How do websites make money?

How do websites make money?

Most commonly, websites make money through display ads, affiliate marketing, digital course and product sales. Websites may also sell subscriptions, memberships, or software as a service (SAAS) for recurring income. All websites can be sold as an exit strategy.

Imagine, finding the right monetization strategy for your website. You build a website that pays you while sitting on a beach down in Mexico.

There are plenty of ways to make money with a website without selling anything or ads if that’s not your style.

Luckily for you, I’m going to show you how websites make money. I’ll show you the best strategies and list the pros and cons. You’ll have a clear understanding on how you want to build your website.

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How do websites make money?

Websites make money by selling ad space, products, or services and subscriptions. The most common monetization strategies include display ads, affiliate marketing, digital courses, and product sales. Monetization differs from website to website depending on the website type, such as, retail, informational blog, or ecommerce store.

A website that sells software as a service has a clear monetization strategy of selling you their software. The company doesn’t want to distract you from their software with display ads, because they make money by selling software.

The best thing about websites is that you can make money in different ways. Blogging is one of the best examples of how individuals create websites and monetize differently.

One blogger might focus on building up significant traffic and living passively on ad revenue. A second blogger might collect information from visitors and sell leads to companies. Another might focus on building a significant email list and sell products for companies.

There are plenty of ways to monetize your website. Which one of these methods works best for you?

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Display ads

Putting display ads on your website is one of the most passive forms of earning an online income. You partner with an ad network, like Ezoic, and they place advertisements on your website. Ad revenue is earned when ads are seen or clicked.

The best part about ad revenue is how easy it is to make money. When you put display ads on your website, all you have to do is focus on bringing in traffic. The more traffic your website gets, the more money you make.

For example, you put display ads on your website that receives 30,000 pageviews per month. The ads on your website might make you $20 per thousand pageviews. In this case, you’re now earning $600 per month from display ads.

Now, all you have to do is scale your website to make more money. Your website becomes more valuable to advertisers as it becomes larger. 

You might grow to 200,000 pageviews per month and now make $28 per thousand pageviews. Now your website makes $5,600 per month in passive income from display ads.

Most website owners start out with display ad revenue while they’re building traffic. Once they reach a substantial level of traffic, website owners branch out to other monetization strategies.

Affiliate marketing

Affiliate marketing is the process of selling other people’s products for a commission. Typically, selling other people’s products works well with established websites. You consult your analytics to see what your website visitors are interested in and match them with relevant products.

Let’s assume you have a pet blog which receives 100k pageviews per month. You’re making decent money with ad revenue, but want to diversify into affiliate marketing.

You check your Google Analytics and find out the majority of your traffic is reading articles on dog training. Therefore, you need to find a dog training affiliate program to promote on your website.

Spend some time researching and comparing different dog training programs. You find one blogger who has a dog training course with an affiliate program. 

His affiliate program gives a 50% commission for all sales you can refer. The course sells for $40, so you’ll earn $20 for every sale you make.

Go into your Google Analytics and find out which pages are driving the most amount of traffic. Link to the course in each article, where it makes sense of course.

Let’s assume you’re able to convert 1% of your website traffic into sales. You make 1,000 sales per month at $20 per sale. You’ve now increased your income by $20k by finding an affiliate product!

Digital courses

Creating and selling digital courses is a good way for any website owner to make money. You create a valuable product and list it for sale on your website. Additionally, you can find other people who would be interested in selling your product for a commission.

Let’s go back to the dog training example that I mentioned in affiliate marketing. You’re making $20k per month by selling someone else’s product. However, you’re also making the product owner $20k per month from your traffic referrals.

Now that you’ve proved you can sell a dog training course, why not create your own?

You make a dog training course and price it at $40, just like the product you’re currently promoting. Now, replace the links on your website to the other dog training course to point towards your own course.

You’re now making $40k per month should the sales remain consistent.

You can also reach out to other bloggers in the dog niche. Offer the bloggers a 50% commission to promote your product. Now, any sales they make will make you $20 as well.

Product sales

You can create and sell your own products with your own online website. However, creating your own physical product can be very costly and time consuming.

Let’s assume you have a health blog, which focuses on supplements and nutrition. The majority of your highly trafficked articles talk about the benefits of Omega-3 fatty acids. You might be able to sell your own brand of fish oils to website visitors.

You’ve got to find a manufacturer who would be willing to private label your product. Typically, you’ll have to have a minimum order quantity, which can be expensive. You’ll also need a method for storing and shipping all product sales.

As you can see, selling physical products can be much more difficult than a digital product. A digital product doesn’t require space or expensive production costs. You can keep selling a digital product over and over again.

Lead Generation

Lead generation is when you recruit potential leads for businesses. Businesses are willing to pay you money to seek out potential customers who are already interested in their product. Lead generation will often require a lot of work to find businesses interested in your services.

For example, you might have a website that focuses on insurance plans. You have a contact form for people to use that want a free consultation on the best insurance plan for their needs. Your website visitors fill out the contact form and you pass the contact information to an insurance company.

You’ve already negotiated a rate with the insurance company. All leads you send their way earn you $100, regardless if they choose an insurance plan.

Everyone wins when it comes to lead generation. The business gets a lead to people who are interested in their service. You get paid for finding interested people. Customers get to speak with a professional who can help them find the right service.

Service provider

Your website can provide a service where people can hire you or your staff to perform a job. You use the website as a means to attract customers to hire you.

For example, Textgoods is a content writing service for bloggers. You can hire them to write a blog article for your website. They provide a service and rely on a steady stream of customers to stay in business.

Being a service provider is a very active form of website income. You always have to be available to perform a service. Unless you have employees, you can’t take a week off for vacation because your customers are depending on you.

Ecommerce

Ecommerce websites are online retail shops to sell physical products to customers. You are responsible for sourcing products, getting website visitors, and shipping products. Ecommerce can be very profitable, but it can also be a lot of work.

Solopernuers should avoid Ecommerce as a business. It’s a full time job to source products and another full time job to get website visitors. You guessed it, it’s also a full time job to ship out products.

Dropshipping

Dropshipping is a form of Ecommerce where you never see the products. Someone orders the product from your website and you fulfil the order from a manufacturer or supplier. The item is then shipped directly to your customer.

The problem with dropshipping is that profit margins are typically small. You’re just the middleman, who might earn a small portion of the sale. Even at a 10% profit margin, you would have to sell $500k worth of items to make a $50k salary.

Donation

Some websites will ask for donations to stay in business. Wikipedia is a large website that makes their money through asking for donations. However, Wikipedia provides a lot of value to people, so people are willing to donate.

Asking for donations is a very difficult business model. You have to have a loyal following that love your content. People are not likely to donate if they hardly know or trust your website.

Subscriptions and Memberships

Memberships and subscription websites are amazing sources of recurring income. The main problem is that you need to provide a ton of value to your customers to keep them subscribed. Some websites choose to provide a software as a service (SAAS) where people pay a monthly fee for the software.

For example, someone could create a paid membership for stock picks. They charge $15 per month and get stock tips delivered each week. People are willing to pay $15 per month if you’re making them more than $15.

Your first 100 subscriptions make you $1,500 per month. You could scale up to 1,000 subscriptions, making you $15k per month! Honestly, there’s nothing stopping you from scaling to 10k, 100k, or even 1M subscriptions.

Sponsorships

Companies and brands are willing to pay websites money to promote their product or service. You make an agreement with the brand to create and promote content in exchange for money. The larger your audience is, the more money companies are willing to pay.

Sale of websites

At the end of the day, you can make money building and selling websites. There is always someone wanting to buy a well put together website. Websites typically sell between 32-45x their monthly income.

Let’s assume you build a website that generates $10,000 per month. You’ve made a decent sum of money on your way to $10k per month. Now, you can sell that website for $320k to $450k!

Websites like Empire Flipper or Flippa make their money facilitating website sales.

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Summary: How do websites make money?

As you can see, there are plenty of ways websites make money. The most common ways websites earn money is through display ads, product sales, affiliate marketing, and digital courses. However, there are plenty of other ways to monetize your website.

In all cases, websites get paid the most to provide value. The more value you can provide to website visitors and your clients, the better.