If you know your niche, that's basically all you have to look at when you are searching for ways to monetize a site, along with "how big is the cut".
I didn't start in internet marketing. I started before I had a computer in my teens with "Make Money at Home" offers. I never fell for any of them enough to sign up, but I got myself on every list I could. I would get an offer and follow the money trail in my mind. I realized why most MLM products are so expensive. Because everyone and his brother gets a cut. I approached it from the mentality of someone just getting an entry level job and telling his boss, "I want your job."
Your Own Product
In my last post, I forgot to mention that probably the best way to monetize a site is with your own product. That way the only person who gets a cut is the payment processor. And with digital products like software and ebooks, there is no overhead once the product is finished, except for updates. Plus, if you sign up some affiliates, you don't even have to cover the marketing. Of course, affiliates get a cut now. But it is much better to get 50% of the profit from 100 people promoting your product than 100% of the profit from doing all the work yourself.
Affiliate programs were the first way the average person could get online and start making some money and I bet that some of those people who signed up for the first affiliate programs are currently deciding in which one of their five houses they will be spending the summer in.
You have to investigate affiliate programs to see who gets cuts. With most digital products, only the product vendor, the payment processor and you get a cut. And usually the average cut you will get is close to 50%. Digital products are unique in that the break even point for the vendor who created the product could be only a few sales in, yet people are willing to pay $100 a pop years after he has paid off his house with the sales. Digital products solve problems.
With hard product affiliate programs, you have to go all the way back to the person that mined the silicon for the computer chips, but not always. Some markets, usually the type you see in MLM's like herbal supplements, will give you the same cut as digital products. They no longer have to pay off everyone and his brother. Only you, the affiliate.
Then there are leads, which is a different animal altogether. You get paid a flat rate for someone to sign up for something. Usually they don't have to pay anything to do so. And the cuts are harder to see, since the company paying you is playing the cell phone company trick. We will give you this phone, but at the end of two years, you will have paid us many times the price of this free phone. So they pay you the affiliate hoping to make it up in the end. And they always do. If not, the amount they pay you will adjust to make everything profitable.
You have to watch affiliate programs sometimes though. A lot of the products you can promote through Amazon can be promoted through each companies own affiliate program without Amazon taking their hefty cut first. But there is something to be said about the automation Amazon provides.
When we move to CPM (getting paid a flat rate for every 1000 visitors) and CPC (getting paid for every click), your cut really starts getting smaller.
CPM is Crap
CPM is crap. Let me repeat that. CPM is crap. CPM is for people that have so much traffic that they don't know what to do with it, so they sign up for CPM programs because they don't want to screw with it. CPM is the model of huge companies. If you are the biggest computer maker in the world, you can afford to make only $1 profit from each computer if you are selling a billion computers a year.
Let me put it in other words. If you have a site that can make good money from CPM, you are probably not reading this sentence. CPM is shotgun marketing. Throw hundreds of ads at the wall for cheap and see what sticks. I have been on the other side of this equation a few times.
You pay something crazy like $2 for every thousand visitors who see your ad which you think is a deal. Chances are that less than 1% of the people will click the ad. Of those people, you are lucky to get 3%. So by paying $2, you may only get one sale. The prices paid for this type of advertising is not going up. If anything, it's going down as advertisers get more savvy with their money. Not every advertiser is a lawyer with 40% commissions to throw around. Some are like me, affiliate marketers, who still have other people waiting for their cuts after I make a sale.
And, of course, the company that these ads are generated by, (i.e. Adwords), get their cut too, with the average being around 50% of what the advertiser is willing to pay.
As a publisher, you feel like the pizza delivery guy who gets a 25 cent tip after delivering 100 pizzas to the Lions Club.
CPC is not much better
CPC is about the same, but sometimes you can pick some winning clicks by focusing on certain topics and subjects or by signing up for a new program where the advertisers are still throwing money away.
It's about the same, because all the same cuts are taken out. And if everything were balanced, CPM and CPC would be the same price at the end. Holes get plugged. If advertisers discover that CPM is cheaper through a system, a bunch will move in that direction, which will cause the CPC ROI to increase and send advertisers in that direction. An endless cycle that results in a net balance.
The more people involved in an advertising system, the less room for runaway profits. New systems like AdBrite and Bidvertiser offer better CPC payouts compared to Adwords. I have tested them. But they are still in their wild west phase. Advertisers overspending in a system they are just learning. Not enough sites in the system to have real variety, so all the advertisers are bidding on the same limited amount of sites. These programs will either level out or fade away.
Oh, my God. They had to take the cuts one step further. There are currently a few sites in beta that optimize your CPC ads for you, testing and running the most profitable ones. They are free in beta. But soon they will be taking their cut, about the 400th cut in that money line. Yes, they optimize your ads so you make more money and if you already make a lot from CPC it's worth it. But if you have 100 subscribers, don't bother.
There are few widget ads companies out there. I am not sure of their actual inner workings. I am planning a Wordpress plugin and system that will take them out of the equation for bloggers who want to get their hands dirty. People are getting paid 30 cents a click on hard product ads. Better than Google, but not even close to the average 10% commission you can get from a sale.
Paid reviews and text link ads are a different animal.
Text link ads have more value than just for advertising. They can actually improve rankings in search engines for the advertiser. Currently I think a lot of these are underpriced due to the "Google is going to find out" scare. And this is a game to be played by experts, not that I am at text link ads. I am just learning this one myself.
With paid reviews, you are also walking a fine line with Google also. And depending on who you go through, the cuts that everyone takes varies. But with newer sites, the promotion value of being in a system outweighs the cut.
When you are up to the "guru" stage, like John Chow, you really don't need a program to go through. When the price for one post starts hitting the hundreds, you are not only getting paid to get the word out about something, you are getting paid because "you" got the word out about something.
If you can sway a lot of people and your word is trusted, there is a little slop. Yes, the person getting paid millions of dollars to plug basketball shoes can get a whole bunch of people to buy, but does it have anything to do with the shoes or the words he is saying. How much would the average no-name actor get paid?
That has to be a nice place to be though.
Follow the Money Trail
Like I said, that's basically all you have to do. See who gets paid every step of the way and it doesn't matter what the commission is, you will know when you are running around in a gerbil wheel for peanuts.