What Is Passive Income Online?

by Dmarcotte

Learn what types of passive income earn you money online and how using more than one will earn you a higher income.

Most people are familiar with earning interest on a savings account – that is a form of passive income. You don’t need to do anything except have money in the bank and you earn an ‘income.’ With the explosion of the World Wide Web the concept of passive income has taken on a whole new meaning. It is possible to perform an action on the internet and earn ongoing income without repeating that action. This is different than your day job because to earn money you must continue to show up and do your job.

Kinds Of Passive Income

There are three basic forms of making money online

  1. Advertising
  2. Selling products
  3. Memberships

Almost every online website has some form of passive income built in. Either they have advertising or they have a membership option. This means that once the website is built with ads on it the owner can just sit back and let the money roll in as people find their website and click on the ads.  Okay – that isn’t really how it works, but that is the idea behind a lot of ‘make money right now’ gimmicks out there. The hard part is getting people to visit your site and click on your ads so you make money.

Advertising is a great way to get started making money online, but you probably aren’t going to make a lot at it. Another form of income is a membership. This is a great way to make more money because once a person joins they will pay you monthly and over time this adds up. Of course people will come and go to your membership site, but once they have joined you don’t have to work as hard to ‘sell’ to them again. If you provide a quality product they will stay.

Membership sites often also sell products and services related to their subject, but this is not as passive as the other types of income. When you sell products and services there is a certain amount of marketing that must be done all the time, so it is a bit more work. There are very few companies that can simply create a site and then not do anything and still make money. Disney is one, but not very many of us have that kind of reputation and captive audience.

Most online entrepreneurs use a combination of these passive income options. This will provide the best income over a long period of time. The exact combination depends on the niche and the individual running the website.

How to Create Passive Income on Your Website

Creating passive income online takes time and effort. You have to build the site and then market it to get people to visit. You have to create a product or find a quality product to sell. Starting a website is easy, making a lot of money takes time.

I recommend reading books such as the 4 hour Work Week or Guerilla Marketing to learn some of the basic theories. There are also a lot of people online who would love to sell you their process for making money.  Before you buy anything check out the single most valuable site I have ever found, IMReportcard.com  This is kind of an Angie’s List for making money online. They have a free membership and you can find the best mentors/products on the web. I also personally follow Pat Flynn of Smart Passive Income. He has some great ideas and is not shy about sharing what works and what doesn’t.

The great thing about what you do online is that as long as the information isn't related to a specific date it is always there. I personally created a gardening site in the spring of 2011 that didn't earn me anything. I didn't work on the site after a couple of months and moved on to more profitable sites. Suddenly in the winter of 2012 I have people joining this membership site almost daily. After about a month of this I have gone back and started adding information to the site. I have no idea what changed, but all of the work I did originally seems to have paid off. This is truly passive income. I put the information out there and now am earning income from it.

Creating an income from an online business is simple, but not easy. It takes work over time, a marathon not a sprint. While you can make a lot of money much faster online than in any other way, it still takes work. It is definitely worth the effort though as you can reduce your 40 hour week to a 4 hour work week.

Updated: 12/06/2012, Dmarcotte
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katiem2 on 12/11/2012

A very good explanation for exactly what a passive income is and how it translates online. :)K

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