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What you need to know about passive income online

Passive income, by way of the web, often seems too good to be true.

There’s no shortage of spam comments, weird pop-ups and affiliate blogs claiming that if someone’s mother-in-law or step-cousin can make six figures with minimal effort, you too, can make things happen.

Now let’s be clear, passive income is not the same thing as “making your money work for you” through smart investments.

Instead, we’ll take a look at the reality of affiliate incomes, drop shipping, and other money-making schemes that promise comfortable living.

Guide to popular passive income options

passive income

What is passive income?

Traditionally, passive income includes things like a limited partnership in a company, real estate ownership, or dividends from investments. Online, however, other passive income opportunities promise a way to game the system.

Admittedly, it’s hard to find any information on passive income tips and tricks that don’t feel like junk. Much of the online content consists of ebooks and courses and yes, mom blogs that rake in the residuals.

So, how do you separate the fakers from the legit opportunities — and is it even possible?

Affiliate sites

Digital entrepreneurship and affiliate links are a fact of life on the web. A good chunk of your favorite sites engage in some affiliate partnership; they’re embedded in articles, YouTube videos, and online games.

A quick refresher: affiliate links are a type of advertising that pays sites a commission based on clicks and sales. Online content creators can sign up with Amazon or other eCommerce programs and promote links within their blog posts and videos.

It’s not just Amazon, either. Uber has an affiliate program, as does iTunes, and others.

affiliate marketing

The issue with affiliate marketing isn’t that it’s a scam. You can make some money this way, but it’s not something that you can set up, forget about and get rich overnight.

For one, you need to have a website that generates enough traffic to result in income. You’ll need to have a blog or popular website to do this — and, of course, that takes time and its skillset.

Affiliate programs also need to match your content. If you write a food blog then adding affiliate links for fishing gear and motorcycle parts isn’t going to work. For one, customers will think that you’ll shill anything, thus compromising your authenticity.

Second, those visitors likely are on your website because they want to learn how to make a chocolate cake that doesn’t stick to the pan. They’re not going to see a link and think — hey, I do need a new fishing pole.

In addition to creating content, maintaining a website, and finding affiliate links that fit, you also need to have some marketing savvy to make this work. You’ll have to start an email list and create landing pages that you promote to encourage new sign-ups.

There’s more to affiliate marketing than what we’ve listed here, but the point is, it’s hard. If you’re considering this path, you should want to create a blog/site anyway.

Drop Shipping or Retail Arbitrage

Drop shipping, and its cousin, retail arbitrage, are something of a shortcut to establishing an online store. Instead of selling your products, you sell products from other companies. Customers submit an order through your website, but the company who makes the product ships it. The benefit is, you don’t have to buy inventory and maintain stock levels. As such, drop shipping is often promoted as easy money.

That said, you need to find a way to promote your store in a crowded space. Cosmetics and vitamins are popular products in the drop shipping space, for example. You might run into a lot of competitors with the same products.

With retail arbitrage, you buy up items on discount or clearance at your local brick-and-mortar store and flip them online for retail prices. In this case, you do the shopping, the packaging, and the shipping. Not super passive.

With either method, you will need to field customer service inquiries, which involves answering questions about other peoples’ products and order statuses that may be out of your control. But customer service dealings may only take up a couple of hours here and there.

We should note, drop shipping needs to be approached with some caution. For example, many drop shippers are scammy. You also need to look for products that are trending and that you know enough about your audience to market effectively.

This article from Shopify is a good source for someone looking for a primer on drop shipping. For retail arbitrage, check out these videos.

Sell a digital resource

Digital resources include things like memberships, e-books, online events, and so on. These items are known as information products, and there’s no shortage of bloggers promoting their own set of paid content.

The benefit of digital resources is, you’re making almost 100% profit margin — you create a product once, and sell it over and over.

The only thing is, to make any money, people need to know who you are and you need to make something people want. Do you have knowledge that other people can’t find with a simple online search?

Sell courses

If you have an online audience and a skill that people want to learn, you could earn some passive cash by offering digital courses. Skills like photography, video editing, SEO best practices, e-commerce basics, and so on could all potentially net you some money here and there.

Creating courses that add value to your audience is not remotely passive. Up front, it’s an investment that requires time and some cash. Thankfully, it gets easier after the initial push.

To do this, you’ll need to create an email list as a means to promote your course to readers.

Wrapping up

It’s important to realize that there’s no such thing as a truly passive income. Affiliate marketing, selling products, and monetizing digital resources all depend on your ability to drive traffic and create something that people want.

It’s not simple, and it isn’t passive. Instead, you need to be able to handle web hosting, copywriting, content creation and have a firm grasp of digital analytics.

And, those skills are just the starting point. It’s a whole other skill set to find and promote affiliate links that make sense for your audience. Developing online resources that have professional polish is a separate skill, too.

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