Passive Income

[shinyjourney]

Hi Guys,

I'm doing a research on Passive incomes online. I just read the Time Ferriss' book "the four hour workweek" and i would love to know your thoughts about it.

Even if it is not about "the four hour work week", did you or do you experience a success in passive income. What strategy do you use?

Would you share your story?

Thanks

[mikethedrummer44]

Four hour work week is a great book. Really helped me focus on making passive income myself. I run a SEO article writing business, and I've recently started hiring people to do the work for me. It's not completely passive--I still have to proof read and edit all the articles, but I only spend about 30 minutes a day.

The problem is, now that I have semi-passive income, I have way too much time on my hands. Gotta find a new hobby, or maybe I'll just play more video games.

[SnerpGoodWord]

I think passive income is somewhat of a misnomer in the sense that it takes a lot of work to get the income flowing and maintain it. A good example is people who buy strings of vending machines. Is it passive? Sure, people just come by and buy your soda or whatever. But you have to stock them, and that turns out to be time consuming. It's really easy to buy yourself a sub-minimum-wage job that way.

I see a lot of people do the same thing online blogging or whatever too - they put hundreds of hours into writing about whatever, and get $75 a week in return from adsense after they build a bunch of traffic.

Just as a general economic principle, production requires a mix of both labor and capital (aka money/physical resources). Passive income is trying to do away with the labor (at least on your part). And since most people looking for passive income are pretty broke, it generally doesn't involve a capital investment either, or not much of one. Typically the result, as economics suggests, is that nothing of value is produced.

[Curtis2011]

Originally Posted by SnerpGoodWord

I see a lot of people do the same thing online blogging or whatever too - they put hundreds of hours into writing about whatever, and get $75 a week in return from adsense after they build a bunch of traffic.

If you think about it though, the actual return on investment can be very high in the long-run if you set up a website that makes, say, $200 a month. Even if you spend 500 hours building that website, once it reaches "autopilot" it is basically like holding a stock that is paying you dividends for the rest of your life. Generally if you do it right, your website will last for years and years and even often increase its traffic and the amount it pays you.

So, in the short run, it is a very bad investment. But if you look at the returns over 10 years or more, things like $50 a week from a website can really add up in total value.

Originally Posted by SnerpGoodWord

Just as a general economic principle, production requires a mix of both labor and capital (aka money/physical resources). Passive income is trying to do away with the labor (at least on your part). And since most people looking for passive income are pretty broke, it generally doesn't involve a capital investment either, or not much of one. Typically the result, as economics suggests, is that nothing of value is produced.

I think this is only partially true. With an online business that brings in passive income, it's not that you are reducing "labor" to zero. It could be argued that instead, you are setting up computers to "do the labor" for you!

Think about it: If I set up a website that automatically gets visitors, shows them a sales page, sells an ebook, delivers the ebook automatically, then deposits the payment into my account.... Well, that is a lot of "labor" or "stuff" that is going on.

In traditional business, some labor would be things like making cold calls to find new customers, talking to them enough to sell them on your product, collecting their payment, delivering the product, etc. With today's technology, you can still "do" all that "labor", but it can all be done by machines and automated completely.

So in essence, depending on how you want to look at it, it could be argued that creating passive income is simply automating the labor by utilizing the right capital, similar to automating a production line by buying machines to make the products for you. All the same work is still being done, but now you don't have to have humans doing it.

[shinyjourney]

Mikethedrummer44, this is really great for you, you found a model that works for you, i like it!!

Snerpgoodword, I think you missed my point. And maybe, as Curtis2011 said, this is a great investment to work hard at first and then establishing an auto pilot business. BUT, this requires work to set up.

My point isn't to not work to get money, (i own a video production company in france that requires a lot of work, so, i'm not affraid by working), it is to find SMART ways to make money. And smart today means passive, this is the result of my searches on the subject. Why will I search for jobs that make me work 13 hours a day when I can work now to find auto pilot businesses that will help me to do what I truly love and not be dependent on it to earn money.

Do you get my point now?

Thank you :-)

Virginie

[SnerpGoodWord]

Originally Posted by Curtis2011

So in essence, depending on how you want to look at it, it could be argued that creating passive income is simply automating the labor by utilizing the right capital, similar to automating a production line by buying machines to make the products for you. All the same work is still being done, but now you don't have to have humans doing it.

I don't think that's an unreasonable view up to a point, but I get the distinct feeling that most people trying to build passive income online aren't in fact automating the labor. Instead they're doing huge amounts of labor to keep that two figure check coming. I realize there are a few success stories, but I think they're outliers. If you added up the total hours spent "making money online" and compared it to the total $$$ earned, my guess is people are making well under minimum wage on average.

[Daffy Duck]

Originally Posted by SnerpGoodWord

If you added up the total hours spent "making money online" and compared it to the total $$$ earned, my guess is people are making well under minimum wage on average.

I'm sure you're right. Making money online isn't right for everyone. Many people are not talented writers, so they spend a lot of time writing something that just ends up being crap. But for the people it does work for, it can work very well. And it's fun.

[mikethedrummer44]

Originally Posted by Daffy Duck

I'm sure you're right. Making money online isn't right for everyone. Many people are not talented writers, so they spend a lot of time writing something that just ends up being crap. But for the people it does work for, it can work very well. And it's fun.

Fun?

Well, some parts are, I guess.

[Daffy Duck]

I hope so, bud!

The sites I have that make me the most money are the ones I started as a hobby, for fun, without any intention of making money from them. I've only recently got into the concept of building sites specifically created to make money from. I'm still having fun with it.

[Curtis2011]

Originally Posted by Daffy Duck

I'm sure you're right. Making money online isn't right for everyone. Many people are not talented writers, so they spend a lot of time writing something that just ends up being crap. But for the people it does work for, it can work very well. And it's fun.

Well yes, it requires tons of work in the beginning.

If I added up how much money I've made from my acupuncture website versus the hours I've put into it, there is no way it would even reach minimum wage.

But the thing is, if I wanted to, I could just let it sit for the next 10 years without doing anything to it, and it would keep earning money at about the same rate. I haven't modified it in about 6 months and it's still earning the same amount of income every single day without me touching it.


I think you really strike it rich when you do a ton of work, and get a much BIGGER amount of passive income. Then eventually you can just chill out and sit on your butt all day if you want to, and let the income flow in.

[mikethedrummer44]

Speaking of helping your websites by doing nothing (were we speaking about that?), I'm actually really surprised how much link juice this forum gives to the websites I have up. Good stuff!

[Curtis2011]

Originally Posted by mikethedrummer44

Speaking of helping your websites by doing nothing (were we speaking about that?), I'm actually really surprised how much link juice this forum gives to the websites I have up. Good stuff!

Your websites probably are doing better simply on their own... because all of the links from this forum appear to be no-follow.

[cdavis]

Originally Posted by mikethedrummer44

Speaking of helping your websites by doing nothing (were we speaking about that?), I'm actually really surprised how much link juice this forum gives to the websites I have up. Good stuff!

I thought everyone says these are no follows?

try to go to Paul Oakenfold's website and join his forum, I hate forum spam but supposably his passes a lot of link juice

[cdavis]

yea dude I just checked these are definitely no follows

Search Marketing Bootcamp: How To Tell if a Link is NoFollowed

[mikethedrummer44]

Originally Posted by cdavis

yea dude I just checked these are definitely no follows

Search Marketing Bootcamp: How To Tell if a Link is NoFollowed

Well they show up on yahoo site explorer.

Doesn't really matter anyways, because you get a ton of traffic just by having links in your signature. Also, word on the street is that google does follow some no follow links. Not sure how that happens, but whatever! Lol

[Curtis2011]

Originally Posted by mikethedrummer44

Well they show up on yahoo site explorer.

Doesn't really matter anyways, because you get a ton of traffic just by having links in your signature. Also, word on the street is that google does follow some no follow links. Not sure how that happens, but whatever! Lol

Well Google has specifically stated that they don't fact no-follow links into ranking calculation. They still could do it, but it is doubtful; they haven't been known to blatantly lie to the public as far as I know (unlike some companies.. ahem British Petroleum, et al.)


But yes, Yahoo does report back no-follow links. However, that does not mean they are factored into ranking calculation. Most likely they are not.

[cdavis]

Yea, too many SEO's spam forums that pass good link juice...once they are discovered, they get spammed like a motha' and the forum owner is forced to go the nofollow route, lest they be spammed to death.

I don't know about yahoo though, I only pay attention to Google.

[mikethedrummer44]

Bummer. I saw the links in site explorer, and saw my site rising in the serps even though I hadn't updated it in a while. Must be the age!

Oh well. Still get some traffic through this site.

[cdavis]

SEOmoz | Linkscape — Unparalleled Link Intelligence™

Try using this tool, it's the best free link analysis program you can find

[Curtis2011]

Originally Posted by cdavis

Yea, too many SEO's spam forums that pass good link juice...once they are discovered, they get spammed like a motha' and the forum owner is forced to go the nofollow route, lest they be spammed to death.

I don't know about yahoo though, I only pay attention to Google.

I just don't pay attention to my links at all

I only use Google/Yahoo link searches to research competitor websites.

[mikethedrummer44]

Originally Posted by cdavis

SEOmoz | Linkscape — Unparalleled Link Intelligence™

Try using this tool, it's the best free link analysis program you can find

Cool. I'll most likely use that in the future.

[cdavis]

Originally Posted by Curtis2011

I just don't pay attention to my links at all

I only use Google/Yahoo link searches to research competitor websites.

why don't you pay attention to your links Curtis?

SEO heresy I tell you! heresy!

[Daffy Duck]

Originally Posted by Curtis2011

But the thing is, if I wanted to, I could just let it sit for the next 10 years without doing anything to it, and it would keep earning money at about the same rate.

I agree with your philosophy that once it is built, it will keep earning money. I have a site I haven't updated in a solid year and it actually earns me more money now than it used to.

But -- we don't really know if our sites will be making money for the "next 10 years". The Internet could change in a big way in 10 years. Know what I mean? There could be some new technology that makes all SBI and Wordpress sites practically worthless. Technology changes fast.

Hopefully that doesn't happen!

[SnerpGoodWord]

Originally Posted by Curtis2011

Well yes, it requires tons of work in the beginning.

If I added up how much money I've made from my acupuncture website versus the hours I've put into it, there is no way it would even reach minimum wage.

But the thing is, if I wanted to, I could just let it sit for the next 10 years without doing anything to it, and it would keep earning money at about the same rate. I haven't modified it in about 6 months and it's still earning the same amount of income every single day without me touching it.

This is an interesting point. When evaluating income streams more conventionally as investments, one of the classic mistakes is to assume the income stream will last forever. In the brick and mortar world, that's never true. Buildings wear out, products become unattractive to consumers, etc. and additional capital and labor is required to repair/refresh your investment. It would be interesting to understand the analogous online paradigm and whether it's really different - what has happened to the income generating sites of 1998 that were left untouched for example?

[Requiem]

"Success" is hard to define, but I'd say that my current passive income activities are successful.

For one, I make passive income through dividends. The income grows as I save, and each source grows each year as well.

And then I've got my blog, which is only partly passive since I still put a lot of time into it. But it's passive in the sense that the amount of time I put into it is decoupled from the amount it actually earns now, as the traffic is pretty self-sustaining at this point. And it's now to the point where the amount of time I put in is well-rewarded. At first when I blogged, the amount of income divided by the amount of hours spent in a given month was really low. But now it's on par with my regular job.

And I expect it to become more passive as it continues to mature. For instance, I write weekly stock analysis reports. I currently have 30+ of them published. Once I get to about 60, I could drastically cut back on my time spent on the website by re-publishing an updated version of each stock once per year (which is useful because things change over time). An updated stock analysis will take less time than a fresh one. But I plan to stay active by continuing to publish new ones in addition to updating old ones.

Also, I find these things successful simply because I enjoy doing them. I like investing and I like writing about investing. Plus, they have synergy. I spend a lot of time researching companies to invest in because I enjoy it. So publishing my research adds a lot of extra value for a fairly small extra investment. In other words, even if I didn't have my blog, I'd still spend a lot of time doing it, so it's well worth it.

[Curtis2011]

Originally Posted by SnerpGoodWord

This is an interesting point. When evaluating income streams more conventionally as investments, one of the classic mistakes is to assume the income stream will last forever. In the brick and mortar world, that's never true. Buildings wear out, products become unattractive to consumers, etc. and additional capital and labor is required to repair/refresh your investment. It would be interesting to understand the analogous online paradigm and whether it's really different - what has happened to the income generating sites of 1998 that were left untouched for example?

Well actually my website traffic seems to be increasing on its own, with no action from me, by about 8% per month for the last year or more, so I am not worried about my revenue streams drying up anytime soon

Originally Posted by Daffy Duck

I agree with your philosophy that once it is built, it will keep earning money. I have a site I haven't updated in a solid year and it actually earns me more money now than it used to.

But -- we don't really know if our sites will be making money for the "next 10 years". The Internet could change in a big way in 10 years. Know what I mean? There could be some new technology that makes all SBI and Wordpress sites practically worthless. Technology changes fast.

Hopefully that doesn't happen!

Yes the internet could change. However, I doubt there will ever be anything more efficient for the transfer of knowledge than reading text. Videos and multimedia presentations are gaining popularity but they inherently cannot satisfy the desire for instant gratification when searching for knowledge online. For example, if you find a video that explains something, you have to watch the whole video to get to the part you want. With text, you can skip around and read the most interesting parts. = Instant gratification.


Because of this, I think that as long as people are searching for information on a topic, a website that provides the information that they are looking for is a great business model. Of course, you have to make money off of the visitors once they get to your website, but there are plenty of ways to do that.

[gene2009]

Originally Posted by Daffy Duck

Many people are not talented writers, so they spend a lot of time writing something that just ends up being crap.

I agree with you.
You should be a talented organizer who has a good idea, some SEO skills and 1000 bucks.
It's easy to find talented, cheap writers from poor countries. It's easy to set up a website or a blog with wordpress. And it's no problem to do seo for you one.
Unique idea + few money + time + seo = Your passive income.

[Curtis2011]

Originally Posted by gene2009

I agree with you.
You should be a talented organizer who has a good idea, some SEO skills and 1000 bucks.
It's easy to find talented, cheap writers from poor countries. It's easy to set up a website or a blog with wordpress. And it's no problem to do seo for you one.
Unique idea + few money + time + seo = Your passive income.

Pretty much this.


But of course, usually success comes from having the right knowledge of how to organize the website and how to choose a market/niche/product to sell in the first place.

And unfortunately, all that knowledge usually comes from making tons of mistakes beforehand!

[gene2009]

Originally Posted by Daffy Duck

I agree with your philosophy that once it is built, it will keep earning money. I have a site I haven't updated in a solid year and it actually earns me more money now than it used to.

But -- we don't really know if our sites will be making money for the "next 10 years". The Internet could change in a big way in 10 years. Know what I mean? There could be some new technology that makes all SBI and Wordpress sites practically worthless. Technology changes fast.

Hopefully that doesn't happen!

It's true too. Nobody knows what change with Internet and seo withing 3-5 years. Internet is a very fast changing thing.

[Daffy Duck]

Originally Posted by Curtis2011

And unfortunately, all that knowledge usually comes from making tons of mistakes beforehand!

A man went up to a wise guru and asked, "Oh guru, how can I achieve success and everlasting happiness?"

"Good judgment", said the guru.

"And wise one, how can I know what is good judgment?", asked the man.

"Bad judgment", answered the guru.