have paid placements in their content and "sponsored by", which would be a fair amount on a site that well-trafficked. Then they have direct ads you buy on their site, which probably costs less, but still pretty good. Then they have ad network sites to fill in any unsold inventory, which doesn't pay a lot, but does pay something.
posted by Ghostride The Whip at 1:12 PM on October 14, 2012 [2 favorites]

So you're saying restless_nomad that there is decent click through on the ads?

It keeps me in cat food and cold medicine, and all my coworkers. I don't know the details but I do know that ads are our primary revenue stream (by, I think, a very large margin, compared to, say, the signup fees, which are beer money at best.)
posted by restless_nomad at 1:23 PM on October 14, 2012

A prime example of someone who is making a bundle is Gruber - Obviously, he is a single man operation, which keeps his costs minimal. But he has half a dozen revenue sources - He charges $7500 a week for his feed sponsorship alone - add half as much again from his podcast & display advertising - not to mention affiliate fees, fees from other podcasts on the network he part owns, his membership scheme, t-shirt sales, speaking fees from conferences and it is not unreasonable to guess he makes a 7 figure sum from DF. I would imagine he is probably the most profit/head but it is certainly possible to make money primarily from advertising if you have multiple revenue streams.
posted by Another Fine Product From The Nonsense Factory at 2:51 PM on October 14, 2012

Well that's good to know. So you're saying restless_nomad that there is decent click through on the ads?

There is negligible click-through on the ads. Everyone gave up on click-through a while back. :) (Advertiser "conversion" is getting viewers to share on social networks now.)

Websites can sell on traffic or they can sell on "audience," as explained nicely above. If you have a website that is solely read by cat-loving 29-year-olds who buy a new phone every 6 months, you can command rates beyond your traffic. But those two qualities are sort of like twin suns, their gravity fields have an effect on the other.

In addition, affiliate marketing and other similar is good for some sites. Some--a very few--tech blogs make as much as $80,000 a month in Amazon referral fees.

Google ads are pennies. Real CPMs (at $1 to $15 CPM) are nickels. SOMETIMES EVEN DIMES.

People don't talk about this stuff too much in public, but if you do back of the envelope math on pages served and approximate CPM, you start to see that some blog companies can make a healthy 8 figures a year.
posted by RJ Reynolds at 3:13 PM on October 14, 2012 [2 favorites]

Also it should be said that the model currently being practice by Buzzfeed is growing in influence. Their only advertising product (I did not say only "revenue product!) is advertorial, basically.
posted by RJ Reynolds at 3:41 PM on October 14, 2012

Sorry to seem lame, but who/what is Gruber?
posted by zenpop at 4:24 PM on October 14, 2012 [1 favorite]

One more revenue stream which is small but growing is that publishers (websites with content, like BoingBoing) can sell their cookied audience lists to advertisers.

In other words:

- I'm the GAP, and I want to show banner ads to users who have ever read an article about striped sweaters, not just while they're reading an article about striped sweaters.

- I'm the blog with the article about striped sweaters. I drop a cookie on my readers when they visit the striped sweater post. Now I can sell that cookie list to the GAP so they can target striped sweater intenders all over the web.
posted by telegraph at 4:32 PM on October 14, 2012

John Gruber, of Daring Fireball.
posted by kirkaracha at 4:35 PM on October 14, 2012

An additional source of income for Boing Boing is self promotion. All the major writers use it to promote their own books, etc. Which brings in more money for the individual, so they don't need to make a living 100% from Boing Boing. (If you look you'll this is a pretty common model. Come because we're awesome, and sometimes learn about ways to leave even some money in our pockets.)

Gawker notoriously pays poorly, though blogging for someone else simply doesn't pay worth a damn anywhere. The point of working for Gawker blogs is so you'll become a big enough name to go off on your own.

Sites like the Gawker and Cheezburger family have a couple of tricks to keep costs down. One is that the vast majority of their content is submitted by loyal fans which makes the writer's editor's job much easier. There's really not a lot of writing on most of them. And when you have a family of similar blogs you can cross-post tons of stuff, which is like getting paid twice (or more) for the same content. (Last time I had a video get on a Cheezburger site I had hits from 6 different sites in the network. They got their money's worth out of my content.)

I've talked to people at a couple of sites that moved from network ads (Google Adwords, etc) to selling their own directly. They saw revenue at least double immediately and then grow steadily after that as they found their audience. It takes more effort/staff to sell ads, but when you're past a certain number of viewers they easily pay for themselves.
posted by Ookseer at 7:43 PM on October 14, 2012

Boing Boing makes most of its money from advertising. We have six full-timers and a handful of part-time/hourly people taking care of stuff like system administration and moderation. Freelancers are paid 50c a word up to $250 for posts, which are pretty good rates for the internet. Unpaid is rare--when it happens, it tends to be book excerpts and what have you.
posted by beschizza at 6:18 AM on November 3, 2012