Often, I've been asked how I make money blogging. My typical response is that I don't, directly. I blog because I feel I have something important to say. Yet there is an indirect component. Blogging boosts my profile. People can learn more about what and how I think and hopefully, decide to retain me for various contracts.

Yet part of what I'm interested in is how people make money online. It seems like a lot of it is selling snake oil, and there are probably hundreds of new scams created each day. Other parts are just over hyped. So, let's take a serious look at the sort of revenues that can be made on a blog.

First, there is Cost per Thousand Impression, or CPM advertising. This is advertising where you get paid by the number of times an ad is seen on your website. CPM rates can be all over the place, from much less than $1 per thousand impressions to more than $10 per thousand impressions. These rates will depend on whether you can target advertisements, the size of the advertisements and other factors. So lets take a blog with 10,000 impressions a month. Let's assume a better than average CPM of $4 per thousand impressions. If you don't have a great way of selling your ads, you might end up only getting $.25 per thousand impressions. If you can get ten such ads, you could be making about $400 per month, or only $25 per month. That said, I suspect many bloggers are getting closer to $25 per month.

Next there is Cost Per Click, or CPC advertising. The percentage of ads displayed that actually get clicked on varies considerably. Some people claim that rate is as high as 2% to 4%. Others report an average about a quarter of a percent of advertisements actually getting clicked on. This means that if you have 10,000 impressions a month, between 25 and 400 ads will actually get clicked on. Like with CPM advertising, the CPC rates vary considerably. For some ads, they might be as high as $10. For others, they can be less than $1. So, if you are getting 4% of your ads clicked on, that is 400 ads. If you get $1 per click, that is $400, about the same as more profitable CPM advertising. On the other hand, if you are getting a dollar per click on about .25% of advertisements, you're back at the $25/month range.

Let me pause for a moment to talk about the quality of traffic you receive, and how to increase traffic, and/or quality of traffic. One measure is the demographics. If I get a lot of really rich folks that like to buy things online, my traffic is really valuable to advertisers. If I get some traffic from moms trying to save a buck, that is still somewhat valuable. If most of my traffic is from people trying to find where to download free nude pictures of the latest celebrity, that traffic probably isn't worth a lot.

There are several networks that I belong to that bring in additional traffic to my site. EntreCard is a site where bloggers advertise their blogs on other participating blogs. People hop from one EntreCard site to the next 'dropping their cards' to gain credits that can be used to buy more advertising. This network drives a fair amount of traffic to me, but it is mostly, 'drop and run' traffic, that in most cases barely even reads my blog posts.

Adgitize works in a similar manner. It seems to be a smaller, more dedicated group of bloggers. With Adgitize, you buy and advertisement using real money, as opposed to the EntreCard Credits that EntreCard uses. Then, you receive credits for the number of other participating blogs you visit, for the number of ad impressions served, and for keeping your content current. For me, this site is generating about 60% of the traffic that EntreCard produces, but the participants spend more time on my site. In addition, each month, I receive more money from Adgitize than I spend on my advertisements. If you are an active blogger interested in low level monitization of your website, as well as building up a stronger community of readers, I recommend Adgitize.

Third in this group is CMF Ads. They have different advertising options, including a CPC and a CPM model. I've experimented with different options. As a general rule, the money that I make from CMF Ads gets reinvested into advertisements. It doesn't generate as much traffic as EntreCard or Adgitize, but can be a nice complement to the other networks. I use all three as you will see on the right side of this blog. I should note that both Adgitize and CMF Ads has an affiliate program so if you consider using them, please click on my links so I get credit.

Another form of advertising is paid posts. I haven't really done any paid posts, so I can't comment on them. I do participate in Business2Blogger which sends out an email of different opportunities to review products and get free samples. So far, most of the opportunities haven't been very interesting to me, and those that are, get filled up by other bloggers quickly.

Updated 10/1/2010

I have just received an email from Chris Kensworthy asking me to take down my links to the Escalate Network promotions because I have listed what the payout is. Because of my commitment to transparency, I seriously question the online advertising ethics of Escalate Network, Chili's and Vital Juice.

I am complying with their request and modifying the section below. I also strongly encourage people not to join Escalate Network, purchase chips from Chile's or sign up for Vital Juice.

Today, Business2blogger announced a special deal for its members to join Escalate Media Affiliate Network. As an affiliate network, I do get money for people signing up, so please consider it. Escalate Media is running on a third type of online advertising called Cost Per Action, or CPA advertising. One particular type of CPA advertising is Cost Per Lead, or CPL advertising. For simplicity, I just lump them all together as CPA.

What this means is that even if you click on an advertisement, the blogger doesn't get any money, unless you complete a specific action. This action could be something as simple as signing up for a mailing list, completing a survey, or filling out a form to request free samples.

As an illustration, if you click on:
(Ad for Chile's removed)
to can sign up for Chili's Free chips and queso coupons. You probably get added to a mailing list, and I get an amount I am not allowed to disclose.

Or, you can sign up for a nutrition mailing list from Vital Juice.
(Ad for Vital Juice removed)
I get an amount Vital Juice does not want disclosed from Vital Juice for each signup. People who like chips and are concerned about their health might want to try both.

As a different example, if you order a 'Free' Tote bag from VistaPrint, I get an amount that it might be okay with VistaPrint if I disclose, but I believe that Escalate Network would have a fit. I believe that only happens if you go all the way through and actually get one of the tote bags. Of course the way VistaPrint does this is that they offer a free totebag, but then try to get you to buy more things while you are there. Why not get a dozen tote bags instead? Maybe you can carry your chips in your tote bags.

Since this is my first day with Escalate Network, I'll experiment a little bit with it to see how it goes. If it seems productive, I may take some space on the right of my blog to further promote them.

The advertising on this blog isn't likely to replace the consulting that I do, but it gives me good information about various programs that are out there.

How about you? Are you making money off of your blog? How important is that to you? Are you getting the traffic you want? Are there other sites that you recommend?