I think that one of the classic problems with the notion of passive income is the belief that it cannot have any ambition.
A case in point is that my wife and I created a web site 3 years ago. This site has not been touched in over a year, and that was the first and only update to the site in over 2 years.
It has been consistently banking $2,500-$4,500 per month for the entire time it has been online. I put in maybe a few hours of time each quarter just to check in on it.
Now, there is a catch - you can't just make a site and call it a day. You first have to do market research, come up with an angle, partner with a merchant or five, write a content plan, build it, market it, etc.
Now, assume that your time is worth $100/hour. If you spend a full 2 weeks on it at 40 hours/week, you'll rack up $8,000 in overall opportunity cost. At first glance, that is a steep price.
However, if you've picked right, you'll make that money back within a few months, probably less. This does mean there is going to be an upfront cost to you in order to get it out the door, but you will also have a better long-run profitability.
> You first have to do market research, come up with an angle, partner with a merchant or five, write a content plan, build it, market it, etc.
It seems like you could make a website about that without some kind of selling angle because those were the first questions I had. I can't think of anything I know to write that anyone would be remotely interested in reading; i have no life, can't relate to normal things like bars or restaurants or whatever people do in their spare time.
Step back and examine your life, and you'll find tons of stuff once you think about it. For example, poking through your history I discovered that you've been through an acquisition: http://news.ycombinator.com/item?id=4329721. It probably wouldn't make you a boatload of cash to retire on, but there are probably some folks out there who are interested in learning about Surviving The Acquisition, or What To Do When You're Being Acquired.
If you don't feel like you have anything yet - go learn something, and document the process. Others who are learning usually appreciate that, and there's always something you can teach someone.
Now you probably wouldn't want to link to the site here but would you feel comfortable expanding on what type of site it is? Does the site update content regularly either via users or scraping? What are your visitor numbers for that kind of revenue? Is it direct sales of physical products?
- It is an SEO site
- It has not seen a single update in 4 months
- It gets 2-4k users per month
- Direct sales of a physical product through a merchant partner
The big advantage for a lot of my affiliate sites is I have exclusive terms and other deals. With the one I pointed out, I get paid 40% more than any affiliate would, have my own branding of the product, provide no support and invoice the merchant at the end of every month.
They've paid on time, every time for 3.5 years. I have other more successful (and much less successful) sites as well, but this is probably the lowest-maintenance one I have.
I'm happy to shed some light on this for people because I feel that here I might be able to help fellow entrepreneurs.
How would you view your site, in relation to their product:
- Is it articles about that field that point to that product as the best?
- Are you a tutorial/more-info for that product?
- Is it a "Find out which product is best for you" type configurator?
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I guess what I'm curious of, is what approach you took to make a mutually beneficial affiliate marketing site. Also, do you find yourself spending more time writing code/writing copy/creating graphics? It would seem like the majority of the time for something like this has to be writing copy
In order to do well in paid search or SEO for the long-haul, you've got to provide a lot of clear information and really guide the user. You have to make something people would miss if it didn't exist.
The best approach to this day, imho, is not to make a straight-up site any longer. So many people create them that you are one voice in a massive crowd competing for attention. What gets that attention now is unique functionality, ie: software. Focus on developing a unique solution instead of the same-old-same-old.
Case in point: RetailMeNot was the most successful of the coupon sites. They sold to WhaleShark for about $36m and had about $1m/month in commissions. However, anybody and their mom made a coupon site, which made any search term for "insert-brand-here coupons" get bombarded with results, all pushing the same thing. They succeeded because they have great social features, deal in printable coupons now, work closely with merchants, etc.
As for us, most of my time was at first in copy/video/graphics; that ended up changing to more code related time as we started packing unique features into our sites.
Eventually, I figured out that we are a marketing-heavy software company. Haven't looked back since.
Another thing to keep in mind is the game is HARDER now than it was years ago when RetailMeNot, CouponMountain, CouponCabin all started. Google is less forgiving, it's harder to get links, and harder to get through that low morale period when you're gonna be getting ZERO Google love.
In order to do well in SEO I'd say you should take advantage of your programming abilities. Look up this company called Narrative Science. Using algorithms to create automated stories. Now I'm not saying make spam, but leverage something like that to give you a competitive advantage. Plus, I know Demand Media gets tons of hate, but check out "site:livestrong.com" and "site:ehow.com". Millions of pages indexed, and thousands more created day after day. You're competing with people like them.. how the heck are you supposed to succeed?! Create quality content, but also find a way to make it scalable.
SEO is something I consider to be the game of major companies...and hackers like us now as well. However, it isn't enough to make a page, slap ads on and SEO the hell out of it.
If you don't have lasting value in your site, you don't have staying power. No staying power means low future profit and therefore lower sustainable startup opportunity cost.
Interesting. How do you evaluate different affiliates to see which ones are worth the time? Do you just stick to major ones like Amazon, or talk to them individually? It seems like it can be risky, in the sense that you can spend a ton of time setting something up, only to have the affiliate change the terms.
While AznHisoka has a point there - find the best program as far as commissions go - there is more to it.
There is always a risk in affiliate marketing, and at this point I'd consider the major success differentiators to be 1) innovation and 2) risk mitigation. You can make a really innovative site and get lots of quality traffic, but you had better do your damnedest to mitigate your overall risk or you may find your source of revenue gone overnight.
You can mitigate risk by spreading your site out so that it covers many products, brokering custom deals, making your own community (FatWallet.com and Extrabux are great examples), or doing something really innovative in terms of functionality (HipMunk, Mint.com).
As an example of what can happen, we had an affiliate site running for the better part of 3 years on Google AdWords. We owned the top spots in a pretty significant vertical and made quite a lot of money. The client (the agency of record for the product) was super happy, we had exclusive terms and business was booming.
All was well until one day I get a call. The merchant decided to drop the agency and eliminate their entire affiliate program. It didn't matter that we generated them huge sales each month, that was it. Nothing we said could convince them otherwise.
Create a site in a profitable niche where there's opportunities to plug in several different affiliate products, not just 1. So if you're making a camera review site, and Adorama affiliate program sucks, you can switch to Amazon, or NewEgg, or Best Buy, etc.
Affiliate marketing is intensely competitive - the reason I can make a fair amount of money in the field is because we pursue every advantage at our disposal. The plethora of competitive intelligence tools in the field and the low barrier to entry make it extremely tough.
However, there is a high barrier to success as well.
The author makes a good point about support being a big hassle, but I think misses the lesson from it. When you're selling something for $7.50, customers demand a lot of support if something goes wrong.
But who says they are entitled to that support? You should craft a carefully worded answer to support emails around "support being through the existing web site and documentation". And quote a nice high hourly rate if they want custom services.
Zero support should be the model for software priced under $100.
Looking at ThemeForest, most authors respond to all comments in the forums for their template, but politely say they cannot assist with customization or make even small changes to their theme for people.
People confuse minimum viable product with low quality all the time. Minimum viable is really about the smallest set of features a customer needs to spend money on your product. It doesn't mean a low quality product rushed out quickly. A minimum viable product could still take you months to build, and require design help, if the features demanded were hard to build.
I must say that making $1,000 in a year from passive income is a pretty low goal. I make that in under three months with my "now passive" income. (I prefer to call it "now passive" income because it came from a lot of hard work in the past, but requires little to no upkeep.)
The author mentions that he plans to set another goal once he reaches the $1,000 goal. My advice: definitely do so! It may not be easy, but it is possible. And yes, reaching an originally low goal may give you the motivation to continue.
My personal goal is to eventually have enough "now passive" income that if I were to lose my job, I could lower my standard of living and survive unemployed without dipping into my savings.
I think that the first goal is totally dependent upon his current situation. It is very much a low hanging fruit scenario, so that grabbing the low fruit will provide some motivation and inspiration to continue one. Nothing worse than setting the bar too high, missing it and getting depressed about it.
It's not a low goal if you're just starting out, it's a realistic goal.
It takes time and triangulating over a lot of ideas before one gets good at coming up with passive income winners. I think the author is right on track and he has a great giver mcgiver attitude.
Also, the marriage proposal app is a pretty good idea FWIW.
I would encourage the author to read patio11's blog (http://www.kalzumeus.com/blog/). You could be aiming higher, and I think you'd do well to switch your focus away from penny-producing efforts like Flattr and toward more scaleable things.
Passive income is pretty great but no source of income is truly passive. You'll always have certain issues like maintenance, customer support, etc. i.e. when you're talking about software.
If it were a website/webapp you'd still run into issues with bugs, security fixes.
This doesn't even take into account the fact that new competitors might come in, search algorithms may change, etc.
That said, a well SEO'ed site (for a popular keyword) is possibly the best kind of passive income one can have. No marketing expenses, the content is already there (presuming that's what got it SEO'ed well..) and you'll keep getting visitors. Awesome :)
> If it were a website/webapp you'd still run into issues with bugs, security fixes.
This was really true a few years ago, but changed as of late. Right now we are running all of our sites on a Sinatra-based engine on Heroku. It has no admin backend, no security fixes to make, nothing. There isn't even a database!
The whole thing is compiled and cached. Any changes made on a live basis come through git or via a unique caching system I did with S3/Cloudfront. The upshot of this stack is zero overall maintenance. It doesn't break as there is simply nothing to break (except Heroku/AWS)
That's interesting but definitely not a global use case. Most apps will require some sort of bug fixes and security updates. Even the linux kernel requires security updates and I do think that's some tight code right there =)
Not every app can be compiled-cached-served. I think 99% of them can't go that route.. Would love to see how you can run relatively dynamic code/functionality by the method you're suggesting.
I'm talking about the typical affiliate site that is SEO'd or run with PPC. Many of those don't require much and you can often do dynamic functionality without requiring a database.
I have one site where you can look up physical locations of the merchant. Instead of a database, there is a YAML file that is dumped into MemCache - doing a search hits that and I don't need to maintain any Postgres instances.
I see. So you do have a database (it's the YAML file) but I see how you're talking about keeping costs and maintenance on the lower side. Nice! So I guess the only thing you're worried about is if google algorithms change. Still, that won't happen to PPC.
I would love to find some good niches for PPC affiliate commissions. Do you have any examples ? ( don't have to be your sites..)
Can someone give some examples of (hypothetical or real) "passive income" service/site? Every time I hear about the concept, the person is always very circumspect of revealing anything about their business(rightfully so), so it's hard to visualize for me.
Honestly, I've found the return I've gotten on various endeavors to be pretty baffling. Wholly dominated by external factors as far as I can tell, many of which are themselves dominated by random contacts. My most profitable projects have been totally random things I put very little work into, and I could not have predicted they'd be the ones to take off.
I used to have that i couple times in my life. Related to SEO and online betting. But those holes are usually closed in 1-2 years. It's not a startup, not even a lifestyle business, just a sort of an intellectual game.
A case in point is that my wife and I created a web site 3 years ago. This site has not been touched in over a year, and that was the first and only update to the site in over 2 years.
It has been consistently banking $2,500-$4,500 per month for the entire time it has been online. I put in maybe a few hours of time each quarter just to check in on it.
Now, there is a catch - you can't just make a site and call it a day. You first have to do market research, come up with an angle, partner with a merchant or five, write a content plan, build it, market it, etc.
Now, assume that your time is worth $100/hour. If you spend a full 2 weeks on it at 40 hours/week, you'll rack up $8,000 in overall opportunity cost. At first glance, that is a steep price.
However, if you've picked right, you'll make that money back within a few months, probably less. This does mean there is going to be an upfront cost to you in order to get it out the door, but you will also have a better long-run profitability.