There are many ways to generate revenue online but they break down into three broad areas. You can either make money through advertising, promote existing products through affiliate marketing (where you earn a commission) or sell your own product or service.
This post will give you an overview of how each type of revenue stream works and which types of sites are best suited to each.
Selling Advertising Space
The revenue model for online advertising is simple. As a publisher you allow other businesses to use blocks of space on your site to display their ads. Sometimes you’ll be paid based on how many visitors see the ad (Display Advertising) but more commonly you’ll earn revenue only when a visitor actually clicks on an ad.
The Pay-Per-Click model, often shortened to PPC, is much, much more common than Display Advertising. It’s the model used by one of the largest ad programs, Google AdSense, and most other web advertising networks. In fact, Display Advertising is so unusual – not to mention unprofitable for all but the very largest of web publishers – that I’m not going to go into it here.
The amount earned per ad click varies. PPC networks run an automated auction system where advertisers set the maximum amount they are willing to pay for each click. Generally, this means publishers get better payouts in niches where there are more advertisers bidding or where the profit made on the product or service justifies the advertiser offering more per click.
The more the advertiser bids, the better position their ad link will get.
In the example AdSense ad block on the right, Holiday Inn Express bid the most per click so their ad sits in the most prominent position at the top of the adblock.
It tends not to work very well on community or social sites like forums and message boards.
In Affiliate Marketing, web publishers get paid when a visitor clicks on a link from the publisher’s site taking them to the advertiser’s site and they make a purchase or fill in a lead generation form. If the visitor clicks the link but doesn’t buy anything or complete the lead generation form the publisher doesn’t get paid.
Lead generation forms are commonly used in service industries like insurance and the publisher get a one-off fee for sending a potential client to the advertiser. For a product purchase the publisher will get a one-off fee per product or a percentage of the total sale value.
Usually there’s a tracking system in place so that if the site visitor goes to the advertiser’s site but doesn’t make a purchase until some time later the publisher still gets a referral fee.
Many affiliate programs include an incentive bonus for reaching certain sale levels so it’s possible to make a good income from affiliate marketing.
One of the best known affiliate programs is Amazon Associates which pays site owners for referrals that lead to sales on Amazon. If you’re new to affiliate marketing Amazon Associates is a pretty good program to start experimenting with. It’s easy to use and because Amazon sells just about everything these days you can probably find products on the site that compliment your site content.
Suppose your day job involves selling TVs. You’re in a great position to write a review site about which new models have the best feature set or offer the best value for money. You could write a page about a particularly good TV and round off the page with an affiliate link to that model on Amazon. If the review is helpful there’s a good chance that some users will click through to Amazon and earn you a sales commission.
Affiliate marketing can work well for most types of sites – including forums and message boards that are full of people passionately discussing a certain type of product or service.
Selling Your Own Product or Service
This is the hardest work of all but it can be really profitable since there is no middle agency – you get to keep all the revenue generated, not just a percentage. But bear in mind this is a lot more work than either offering advertising space or being an affiliate for someone else’s products.
You have to create the product, get the website online and do the marketing. You’ll need to be good in all these areas – or hire someone who is – to succeed.
Of course, you can use AdSense, affiliate marketing and other channels to promote your own product on other sites to help bring in the buyers but it’s still a lot more work than the other two options.
Which Will Work Best for You?
The truth is people are making good incomes using all these methods. There’s no one method that’s guaranteed to generate more income than another.
The secret to being successful is to find the method that suits your site, your visitors and you. If you don’t like the idea of being an affiliate, for example, you’re unlikely to succeed because your heart won’t be in it.
Many successful web publishers find they are better at one form of revenue generation and decide to concentrate on that. So pick the one that appeals to you most and get started.