Making money from blogs

From a blog which might average one hit per day, how might I know anything at all about the economics of blogging?

Start here: the Wall St. Journal has a piece suggesting that blogging is more economically tempting than some of us might understand.

The problem with this story is that it imagines that advertising is something one sells simply on traffic alone. The idea of "$10/RPM", or $10 per 1000 pages viewed on your blog, is simply bogus. It's bogus because no one is going to pay for it.

There are two important aspects to advertising:

• Name Recognition
• Immediate sales

If you're selling high margin products, such as beer, you're willing to buy a lot of advertising to establish your brand. You're creating an image, and you're buying brand loyalty by keeping your brand in front of people who consume your beer.

But the internet in general, and blogs in particular, are bad vehicles for carrying brand advertising. Television, with its claim to all of your attention for at least a few moments, works far better.

Give it to Google for sorting out what internet advertising, blogs in particular, is all about. Immediate sales. Customer clicks on ad, goes to advertiser's store, and buys something.

One thing we can observe about such advertising immediately is that it is trackable. The clickthru is tracked, and sales from that clickthru are tracked. The merchant can do the arithmetic, did the ad make money?

Ah, but there's repeat sales. Customers who come back with no advertising. Yes there are, but typically this is a minor subsidy to the immediate affect of the ad. Brand loyalty on the internet is weak indeed.

So if blog ads are to make money, they have to move product.

One more thing about moving product on the internet by advertising. You can't just raise the price to cover the advertising. With regular advertising, you can flood the market with ads offering 40% off on immediate purchases without explaining that you increased the price 60% to cover the program. On the internet, whatever it is you're selling, there are ten more people selling it too, and price comparison is easy.

What really got me about the WSJ article was the detached nature of the analysis. The idea that one could create a blog purely with the goal of generating traffic, and expect to generate advertising revenue without giving a moment's thought to whether your blog would actually move product is just bogus.

Places like Dpreview.com have it right. Provide high value content on making decisions regarding which digital camera to buy, and you might move some digital cameras.

Instapundit also has it a bit right. Check out his ads, and you'll typically observe Glenn to be moving tee shirts with right wing sayings. And a few paintings which appeal to the boomers who read Instapundit (both of those being higher margin products, even on the internet). And of course, Glenn sells his book, An Army of Davids, which has its own cozy economics with respect to Instapundit.com.

But your basic blog, even if it were to somehow by magic go to tens of thousands of page hits per day, wouldn't move enough tee shirts to generate enough revenue for a good dinner, let along a living. If that's what someone might want from blogging, that's what to aim for, rather than aiming for a place to offer personal comment and solicit reaction.