ProBlogger: Understanding Blogging Arbitrage

Posted: 30 Jul 2011 07:08 AM PDT

This guest post is by Kevin Muldoon of WordPress Mods.

As I used to run a few poker discussion forums and information websites, a large part of my income over the last several years has come from poker referral commissions. Commissions have dropped every month over the last few years, which is not a big shock since I sold my last gambling related site about five years ago. What was a big shock was the recent poker ban in the USA, resulting in thousands of dollars being taken away from me every month.

Strangely, this has not necessarily been a bad thing for me—quite the opposite. Having a constant stream of income every month for several years was great, though it did make me lazy in many respects. With these commissions gone from my monthly income, I have found myself really focused to get things done and get things done sooner.

The first thing on my agenda was to reduce outgoing costs. Sadly that meant letting two regular writers of my blog go (for the time being) until I can reassess where income can be improved. I enjoy writing so I don't mind taking on extra writing responsibilities for my blog, though it did make me analyze my own duties more.

What is your time worth?

One of the biggest questions I had to ask myself when my income dropped was, “How much is my time worth?” If you make money from a number of different areas online (e.g. affiliate commissions, blogging, flipping websites and domains, etc.), this isn't an easy thing to answer, particularly if your schedule changes from day to day.

If you are a blog owner and spend a lot of time writing articles for your own blog, there is a more suitable question to ask: “How much is my time worth as a blogger?” This is something I asked myself when thinking about the long-term posting strategy for my blog. Is some of my time better spent writing for other blogs and websites?

Consider a blog owner who writes one 1,000 word article for his blog every single day but unfortunately has no money to spend on writers. If he were able to find a good writer it would be in his interests to hire him if he was able to secure a writing job for himself at a much higher rate.

For example, if the blog owner got a blogging job that paid him $50 for every 1,000 word article, they would have the funds to hire a blogger at $25 per 1,000 word article. The blog owner would of course expect that the articles were of an equal or higher quality of his own. The outcome being another article being published on his blog plus $25 in profit from his own writing position.

In economics this is known as Arbitrage. Arbitrage is the concept of taking advantage of the difference in price between two markets. If someone can exploit this, their profit will be the difference in prices. Those who have dabbled in PPC marketing will be aware of this concept, as it’s used by many affiliate marketers to make money through Adsense. (In short, they bid low for certain keywords on PPC services and hope to make a profit when the user clicks on an Adsense advertisement which pays out more.)

Therefore, blogging arbitrage could be described as:

The difference in price between the rate you personally charge as a blogger and the rate you can pay to other bloggers to take over your writing responsibilities.

There are some things to bear in mind when applying this strategy:

You need to take a note of the time you are spending writing articles for others. Getting paid twice the rate you pay out is irrelevant if the articles are taking you three times as long to write.
A little time needs to be set aside when hiring writers for your blog, as it can be time consuming emailing them with advice and guidance, proof reading their posts, and then arranging payment.

Taking advantage of blogging arbitrage

I don't believe that any blogger should spend more time blogging for others than on their own site. It's important to have an input into your own blog and not let additional work slow your blog’s progress.

There are benefits of using blogging arbitrage, though. Not only is it an extra way of making money, it also helps promote your own blog. Most blogs have an author bio at the bottom of each article where some information about the author and a link to their website can be found. Therefore, writing for other blogs will bring you some extra money and traffic back to your blog.

The additional income is something that is vital for bloggers who are starting out and are looking for ways to increase their profits, so the benefits of using blogging arbitrage will decrease as your blog becomes more successful.

Nevertheless, I think that it is an important principle to understand. Have you ever used blogging arbitrage? Does it sound like a tactic that could help you make your blog more profitable?

Kevin Muldoon is a webmaster and blogger who lives in Central Scotland. His current project is WordPress Mods; a blog which focuses on WordPress Themes, Plugins, Tutorials, News and Modifications.

Originally at: Blog Tips at ProBlogger