Welcome to my new blog about Internet economics. My plan is to discuss basic economics of Internet-related businesses and markets. This is the first post, so I decided to look at the economics of blogging. Most people write a blog for fun and aren’t concerned with making money. Some others have been able to make it into a successful full-time job, however there aren’t many people like that yet. Instead, what if you write a blog in your spare time, partly for fun but partly to make money. Will it pay off for you?

You can make money from your blog by putting ads or other endorsements on your site. Sites like ProBlogger have lots of tips about how to do that effectively. But whether or not it pays off basically depends on 4 things:

1. How many visitors your blog attracts.
2. How much money (on average) you earn per visitor.
3. How much time you spend working on your blog.
4. How valuable your time is to you.

The amount you’ll earn in, say, a week is the number of visitors times the average revenue you earn from advertising per visitor. Not everyone will click the ads, so you have to average over the total visitors. Ad programmes like Google’s adsense don’t permit people to disclose their average revenue rates. I did some searching and it seems that somewhere under US 1c per visitor is a reasonable assumption. Then, the amount of time you spend per week determines how much you make per hour. Whether or not that’s reasonable for you depends on your alternative options and the value of your time to you.

The following graph summarises the tradeoff between visitor numbers, hours worked and value of time assuming an average visitor is worth 1c in revenue.

In the graph, if you’re above one of the blue lines, you’re making at least the amount per hour shown on the line, if each visitor earns you 1c on average. For example, if you work 10 hours a week on your blog, you need about 3,000 visitors a day to earn $20 per hour. Anything more than 3,000 visitors and you’re ‘in the money’ and making more than $20 per hour. If you’re willing to accept $10 per hour for your time you only need about 1,500 visitors per day.

So how likely is it that you’ll achieve this? According to technorati, the 20th most popular blog right now is Crooks and Liars. According to compete.com, this blog receives about 5,500 visitors per day. I don’t know how many hours per week they spend on the site though. According to my chart, they’re making $30 per hour if they work less than about 12 hours a week. Even then, $30 per hour isn’t a spectacular payoff, but it’s better than some jobs.

In all, it seems hard to make blogging pay off, at the moment. It’s possible for some superstars, but the revenue just isn’t there for amateurs, yet. However, it’ll be interesting to see what happens in the next few years.

[tags]blogging, blog economics[/tags]