An Explanation of How the Internet Makes Money

The NetI don’t really have anything particular I want to blog about today, but this topic has been at the back of my mind for a while, so I thought I’d take the time on a slow news day to write about it.

The internet.

Well, not the internet in general, but more along the lines of “where the money comes from.” Because right now, we all use the internet, pretty much for free. Yes, to get the service to your house costs money, but to use various sites online (Facebook, Youtube, Google, CNN, etc.) doesn’t cost you a dime. Ever wondered why that is?

Well, wonder no more.

First off, let’s make a distinction between people and corporations. People often do things for free. (This blog, for example, doesn’t charge you to read it. Nice of me, huh?) Corporations, on the other hand, expect to be paid for what they do. When you buy a newspaper, the newspaper makes money. When you read one online, how does that work? It all comes down to advertising. Do a search in Google, and you see ads. Search in Youtube: you see ads. Check Facebook: ads. Read CNN: ads. Everywhere you go online, you see ads. Corporations charge companies for those ads, and that’s what foots the bill of you seeing something for free.

It’s not free–someone else just paid for it. Make sense?

Take my site for example. When I used to be on Livejournal, Livejournal would put ads up. All my readers would be exposed to those ads, and Livejournal would make money off each exposure. That’s one of the reasons I switched to Blogger. Yes, there are still ads on my site, but now when someone looks at them, I get the money, not some corporation. (No doubt Blogger takes a cut, too–but at least they’re sending some of that cold hard cash my way.)

Of course, it’s a bit more complicated than that. Advertisers are all for paying for ads, but they really want people to actually go to their site or view their full offerings. That’s why they pay even more for people who click on their ads. You viewing an ad on my site might net me somewhere along the lines of $0.000001. You clicking on that same ad? That might give me $0.50 (maybe even more–I’m not sure. People don’t often click on the ads on my site, so I don’t know what the average range is).

Naturally, advertisers don’t want to shell out money for random clicks. There’s such a thing called “click fraud,” where someone pays people to click on ads a ton, thus theoretically making someone somewhere a lot of money. Go figure. You’re also not supposed to click on your own ad links.

I always see rumors swirling around Facebook or other current free sites, saying that soon the site will start to charge money. As long as the site can make money from advertisers, this won’t be the case. But there’s technology out there that blocks ads on your browser, making it so that you don’t have to view them–but of course, the sites you go to don’t get money, either.

The good news here is that if you want to help the sites you like, you don’t even have to really donate to them or buy what they’re selling. All you have to do is keep going to their site. If you see an ad that looks interesting, click it. You don’t need to buy what you clicked on–the site you like will still get the moola.

All of this actually ads up to pretty big sums. For example, for a while Bing was trying to get a piece of the ad market, trying to persuade Google users to come to them. As part of their strategy, they offered the Cashback program. If you went to Bing to search for an item to buy, and you bought that item after finding it in Bing, Bing would give you a percent of the item’s cost back to you–anywhere from 1-8%. Sometimes more. So you could buy a television for $500 and get a check for $40 mailed to you from Bing. Yeah, I don’t get how that all plays out, but my point is that advertising can ad up. (And sadly, the Cashback program is no longer living. It didn’t work well enough–people still preferred to search through Google. How sad is that, when not even bribes can keep people away from a competitor’s site?)

And that’s all I have to say about how the internet makes money. Any questions?

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