The Truth about Passive Income

The Truth about Passive Income image money treeThe Truth about Passive IncomeSince the dawn of the Internet as we know it, the act of making it online has been viewed as some kind of mysterious and mystical practice. To some, it seems just about impossible; meanwhile, others are quick to latch onto just about any get-rich-quick scheme in order to make a buck. Even before the dot-com bubble burst, the illustrious idea of making money online has created a sort of gold rush mentality. That is, entrepreneurs and businesses are taking to the proverbial hills of the Internet in an attempt to uncover some sort of buried treasure.

Passive income is often seen as the holy grail of Internet marketing, and why not? The notion that one can make thousands of dollars a day while sitting in their pajamas is both enticing and sexy.

They do it, so why can’t I? It can’t be that difficult, can it?”

In the midst of the buzz and white noise, many entrepreneurs and business owners have lost their way in search of easy money online. Leaving behind the traditional principles of entrepreneurship and disregarding the modern web, many marketers flounder in their attempts to build a passive income empire as they fail to realize that “passive income” is anything but passive.

Passive Income: the Dream…

When marketers discuss “passive income,” they’re typically referring to some form of affiliate marketing or content marketing combined with AdSense or text-link ads. A typical formula for creating a site generating passive income can be broken down as such:

  • Create a website and subsequent blog surrounding a particular niche market or product with the potential to generate income based on traffic
  • Craft content with appropriate keywords surrounding the aforementioned niche
  • Share the aforementioned content to help generate a social presence for the site/business and establish a link profile
  • Repeat steps two and three until the site’s traffic reaches a level which is seen as suitable by its owner
  • Repeat the above steps with a new niche ad nauseam, eventually creating a network of sites generating passive income

…and the Reality

Sounds simple, doesn’t it? The above example of creating a network of sites generating passive revenue, despite its relative simplicity, presents a number of requirements and challenges for its owner from the start. Ask yourself the following:

Do you understand the fundamentals of websites and web-design? Users today are spam-detectors and aren’t as easily fooled as those online a decade ago. Your blog or website will ultimately suffer without a professional feel and functionality. Consider how seemingly simple variables such as WordPress plug-ins or hosting and how they may impact your site’s traffic. Further consider banner blindness and the fact that an estimated 60% of users cannot remember the last ad they saw. How do marketers overcome such behavior and manage to generate income?

Do you understand a niche market well enough to dominate it? Many marketers fail to find a niche which they can realistically keep up with. Attempting to rank for “laptop” versus “tablet PC” versus “Samsung tablet PC,” for example, represent three completely different niches, sites and amounts of resources involved.

Do you understand the fundamentals of SEO? As Google has continued their crusade against spam from Panda to Penguin, site owners must be particularly mindful when it comes to effective SEO techniques. Additionally, sites today require effective keyword research in hopes of ranking against stiff competition.

Do you have what it takes to craft the content? Content creation is the cornerstone of niche sites and blogs. In addition to the manpower involved behind creating and researching effective content, you must also be able to engage an audience to click-through your links. Historically, this is easier said than done.

Further consider resources and examples from sites such as Pat Flynn’s Smart Passive Income, which is, ironically enough, generating passive income based on Flynn’s knowledge of niche sites. Based on the site’s reports and his own accounts of success, he often must purchase dozens of pieces of content en masse from content mills in order to generate traffic. Can you afford the same approach? Is it even possible to dominate your niche by yourself?

Do you understand the social network? No two social sites are created equally. What performs well on Facebook may not fly on Twitter; therefore, effective social engagement requires a keen understanding of modern social media. Consider that sites such as Tumblr and Pinterest were hardly on the map a couple of years ago. As different sites play by different rules when it comes to content-sharing, site owners have their hands full when it comes to promotion.

Can you keep up? Sites should be consistently updated in order to keep a fresh look and remain in Google’s good graces. As technologies such as AdBlock create new challenges for affiliate marketers, site owners cannot get complacent and must therefore pay attention to trends to keep their so-called “passive” sites current.

The Bottom Line

If you’re able to answer “yes” to the above questions and have the time and energy to dedicate to such a project, you’re poised for success. Bear in mind, however, that the concept of such a project is not so passive, is it? Generating revenue online is far from impossible; however, the true amount of work involved is often and overlooked and oversimplified. While you certainly should not be afraid to try to make a buck online, understand what you’re getting into before you get started.

Image via Shutterstock

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