Back in January, Derek wrote a great post about how passive income will take time and effort. He discussed some of the pros and cons surrounding dividends, rental income, and profits from a business. As he points out, not all businesses result in passive income and many actually have the opposite results. This also holds true for online ventures which brings us to the question… is it even possible to create a website that generates online passive income?
Here’s my personal opinion…
I have been dabbling in various online businesses since middle school (late 90’s). You name it, I have probably tried it… eBay, network marketing, web design, e-books, affiliate advertising, Adsense, and the list goes on. Some successful, most failures. But the one common trait they all share is that despite being hocked as passive or semi-passive income by some, I have found they are anything but. Sure, there are definitely degrees of passiveness, but there are very few that I’ve had experience with which I would consider passive.
With that said, instead of learning the hard way and having to try out all my past endeavors yourself, I will save you some time and spill the beans right now on what I consider to be the least and most labor intensive business model, based on my personal experiences.
Most Passive – Information site monetized by CPC/CPI ads
These are those content/information sites you see which are rarely updated, yet they present some good information on a given topic. They’re not quite “set it and forget it” but with the right subject matter and approach, they could come pretty darn close.
For example, let’s say the site was about something historical. We’ll use history of the Great Depression as an example. You go and create a killer site all about this topic. You start out with a good exact-match domain like thegreatdepression.com. You write well-researched articles about the various aspects, such as the stock market crash, the overuse of credit and buying on margin with low interest rates, and so forth. The site is monetized by Adsense and since this is history you’ve written about, there’s a good chance updates to that content will rarely be required. As you can envision, it’s almost a set it and forget it concept.
Sounds good, right? Well it might be, but there are a couple potential problems to take into account here:
(a) The most lucrative topics require frequent updates– The Great Depression site may sound like a good idea, but the only problem with it is that I bet the revenue it would bring in wouldn’t be that great. If you want to make money, you often need to be in the high-profit niches like mortgages, credit cards, auto insurance, healthcare, etc. And as it turns out, those usually require frequent updates. It’s not like you can put up a site for credit card deals and reviews, expecting the information to remain up-to-date for years to come.
(b) Content mills have crashed the party– Those junk article sites like Suite 101, eHow, etc. have forced search engines to crack down and heavily scrutinize content sites. Most of them (like the two mentioned) deserve their demotions, but other good and high-quality sites have been like babies thrown out with the bathwater… undeserving victims of the slaughter. In short, this means that even if you create a very high quality informative site about a given topic, there’s definitely no guarantee it will ever rank where the eyeballs are. With all that said, I’m sure there are plenty of ideas out there that still work for this model, but finding the right one will undoubtedly be much harder these days.
Another type of information site that can result in passive income is one that provides a service rather than readable content. For example, I can think of several websites which offer nothing but calculators for things like mortgage interest, loan amortization, credit card debt payoff, etc. If you can create a useful service like that, over time it could become self-sustaining or close to it.
Least Passive – Financial product/service review site monetized by affiliate advertising
If you want passive income, then this is definitely not the approach you want to take. How am I so sure of this? Because I run CreditCardForum.com, which is a site for reviews/deals. And boy let me tell you, all those credit card deals require constant updates. Because they’re financial products (which are heavily regulated) the banks are ultra-strict about having interest rates, reward programs, cardholder benefits, and so forth 100% up-to-date at all times. Worst of all, sometimes there is little to no notice given. You just receive an email saying XYZ credit card needs to be updated… immediately! If you don’t comply, you may risk losing your commissions for that month or even getting booted from that bank’s program altogether.
For example earlier this year I was visiting Yosemite, which unfortunately had no internet access (at least not for Verizon wireless cards). However my phone did still receive emails and I got a message saying “Urgent!” in the title and it was regarding two of my credit card reviews; the Chase Ink benefits had changed and the 5% cash back rewardsfor the Chase Freedom card had been tweaked. I was only going to be there for two days but they wanted the updates immediately, so I had to leave the valley and drive outside the park (about 40 minutes away) to get reception so I could hop online and update my reviews of the Chase Ink and Freedom credit cards that same night. As you can imagine, this little detour had derailed my plans for that evening. Certainly not something a passive business would do, right?
If you don’t want that type of stress and high maintenance with your website, then when it comes to affiliate opportunities your best bet may be to stick with non-financial products/services which still have high payouts like credit cards do. Off the top of my head, industries related to fitness, nutrition, and beauty usually pay good and I doubt you would be required to cut your vacation short if an update was needed.
Some may disagree, but in my personal opinion a truly 100% passive online business does not exist. However as demonstrated in my examples, there are opportunities ranging from 99% passive (like those calculator sites) to 0% passive (my credit card site). So you have plenty of options, depending on how much/little time you want to go into the site after you get it up and running.
This guest post was written by Mike, who is the creator of CreditCardForum.
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.