Blogger Tool Economics

posted by philip in Website Updates, Snooth

A few of you asked me to explain the economics behind the blogger tools. Specifically how someone can earn money on the bookmarklet when the per-click rate is just a few cents.

The following illustrative scenario highlights how, if a blogger were to make this part of their routine, the aggregate value of all the links in perpetuity would continue to grow and become very significant.

Lets say this sample blog receives 200 readers per day and each embedded link receives clicks according to the following schedule:

• Day 1 (the post is new and people receive it in the RSS feeds): 10 people click a link
• Days 2-7 (people are commenting and linking to the post): 4 people click a link
• Days 8-30 (the article is no longer on the blogs home page): 1 person per day clicks
• Days 31+ (the post is old, but google still deep links to it): 1 click per week

The key here is that even after day 31 the link is still active and brings in a few cents a week, for as long as the blog is active. So even though the first day would only net $0.50, at the end of the first year that link would have bought in $4.10 - and thats per link. Each subsequent year would net $2.60, again, per link.

OK, so $4 isn’t a whole lot, but now lets assume the blogger publishes 2 articles per week. Now you’ve got 100 links, per year, each pulling in $4 in their first year and around half that in subsequent years.

Fast forward 2 years, and if the numbers hold true, you’ve $600-$800 per year. Once we begin to plot that you end up with something like this:

Each link trails off fairly rapidly, but never hits zero. So, like with any long-tail (or power law) distribution, over time these onesies and twosies add up and become very significant. The blue line, which represents total revenue, grows exponentially - and thats how the money is made. Of course, the real amount that you would earn specifically would depend on number of links, traffic and click through rates. The example here is really to illustrate the power of aggregating the long tail.