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How Does Paid Blogging Work?

One of the biggest questions I am always asked is how the whole paid blogging thing work? Where does the money come from to pay bloggers? How can people afford to pay bloggers to write?
Most people don’t see how there can be any return in investment they make, or that they could even monetize their own blogs and use that to start their own network. One of the best things about blogging is low barrier to enter, and getting bloggers really means you need to pay for a domain, hosting, and the writer/blogger’s time.
Deep Pockets
Usually to start paying bloggers you have to take from your own pockets. The deeper your pockets, the more likely you can be to eventually turn a profit, or if nothing else, pay some decent writers to create content for the blog or blogs. Sometimes it can take half a year or even a full year before a blog is established enough to begin equalizing out the difference between paying bloggers and what the site makes. Some sites never get to this point, and that should be understood before attempting to do this. Its only an investment if eventually the investor gets a return on the funds the poured into the blog.
Advertising Revenue
One of the main routes for paying bloggers is advertising revenue, but this can be a bit of the chicken and egg problem because advertising revenue does not come until a site has become established. Usually though after some time, a blog can pay for its writers via advertising revenue, and sometimes even turn a profit.
Revenue from Other Projects
The last way to pay for a blogger or two can be by taking revenue from other projects or sources. This is a lot like taking from your own pockets, but it is less risky. You only invest into the blog what you are making from another project, and as the blog matures, you can then take any profit made from the blog and invest it back into the initial service.
It usually takes a mix of the three to make sure that the blog runs safe and sound and get it off the ground, eventually advertising through one of the many services that are out there, mixed with a good Google Page Rank and some decent traffic can usually help make a blog have a reasonable cash flow.
When I explain it to people I talk to I tell them it is not really any different than a magazine. Writers are paid by publishers, publishers are paid by advertisers, and advertisers make money by getting the readers to buy their product. Hopefully, this can be a quick article that we all point people to, when they do that head tilt and nod when we tell them that we are paid to write on blogs, or wonder how paid blogging really works.