What is Passive Income?

By | September 15, 2013

The passive income business model is different from the traditional business model in thatbusiness man sitting on a chair on the beach with laptop doesn’t require direct participation of you or an employee to make money. In other words it isn’t a time for cash exchange, you can be at work, playing with your kids, or asleep at night and your business can continue be making money. This doesn’t mean that it won’t time or work to get started or keep running; it simply means that it doesn’t stop working when you do.

A very basic example of passive income would be submitting articles to content farms like ezine.com or suite101.com. With these sites you can write articles on almost any topic, they review it for quality and to make sure it isn’t plagiarized then post it. The article pages have ads or per-click advertising and the writer receives a percentage of the earnings. This method means you need to invest the time necessary to research and write useful articles – you submit the articles to the site & they are approved go live. Note there is no expiration date on these articles so they can stay online for years at a time, especially if they are well written and popular, so you can be making money off them for several years. The initial time investment that went into creating quality content can continue earning money for you indefinitely.

The previous example, writing articles for article submission sites, would be considered a truly and completely passive income source as it wouldn’t require any further time investment once the article is written and submitted. The site is run and maintained by a third party, and all advertising and link building are taken care of, all you do now is sit and wait. Other sources of passive income do require further investment of time, but are still considered passive because the business (website, e-book, App., etc.) continues making money for you even when you aren’t working on them at the moment.

The passive income source that we’ll be focusing on here is niche websites. While this method does require a bit more work & more of a time commitment, the earning potential is higher than with many others. There are other methods of passive income, and you’ll find a basic explanation of what they are & how they work in “Passive Income Sources”.

What Can all this mean for you?
Put simply, it can mean another source of income without getting a second or third job. It can mean helping you get through college or save to put your kids through college; it can be a way to save for retirement or to retire early; for single parents this can mean much needed financial help for school supplies, clothes or medical bills. For some of you learning how to earn a passive income online could even mean a way to change your life & get you out of a dead end job.

I want to emphasize that this isn’t a get rich quick scheme! This isn’t a quick fix to all your financial woes, or an easy-to-win lottery ticket! This isn’ta magic pill that will make you millions in no time with no effort at all on your part. What this is, is a way to build a business that can be very profitable for years to come if you are willing to put in the time and effort & learn the ropes. What you will find here is a tried and true, step by step method that WILL WORK if you stick to it and are willing to put in the effort!

I also want to mention that this isn’t the ONLY way to earn a passive income online, and I’m including information on a couple other methods here, but this is one method that I know works & can work for most people!

If it is really possible, why don’t more people do it?

The number one reason more people don’t make money online is simply that they never follow through with their plans. So many people flirt with the idea, research and read, and buy a domain name, sign up for article submission. Many might even get as far as designing the site, but choke when it comes to creating the content for it, or writing articles. Or, they get it all online, then never work on search engine optimization, link building or building an audience or up keeping the site.

Real-world Example:

Example 2:
Imagine you create a great new product, design the packaging, rent floor space, decorate & personalize, stock the shelves, the whole kit and caboodle. Then, after waiting a few months to see if any customers arrive, you walk away & wondering why it isn’t making any money, and cursing the idea as a stupid waste of time. Well, the problem is, you forgot one major step, advertising!

The problem is no one knows where you are or how to find you. They have no idea what you are selling, what your product does, why they need it, or even that your store exists, so naturally, you have no customers. The people that recognize this and make an effort to market their product, naturally, have a much better chance at success. Sadly, many people give up at this point, shrug it off as another false hope, and throw out the baby with the bathwater. Big mistake!

You see, while in the real (non-digital) world, if you rented a space somewhere with good traffic, like in a big mall, then you might end up with a great flow of customers just because of your location, the internet doesn’t work like that! In the digital world there are no malls or naturally populated areas, so there are no great spots to rent next to Amazon or Facebook that will drive traffic to you just because of your level of visibility.

Translating it to Web Terms

When it comes to passive income, or niche websites the different aspects would be as follows:

 
  • The product is your Content.
  •  The storefront, design & packaging is your website including domain name & hosting.
  • Advertising is SEO or Search Engine Optimization. This includes link building, advertising, social networking, database submissions & on-site optimization to help your customers find your ‘store’.

There is one major difference though, and that is that most websites give their products/content away completely free! As opposed to a physical business where a customer comes in, finds a product they like and pay for it, unless you are running an ecommerce business (virtual store or marketplace, like Amazon), in general a user will go to a site or blog, read the article they need or find the information they want and leave without buying anything directly, So how do you make money? Well, the passive income business model has another aspect to it, and that is monetization, or setting up the site to generate revenue for clicks, leads, or sales of digital products.

Websites that offers free information can make good money without actually selling a product themselves. This is done through affiliate marketing & pay-per click programs.  If a user comes to your blog, reads the article and follows a link to a suggested or mentioned product, and buys it you make a commission for your referral.  Some affiliate products pay as much as 50% of the value of the sale.

Income Source One:

Render of a Affiliate Marketing Concept.

If your user purchases one of the products or services that you suggest or offer, you

get paid a commission, this form of monetization is called affiliate marketing. Affiliate marketing is one the most popular and most profitable ways of monetizing a website while still offering quality content to the user.

Income Source two:

ppc

The entrances to leading to other stores would be pay-per click advertising. This concept is

simple enough to understand, if your visitor clicks the link, you get paid. It doesn’t matter if they buy something or not, of course the pay is much less, than for affiliate marketing, but it can add up if you have well placed ads and a good amount of visitors.

Income Source Three:

Your AD Here Concept

Another source of income could be paid advertising. This form of income isn’t for startup sites and is usually only an option if your site has a good steady stream of visitors. Most companies wouldn’t want to pay to advertise their product on a site that has little to no reach, much like paying for a billboard on a deserted street.

The various ways to monetize a website are explained in detail in the Monetization section of this program, but at this point you should understand the basics of how it works and how it can work for you

 

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