Saturday, April 23, 2005

Lesson #3 - How much money can you make with a web site?

There are two reasons why you would spend the time that it takes to create a web site:
  1. You enjoy it. For example, you might enjoy bicycling as a hobby and you enjoy writing about it to spread the word.

  2. You have read How to make a million dollars and you are thinking about starting a web site as a business -- specifically to generate revenue.
When I started HowStuffWorks, it began strictly as a hobby. I worked on HowStuffWorks because I enjoyed it. Eventually the site had so many visitors that it had to become a business. So, sometimes, you end up moving from #1 to #2 whether you like it or not.

In Lesson #2 - the different types of web sites, you learned that there are different kinds of web sites and they generate revenue in different ways. For example:
  • Retail web sites generate revenue from sales

  • Content web sites generate revenue from advertising

  • Dating and porn web sites generate revenue from subscriptions

  • Transactional web sites like Ebay generate revenue from each transaction.

  • And so on...
Let's start by looking at content web sites that make their money off of advertising revenue. How much money can a simple content web site make?

Right now, if you look in the right sidebar of WebKEW, there is a single sidebar ad being provided by Google. This is called a Google AdSense ad, and these ads are incredibly easy to set up and use. How much money can a single sidebar ad like that generate?

I have a friend with a small web site that uses AdSense. On his site he has placed a Google sidebar ad like this. Google provides statistics for his site on a daily basis. Looking at his site's performance between April 1, 2005 and April 21, 2005, here is what we find:
  • On average, his site displays 3,100 sidebar ads per day. We know, by looking at the log file statistics on his site, that he receives about 1,000 unique visitors a day. So each visitor looks at about 3.1 pages each, and that means roughly 3,100 ad impressions per day are displayed on his web site.

  • On average, those 3,100 ad impressions per day generate 60 clicks. With Google AdSense, you get paid only when someone clicks.

  • On average, each one of those clicks generates 15 cents.

  • So, on average, his site is making $9.00 per day.
Another common way to talk about the revenue of his site would be to say that, "He is getting a $2.90 average CPM." CPM translates into "Cost Per Thousand", when the M is the roman numeral for thousand. That means that, for every 1,000 ad impressions he displays, he is receiving $2.90 on average. Between April 1 and April 21 he displayed a total of almost 67,000 ad impressions. So:
    67,000 / 1000 x $2.90 = $194
In a typical month, he normally receives about $270 from Google.

Your mileage will vary depending on the type of visitors that your site attracts, but those results are fairly typical. A Google AdSense ad tends to generate between $2 and $3 CPM on average. Here are some scenarios:
  • If your site has 1,000 visitors a day and they read 3 pages per visit, you get 3,000 page impressions a day and make about $270 per month.

  • If your site has 1,000 visitors a day and they read 5 pages per visit, you get 5,000 page impressions a day and make about $435 per month.

  • If your site has 10,000 visitors a day and they read 5 pages per visit, you get 50,000 page impressions a day and make about $4,350 per month.

  • If your site has 100,000 visitors a day and they read 5 pages per visit, you get 500,000 page impressions a day and make about $43,500 per month.

  • And so on
Typically a site will put several ads on a page. For example, there might be a banner ad at the top, a sidebar ad along the side and another ad at the bottom. You cannot simply multiply by three to calculate the revenue -- banner ads tend not to perform as well as sidebar ads, ads at the bottom of the page tend to perform not as well as ads at the top, multiple ads on a page tend to dilute the click rate of other ads on the page, and so on. But let's imagine that you put three Google AdSense ads on your pages and you get a total of $5 CPM as a result.

If you can build a site like About.com with an Alexa Rank of 100 or so, you can see that there is a lot of money to be made. 15 million visitors come per month. They read 5 pages each. You make $375,000 per month just off of those 3 ads. You are making 2.5 cents every time someone comes to visit. By adding other features to your pages, like Google search boxes, small affiliate ads, pop-under ads, etc., you can push the revenue-per-visitor number up towards 5 cents per visitor on a large site.

Here is a funny side note that is interesting. Wikipedia.org is a very large web site. It has about 8 million pages and an Alexa Rank of about 100, meaning that it gets about 10 million visitors a month. Right now, Wikipedia has zero ads on the site. If they were to put ads on their pages, and if the average visitor reads 5 pages, it would mean that Wikipedia could be making somewhere between $250,000 and $500,000 per month, or $3 to $6 million per year. Pretty amazing.

What about a retail site? In this case, calculating revenue ahead of time can be trickier because revenue per visit can be all over the map. But here is a way to think about it. Let's say that you put up your retail site and attract some visitors. You find that, for every thousand visitors who come to the site, two of them on average make a purchase. You also find that, on average, you make $5 profit from a purchase. So you are making $10 per 1,000 visitors. In other words, the amount of money you make tends to be not that different from the money made on a content web site. You might make between $1 and $20 per one thousand visitors. It depends on what you sell, how much profit you make on each sale, etc. Of course, there can be niches where far more than two people per thousand make a purchase. I know of sites where the number is more like 10 or 20. If you can create such a site, then you are in very good shape.

One thing that you learn from this discussion is that revenue all comes down to visitors. The more people who visit your site, the more money you can make. We will start discussing how to attract visitors in Lesson #4.

236 Comments:

At 11:46 AM, Anonymous Anonymous said...

You say howstuffworks "had to become a business" Why? What made it become a business.

 
At 11:59 PM, Anonymous WTL said...

I would imagine it was because the traffic costs exceeded what he was able to pay out of his pocket for a hobby.

At that point he was faced with the option to cap visits (once the monthly bandwidth had been used up, the website would be shut down until the next calendar month), to shut the website down, or to look at getting advertising to help pay the hosting and bandwidth bills.

 
At 9:04 PM, Anonymous Anonymous said...

Marshall, your friend should know that in the AdSense Terms and Conditions it says, "You agree not to disclose ... (b) click-through rates or other statistics relating to Site performance in the Program provided to You by Google." But, since we don't know the web address, I guess it's ok.

 
At 12:45 PM, Anonymous Anonymous said...

Am I the only one who thinks that Marshall invented his friend as a nice way to tell us the revenue from this site, without breaking his terms of service with Adsense!

 
At 6:33 AM, Anonymous Anonymous said...

Another important thing is to happen to write about a subject that advertisers want to pay for. I have thousands of visitors each day, and I've placed an ad in what Google claims is the most effective place, and my CPM is not even 1/10 of the one mentioned above!

 
At 9:07 AM, Anonymous Anonymous said...

How about the bandwidth costs?

 
At 10:09 AM, Anonymous Anonymous said...

This lesson mentioned "A Google AdSense ad tends to generate between $2 and $3 CPM on average" -- I never click on any ads! Is there really so many people clicking on these? Amazing.

 
At 10:23 PM, Anonymous Anonymous said...

I click on the ads once and a while, it all depends on the subject and if I happen to notice they are there. When I click on one though i usually click on more than one.

 
At 10:07 AM, Anonymous Anonymous said...

Marshall's HowStuffWorks gets 5-6 million hits a month, not 31,000.

 
At 12:11 PM, Anonymous William C. Spaulding said...

$2 to $3 per CPM is fairly accurate.

 
At 11:47 AM, Blogger ash said...

I have never clicked on any of those Google Ad links until I read about them here. It's quite amazing that they can generate so much cash.

I must say tho that when I click on those ads they just open up a new window with a really long URL but the page never comes up. I think this may be because of an ad blocking software on my PC. So I was wondering if you still get paid for people who click on the ad and the site doesn't show up on the person's screen?

 
At 5:51 PM, Anonymous Anonymous said...

I have been to your site and I too am working very hard at adsense web site to increase my revenue. I am also looking into many NEW ways to utilize the design to further direct people to follow my ads.
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At 12:37 AM, Anonymous Anonymous said...

So create a site like About.com if you want to make any reasonable money, that's not daunting at all

 
At 1:05 PM, Anonymous Anonymous said...

How do video casting websites make money?

 
At 6:16 PM, Anonymous Anonymous said...

In the spirit of encouraging competition to google adsense, and hence increasing my own profit, here are my site adsense stats:

CPM of $6
click rate of 2%

No more than one or two ads per page. Google claims a click rate of 3% but its all lies.

The site will remain anonymous to protect myself from imitators and the google overlords =)

Everyone should post stats, I am curious . . .

 
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At 11:56 AM, Anonymous Anonymous said...

If I like someone's site and/or get useful information from it, I usually "pay the webmaster" by clicking on an ad.

Some people avoid clicking ads thinking they're evil, but advertising is what keeps the internet interesting. There wouldn't be nearly the content that's out there without advertising.

 
At 9:01 AM, Anonymous Vikram said...

hey thanks very much for this info its really useful and too much required by me b'coz i have to make a project on wikipedia and just arrived on this page by searching
"how many unique visitors wikipedia gets in a day"
and i have got a good detail even of adsense clicks
thanking u again

 
At 1:41 PM, Anonymous Anonymous said...

Because I work online and have my own websites, I also know what advertising revenue is all about.

Whenever I'm visiting someone's site and I found it useful, etc... I too, click on an ad or two in order to show my anonymous appreciation. It's just another way of supporting a website.

 
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At 4:58 AM, Anonymous ppc advertising. Which program should I use? said...

You say that you click the ads on a site you enjoy to support the webmaster. Do you not remember that an advertiser paid for each time you do that?

You say that you never click google ads...

Lots of non web savy people click these ads and don't even realize they are ads. You just know what they are lol.

 
At 6:34 PM, Anonymous Greatness said...

Thank you very much....I didnt like the referal link to "Quick ways to get money". Because there are no quick ways to get money on life.

But i have learnt something new today about websites and im young and i might as well try it out.

You know what they say...you learn from your mistakes :)

 
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At 7:09 PM, Blogger James said...

I'm running my new website Tech In Demand and hope to generate revenue with it in the future.

I'm wondering how services like Google Adsense vs Text Link Advertisements stack up?

Anyone have any idea which one would be better suited?

 
At 10:21 PM, Anonymous Anonymous said...

Interesting that the guy who writes this post sells his site to Discovery for $250 million. Kudos!

 
At 2:31 PM, Anonymous Gamer said...

I have a website which receives almost the same amount of traffic like your friend receives but only gets around $1 a day with around 8-10 clicks.

 
At 8:57 AM, Blogger Prasanna said...

Its not really possible to earn so much of money just from blogs,how much important information it may give.For example tell me how many of you clicked on the Ads on the page?So from here you can imagine..
so sometime some people may click on it,but chances are are very less when the content is good.People will come and read your infos and leave...

 
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At 6:34 AM, Anonymous Anonymous said...

With my experience 1 unique visitor/day is around 0.8 cents.
Which Means every 1000 unique visitors you may be able to make 8 dollar. Again this varies. Like a special day when traffic multiplies 10 times your ratio will come around 0.3 cents/visitors. This is mainly because the new comers are just coming with their own goal and they never bothered to click on the advertisements.

That is my experience

Cheers
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At 8:47 AM, Anonymous Anonymous said...

When google places their ad sidebar to your website are you responsible for the content?

Can you pick and choose which ads you want from google? For example, an information website have ads that support the subject, i.e. home improvements?

 
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At 9:21 PM, Anonymous Anonymous said...

howstuffworks became a business because there were so many visitors and it was generating so much revenue that it became its own business. yes, bandwidth costs, but he recognized the potential business opportunity that presented itself and took that opportunity.

 
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At 4:50 PM, Anonymous private placement investment said...

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Once again, thanks for reading. Cheers, and feel free to reply with any questions!

 
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You say howstuffworks "had to become a business" Why? What made it become a business.

 
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