The Opportunity Cost of Advertising

Should you be doing it?

It seems like these days everybody has an opinion when it comes to advertising on your blog. Some (most) think that you must. I mean, it’s pretty much free money that you’d be missing out on otherwise, right? (No, but we’ll get to that later.) Others, lovers of great design, copy purists and the web 100.0 elite think it’s terrible. It ruins aesthetics and cheapens your content. I mean, are you a trust-worthy resource or a salesman?

The value of time

The first camp undervalues you. You’ve decided to monetize your blog, make it professional, and now you’re going to settle for $.30/click from Google or a hundred bucks per month from Buy Sell Ads. This is what a few hours per day is worth to you? Don’t think of it as “extra money”, think of it as what it is: a business venture. Do the math all beginner bloggers are afraid to do and you aren’t going to be happy.

The second camp undervalues you even worse. They don’t think you’re worth anything at all. They’ve decided your blog should be an altruistic source of knowledge for nothing. This isn’t malicious or even intentional, it’s just some still subscribe to the pre-burst money-grows-on-trees, field of dreams way of thinking, and don’t think of a blog as a legitimate business.

Why did you start your blog?

No matter how many clicks you get, what dollar amount of products you sell, or the numbers on your traffic graphs, you’re making somebody else more money than you’re receiving.

This is important. Did you start your blog to solely to express yourself or to make money? If the first, maybe advertising is for you. If you’re only putting a little bit of time towards it, have a steady day job and think of your blog as a hobby, then in a sense Adsense, CPA and affiliate ad revenue is “free money”. Unfortunately, once someone sees some of this money they start shifting in the second group.

Distractions

The problem with advertising is you’re working for somebody. No matter how many clicks you get, what dollar amount of products you sell, or the numbers on your traffic graphs, you’re making somebody else more money than you’re receiving. The reason that company can pay you$ .30 for that click is they feel they can make more than that with it. This is all well and good when you’re doing this as a hobby, but what about when you’re selling a product? There’s usually only one click per view, do you really want to give it away so fast?

“But I’m not selling anything”

That’s the first objection, but is it really true? I see a lot of web designers with blogs; they’re selling design services. I see a lot of blogs with newsletters used to sell highly targetted products to trusting listeners. I see talented people who indeed are not selling anything, but they could be. Think really hard about whether you want to use clicks for advertising revenue, or if they’d be better suited for another purpose before littering your sidebar with them.

So when should you advertise?

Here’s where the opportunity cost comes into play. This is the first day of any economics class, but for some reason people don’t think in terms of economics and business when building their blog. You should advertise when advertising makes you more money than something you could provide. This usually means big traffic. If you sell web design services, but only charge $750 per site, and somebody wants to pay you $1000 to advertise on your blog, then advertise. The only way to find out if you’re being as profitable as you can is to test it out.

If you are advertising and selling a service or a product right now, a book for example, try it out. Strip away advertising for a bit and see the conversion. If you have an advertisement for your book in the sidebar, and Google advertisements above your post, replace the Google ads with another book ad. If your conversions go up and net you more than you made last month, keep going in that direction. If not, either go back to advertising, or work on improving your book conversions.

In conclusion

This is basic stuff, but when people build their blog it happens slowly, so people don’t always realize what’s happening or what money they’re missing out on. Sometimes you need to step back and take an objective view of it all and see if what was working for you last year is still what’s working for you now. Hope you enjoyed the post.

Leave a Comment

Previous post: 7 Must-Have Features for Selling a Wordpress Theme on ThemeForest

Next post: The Little Things: Behind the Scenes User Experience