Posted: Fri, 06 Jun 2014 02:08:18
Updated Jan 2019
(Excerpt from my book How to Write a Book!, an Amazon #1 Best Seller. -- andreas)
People often asked me, "How can I make money with my blog?"
To do this, you use Google Adsense to place advertising in your website or blog. You sign up and download a few lines of code, which you place in your website or blog. When people look at your webpage, Google shows ads in your page. The ads are related to your page, so if you wrote about Hawaii, there’ll be ads for flights to Hawaii and hotels in Hawaii.
How much can you make with advertising on your website? I’ve been using Adsense on Andreas.com since late 2003. Here are numbers from my Google Adsense account and my website andreas.com.
The advertiser (for example, Purina sells dog food, so they place ads for dog food) buys ads at Google by the CPM price. CPM is Cost per Mille (where “mille” is one thousand in Latin). If the CPM is $8, Purina pays $8 to have their ad shown to a thousand people. If Purina wants ten thousand people to see the ad and the CPM is $8, then Purina pays $80 to Google.
The same thing works in reverse for the publisher (the publisher is the site that shows the advertising, for example, you who wants to show ads in your website or blog). As the publisher, you want to know how much you'll get for the ads, so instead of CPM, you uses RPM (Revenue per Mille), which means how much you get for every thousand viewers.
This is how Google Adsense makes money. Google Adsense is an ad distribution network (ADN) (there are dozens of ADNs; Google Adsense has the largest share of the US market). ADNs offer different RPMs, so when you look for an ADN to place their ads on your site, ask for the RPM so you can compare the offers.
Data from My Google Adsense Account from November 2004 to January 2019
I used Google Adsense on andreas.com for fifteen years. On average over all that time, I got $2.32 RPM for impressions. That's $2.32 for every 1,000 ads that appeared (a page could have several ads, so the Page RPM could be higher, such as $4.15). Google Adsense paid me US$0.0023 when an ad was shown (the amount varied, depending on the ads, the page, and so on).
If we know the RPM is $2.32 and Google pays out 68% of the CPM (as stated by Google in Oct. 2018), then we can calculate the advertiser's CPM is $3.41 (RPM / 0.68 = CPM). Google Adsense makes $1.09 for every thousand ads (CPM from advertiser - RPM to publisher = Revenue to Google). The advertiser pays $3.41 to show 1,000 ads.
However, that's the average over sixteen years for 10.7 million impressions. Let's break that down. Here's data in five-year blocks from my Google Adsense account:
Notes: Total = Nov. 2004 to Jan 2019. I divided data into three time periods: 2005-2010, 2011 to 2015, and 2016-2019. Note the steep collapse in traffic from 2005-10 to 2011-15 and then 2015-2019. RPM also fell 58% from $4.88 to $2.06 and rose slightly to $2.30. Impression RPM fell 60% from $2.75 to $1.12 and rose slightly to $1.38. Impr. = Impressions. Price in US$, not adjusted for inflation. Numbers rounded to two decimals.
The Problem with Monetizing a Blog
Are you beginning to see the problem?
To get meaningful revenue, say, $2,000 per month at a $1.38 impression RPM, you must show 1.45 million ads. That’s a huge amount of traffic yet you'll only make $24,000 a year, which is low for a business.
You may be wondering how online media sites are making millions on advertising. For a media site to have an office in Manhattan or San Francisco with a staff of ten, they need perhaps a million dollars in annual revenues, which is about $80,000 per month. To earn that with digital ads, they need to show nearly 60 million ads every month, which requires more traffic than TIME magazine or Hewlett-Packard (to see the traffic of large websites, see quantcast.com/top-sites).
When you ask media sites about the number of unique monthly visitors or their RPM, they won’t tell you. Why? Because the numbers are really bad. Their RPMs are actually lower than mine because large publishers get bulk RPMs, which are lower. I doubt many of these sites can even pay their rent.
How are these sites making money? They’re not. They’re using money from investors to cover salary, costs, and rent with the hope of growing big enough to sell the site to a large company. The real revenue will be the sale of the site, not the advertising. How will the large company make money? Well, that’ll be someone else’s problem, won’t it?
Why are these numbers so low? Don’t people make big bucks with blogs? Back in 2005, I got 60-70,000 monthly visitors and Google also paid a higher RPM, so I got around $12,000 per year. But in 2018, there are 350 million websites, so traffic is diluted. Furthermore, people now spend time on mobile devices, social media, apps, movies, and games which also lowers traffic to websites. For the last ten years, I’ve seen a steady downward trend in traffic and RPM. Google pays less. From 2016 to 2019, I earned $86.35, or about $2.30 per month
What about Video?
Youtube's RPM is $2.07. If your cat is a YouTube superstar and gets a million views, you only get $2,070.
So what does this mean for your blog? Every few months, you’ll be able to buy a hotdog with mustard.
The point of your website and blog isn’t to make money. Just as with books, the goal is to build your credentials to get more opportunities. See my book for more about this.
What If I Become a YouTube Superstar?
It's even worse for musicians. A musician with a music label must see her song played 4,200,000 times on Youtube at $00.0003 per play to make $1,260 (the US monthly minimum wage). She makes one dollar when her song has been played 3,330 times.
Google (owners of Youtube) makes $160 billion per year. Just saying.