I recently locked horns with an online marketer on his video where he listed 10 different ways you could earn what is referred to as ‘passive income’.
In the interest of not ostracising this particular YouTuber, I won’t link directly to the video or him, but instead refer to the whole culture of ‘passive income online marketers’ instead.
Let’s first debunk the myth that is ‘passive income’. There are several definitions floating around, but the one outlined in Investopedia’s article I believe is the most accurate (they also refer to the IRS’ definition, adding another level of legitimacy).
Passive income, when being used as a technical term, is defined as either ‘net rental income and income from a business in which the taxpayer does not materially participate’ — Investopedia
This is the ‘hardcore’ definition of passive income. The ‘softcore’ definition basically says that passive income is a source of revenue you generate without inputting much work. For example, purchasing a lottery ticket and winning money from it could be categorised as passive income, as the act of purchasing the ticket is relatively effortless.
However, the definition has been distorted by a hoard of online marketers hoping to gain some ‘passive income’ (as per their definitions) themselves by creating monetised videos or ad and affiliate link-riddled blog posts. They claim that passive income online is as easy as signing up for an AdSense account and “putting up ads” and that you’ll immediately start earning “BIG BUCKS!!!!!!!!”.
This couldn’t be further from the truth, unfortunately.
The Overarching Flaw
Before proceeding with picking apart the ways in which most marketers claim you can make ‘passive income’, I thought I’d quickly outline what the 2 gaping holes in their arguments are usually.
This could not be further from the truth. Most of the techniques they outline assume that you already have a large, engaging, interested and qualified audience of potential ‘customers’ to sell your mysterious passive income magic too.
Things such as affiliate marketing, advertising and sponsored content will only bring in significant figures if you have a large number of fans already following you. It’s not easy to get such a large audience following you, you essentially have to hold some kind of online presence in order to do this. Large YouTubers, Instagramers, Twitterers or waterers are perfect examples of this.
That tech showcase of the Amazon Echo you just watched, may have been sponsored by Amazon. That photo of a resort in Bali, may have been sponsored by that resort. That Tweet about Clash of Clans, maybe have been sponsored by Supercell. These guys are making money, because they have thousands of followers ready to engage with. The average Joe Bloggs or Jane Doe, however, may not.
This one never fails to amuse me. The whole point of flogging a ‘passive income’ lifestyle which these marketers lavish in bragging about, is that you have to input minimal effort to get maximum monetary output.
Many marketers, when confronted, will claim that nothing in this world can be attained without a bit of work and that money cannot be made ‘easily’. They’re being incredibly self-contradictory here as the ‘USP’ of their pitch is that the money that can be made through these methods can be done without much work at all.
There are no quick get rich schemes, if people don’t want to put in 2–5 years of hard work to set themselves up to not have to work as hard as they will for the next 20… they can’t complain about their circumstances after choosing the path of least effort. — An online ‘passive income’ marketer
This truly infuriates me, as the tone of the video and the repetitiveness of certain phrases puts off the impression that these methods are achieved relatively quickly. No where does the marketer even state that it may take you “2–5 years of hard work” to achieve this, tricking many unsuspecting viewers into thinking that this is a get rich quick scheme.
Why are people interested?
So how come this topic is so popular, and how come so many marketers are jumping on the bandwagon and trying to make their own two cents worth off preaching the ‘passive income’ lifestyle?
If you Google “how to make money online” you will get about 185,000,000 results. If you refine it even more and Google “how to make money online quick”, then you will get about 25,300,000 results. Refining it even further by just Googling “how to make passive income” you get about 4,400,000 results. These are huge numbers for online marketers to tap into.
It’s clear that making money online is a highly attractive prospect to a lot of people. Stay-at-home mums are a particular target of online marketers, students another huge market and even those young adults who are sick of their jobs and want to make some more money quickly.
We are flooded with success stories of YouTubers who went from rags to riches over the course of a few years, online bloggers who rake in six figure sums every year and Instagramers being paid disgustingly large amounts of money to post images of them in a particular bikini or with a particular brand of protein.
There’s no wonder people are constantly looking for ways to rake in the cash online!
What people forget is that a lot of these people were in the right place at the right time doing the right thing to the right set of people. And if not, they have worked their butts off for years and sweated over every minor detail of their marketing campaigns and social media marketing in order to reach that level of following. Those are pretty specific conditions to be successful if you ask me.
But it’s the same in the real world. A successful business either has to be in the right place at the right time doing the right thing to the right set of people, or it has to have worked crazily hard over the course of several years in order to reach the level of success it has now.
Does that mean that it’s impossible? Not at all. It just requires work, and a lot of it. So before you assume that earning a ‘passive income’ is an easy thing to accomplish, think again.
Best-selling authors could arguably be earning ‘passive income’ now from books they published years ago and licensed films they signed years ago, but they might have spent years writing those books and sent endless emails pitching to publishers before having even one published book.
Does that make it ‘passive income’ in that case?
Ways of making a ‘passive income’ online
I will now briefly go through a list of ways in which various online marketers claim that you can make a ‘passive income’ from, and give you the honest truth of why they don’t work.
A great concept when you think about it. You take a commission off every sale made as a direct result of your influence. See that word, influence? That means that this will only become a reliable income source if you have a following online that’s willing to trust you recommendations for products and to go through with purchasing them, i.e. if you have influence.
Another great concept. Create an online course or write an ebook, sounds fun! Two problems with that: you have to spend an enormous amount of time creating that product and shaping it to the very best version you can make it, and then you have to market it. Online courses with thousands upon thousands of students, or ebooks with thousands of sales, are marketed on a massive scale with advertising, coupon code promotions and accompanying free content on blogs to forward people onto the actual paid product. Does that sound passive to you, or easy?
Another fantastic way to make some money off what is potentially a hobby. What marketers don’t tell you is that you are one in a million when it comes to stock imagery, unless your images truly stand out and are immensely marketable. Think of how many people out there have a camera, and then how many of those have thought about making money from their photos of footage. Even then, with the rise of sites like Unsplash, StockSnap or VideoBlocks, stock imagery and footage is easier than ever to acquire at a low cost.
Wow, these are some great ideas. Putting ads on content you produce to earn some extra income? Yes please. Wrong, advertisers will only pay you if you are pushing extensive numbers of potential new customers to them. A report stated that some websites earn as much as $20 for 1,000 views (revenue per mille) — meaning to have an income of $15,000 you would need to be attracting around 750,000 people. This will obviously vary hugely depending on the website, the content, the retention rate, and a whole bunch of other variables, but my point is made.
Same as my point about online advertising and affiliate marketing. Companies will only sponsor you to make a video if your audience is large enough to push sales back. It’s called a return on investment (ROI), which companies actively measure to make sure that the investments they make are actually turning into paying customers. If you have 1,000 views a month, then no one will pay you to talk about a new brand of skincare products. If you have 1,000,000 views a month, then chances are they will.
So what now?
Try to ignore any mentions of ‘easy money’ or ‘passive income’ when it comes to online marketers and their flashy videos or blog posts that have been SEO-optimised to within an inch of their lives.
Remember that there’s no real easy way to make money, that’s just not how things work. If there was an easy way, then everyone would be doing it.
If you want to make money online, then go ahead. Start building up your online presence, start creating content on YouTube or Udemy, start doing whatever you want to do that you think could make some money. And then work as hard as you can at it to get people buying it, using it or viewing it. I’m sure that then, in time, you would be earning a lot of money. Whether or not it’s actually ‘passive’ though, is to be debated.
As the IRS stated, the only real ways of making a true ‘passive income’ is probably from renting out property or from investments in companies. Things that really don’t require much effort at all.
What do I know? I’ve done many of the things these online marketers preach about, in fact I still do, and I can safely say that I have never even come close to earning a sustainable income from them. I would probably put that down to me being lazy and not being bothered to market these things properly.
If I did invest that time though to push these things out to the passes, then maybe, just maybe, I would be one step closer to earning the sacred ‘passive income’ that so many people desire.