6 Point Guide to Diversifying your Online Income Streams

There are plenty of online income streams that bloggers and webmasters employ. Some find great success with one method and stick with it. However, diversification is good. It means you won’t be at the mercy of one corporation or one law to make your living online. That’s not being paranoid though – look at what happened when Amazon closed its affiliate program in California. Thousands of bloggers who made almost all their income online from Amazon affiliates saw their incomes drop overnight from living income to pennies. That’s never a good thing and you ought to make sure such a thing doesn’t happen to you.

Another importance of diversifying your online income that is often overlooked is that you know what works and what doesn’t and you can direct your future efforts in that direction. It is alright to try a method of monetization and fail because that’s not what your readers want. That’s fine – it is always a good learning experience. You’ll realize that not all online income streams work for you, but you’ll get better at guessing which ones are worth the try.

So what are the different ways you can diversify your income online? Here are some ideas. Not all of them are passive, but every method can be lucrative depending on your online presence and your audience.
(write pros and cons below each)

1. Direct Advertising

Direct advertising is when you contact companies relevant to your website or blog directly and let them buy advertising space on your blog. In most cases, this is in the form of a banner, the size of which can vary greatly. Direct advertising gives advertisers a medium to reach out to your audience, and depending on how much value that can add, can be priced accordingly.

Pricing banners can be tricky and varies greatly (I wrote a post previously on how to price banners). In general, the more targeted your niche, the higher you can charge and the more engaged your audience with respect to social media shares and comments, the better you can expect to get paid. Obviously it also depends on how many impressions the banner gets – the higher the better.

Pros: Banners can be a great source of revenue and generally pays better than other advertising (e.g. see pay per click advertising below). Also, you get to form relationships in your industry that can be very useful in the long run.

Cons: Finding businesses that want to buy ad space on your digital property can be time consuming and you need to learn good negotiation skills. It is also a little more active than passive if the businesses don’t want to advertise on your blog for a long time, in which case you have to again go out and look for other businesses. Overall, this can be time consuming.

Example: If your blog is really popular, you can make a good amount of money by this method. Here is the banner pricing for Freelance Switch, the popular online blog and board for freelancers to give you an estimate. Here is John Chow, the famous dot-com blogger and his advertising rates for his blog.

2. Pay-per-click Advertising

In pay-per-click advertising, you get paid a certain amount of money every time someone clicks on a link. This means the pay is variable, unlike a banner ad. If a lot of your visitors click through to these ads, then you get paid more money.

Although there are alternatives, Google Adsense is the most popular option out there. The way it works it that you plug in a small code in your site and Google takes care of the rest – you don’t have to worry about issues like getting advertisers, pricing, etc. Ads can be configured to be text links, images, videos.

Pros: Very easy to set up and doesn’t require any work from you except the initial posting of the code on your blog. If your click through rate is high and you have a good amount of traffic, you can make good income through this method. It is one of the most passive online income streams you’ll find.

Cons: You don’t have control over what links are being displayed. Your pay is dependent on how your audience reacts to advertising – if less people click on ads, you get paid less. A lot of people use software to block ads in which case they won’t even see the advertising.

Example: Plenty of popular sites use Adsense to monetize their websites. Think of sites like EzineArticles that make hundreds of thousands of dollars through Adsense.

3. Affiliate Marketing

Affiliate marketing is both the blessing and scourge of the internet. You need to do this absolutely right to make it sustainable and for it to add any real value without driving away your visitors. Affiliate marketing is promoting products to your readers that might appeal to them. You get paid only when they complete a purchase and you get paid a certain percentage of the sale.

For digital products, ClickBank is one of the best sources of finding products to promote. Commission Junction has a lot of businesses in the online and offline world.

Amazon Affiliates is a special category in itself, being a program from Amazon, the largest online retailer. Amazon affiliates has the lowest percentage commissions per sale, but the conversions are usually very good owing to its brand popularity. Also, Amazon affiliates is a great way to promote a book you’ve been reading.

Before you involve yourself in affiliate marketing, it is absolutely necessary that you promote the right products. Since there can be a conflict of interest with your role as a blogger who wants to provide accurate information and the marketer who wants to complete a sale, you need to tread this area very carefully. Promote only the products that you have personally used and can vouch for. Never ever try to promote something that will turn out to be bad for your readers but gives you good commissions. Remember, it is all about building relationships with your readers. They need to find great value in what you promote.

Pros: Can be a potential goldmine depending on how well your recommendations work and how much your audience trusts you. Many bloggers make the major chunk of their income from affiliate marketing and can be far more effective than pay per click or banner advertising.

Cons: If you recommend bad products, you’ll lose your authority. Also, you don’t get paid until the sale is completed, which means you get nothing for impressions and clicks, which can be frustrating especially for beginners.

Example: Pat from Smart Passive Income shares his income reports every month. For October 2012, you can see his income report which shows affiliate sales at just under $39,000. Yes, that’s for one month alone. Yes, affiliate marketing can be lucrative. No, it isn’t typical (unfortunately!)

4. Freelancing on the Side

This isn’t passive income, but can be good income nevertheless. Generating significant passive income from your blog can take time and isn’t something everyone can do. However, taking your blog as a starting point, it is much easier to enter the freelancing world which can mean very lucrative assignments if you do it right.

You can work as a freelancer for specific skills, like a web-programmer, writer or graphic designer. However, don’t feel limited by these. If you are really good at something that doesn’t fit the traditional job routes, you can always consult for some of the bigger names in your industry and help them understand the market and position themselves better.

Pros: Higher pay for a lot of bloggers than waiting on passive income, immediate income stream. It is also a great way to brand yourself and your blog and get your name out there.

Cons: It isn’t passive and getting freelance assignments isn’t always trivial. Depending on what you do, it can be tough at times.

Example: Oni of YoungPrePro easily earns a 5 figure income just from freelance writing, mostly supported through his blog which is quite popular as well. It is a great way to leverage your skills.

5. Paid Social Media Campaigns

If you have a huge social media following, brands and businesses will be willing to spend money to promote to your list. It is not just about the numbers though, although numbers certainly help. If you write in a very targeted niche and your followers are passionate about what you write and show a level of engagement, you don’t need tens of thousands of followers to make a decent amount of money through this method. Twitter is the favored medium of social media advertising, although feel free to break such rules.

When you are doing this, be sure that you don’t alienate your audience and sound hypocritical. This is very important – there are enough such gaffes already in the celebrity world, the most recent being when Oprah pitched Microsoft Surface, tweeting from her iPad! Please avoid such blatant mishaps, else you’ll lose your credibility – that’s more important for bloggers than celebrities. This can be a good addition to your online income streams even if you don’t have a huge following like Oprah because it is so simple to do.

Pros: Once you have followers, you can promote multiple products without overdoing it.

Cons: You don’t want to lose your followers by pushing it too much and sounding like a salesman. It can also reduce your overall quality of engagement with your audience. You need a strong number of followers to really make decent money.

Example: Freelance Switch has about 40,000 Twitter followers and they charge $200 for a sponsored Tweet (http://buysellads.com/buy/detail/107/zone/1272970). My best guess is their followers are semi-targeted in the niche. If your blog is more targeted, you can get away with fewer followers.

6. Creating your own Product and Selling Online

Creating your own product that helps people solve their problems is a highly rewarding thing in itself. Every creator feels great when their brainchild is being used by people and provides them with helpful solutions. It isn’t easy to do though. However, if you can sell your own product to your audience who find value in it, that can be a source of great online passive income.

What you create will be up to you, but most people prefer a digital version of their knowledge and expertise. This can be in the form of an eBook that people can purchase or an online course or forum where you personally help people out. You can sweeten the deal by scheduling an online Skype call with your members for a set amount of time (though it isn’t completely passive again, but that shouldn’t deter you) where you can directly speak with them and help them out.

Pros: It is highly satisfying and something you create yourself and can be a nice source of passive income. It is also possible to let others promote this for you through affiliate marketing so you pay them a commission on every sale they make for you. Once you have enough engaged readers, this can scale up nicely.

Cons: Needs a lot of initial work and the quality needs to be top-notch. You need to genuinely know what you are talking about.

Example: Carol Tice of Make A Living Writing does this very well. She’s an expert in her field and has created digital properties that she sells through The Freelance Writers Den.

Update: Darren Rowse of ProBlogger has written a really nice article about whether it is practical/realistic to make money blogging and there are ideas about how others do it. Read it here.

Photo Credit: Newton Free Library