Have you ever considered adding a stream of passive income to your earnings? It’s a fantastic way to reach more people, stretch your efforts, and increase your income. But while passive income seems to be a popular phrase these days, how do you actually go about earning it? Today’s post shares some of the best ways for how to make passive income online.
What is Passive Income?
According to Wikipedia:
Passive income is income resulting from cash flow received on a regular basis, requiring minimal to no effort by the recipient to maintain it.
Let’s look at an example.
Let’s say I run a huge website about making money from home. I attract readers who are looking for information about flexible opportunities they can start for a relatively low cost.
There are companies who may be interested in advertising on my website. For example, a multi-level marketing company like Stella & Dot may wish to advertise the opportunity of becoming a Stella & Dot Stylist.
They can work with me to place an ad on my website so that prospective stylists see it. And we can make an arrangement so that I get paid, say, $3 for every 1,000 people that see it.
I then go about my business, working on building my website and managing other activities. At the end of the month, I get paid based off how many people saw that ad. If it’s 100,000 people, it would be $300.
Now I didn’t have to do any more work after setting up the ad on my site. If 5 people saw it or 5,000,000 did, there is no difference in effort on my part.
That’s passive income: in this example I am receiving cash flow on a regular basis requiring minimal to no effort to maintain. Yes, my income goes up based on the traffic my site receives, but in this example I’m not increasing my efforts to gain traffic for the purpose of earning more from the advertising.
On the other hand, if I ran a lemonade stand, that would be active income. For everyone that buys a cup of lemonade, I need to pour a glass of lemonade for them, take their money, and give them change. I have to make the lemonade and manage my inventory and supplies. The more lemonade I sell, the more work I have to do.
That’s why passive income is so exciting: it’s incredibly scalable and makes your time and effort go that much further.
Here are some ways to make passive income online in particular.
#1. Start a Blog.
Blogging is a fantastic way to earn extra money. That’s because it has low start-up costs, relatively low overhead, and can be scaled easily. In fact, I’ve been blogging off and on since March 2012 and have spent anywhere from an hour a month on my blog to 35+ hours a week.
While there are multiple ways to earn income as a blogger, the most common ways are selling your own products, the products of others (affiliate marketing), advertising, and sponsorships.
Of these income streams, the most passive are affiliate marketing and advertising.
If you’re not familiar with it, affiliate marketing is a performance-based type of promotion where a business rewards the affiliate for each visitor or customer brought to them through the affiliate’s marketing efforts.
Let’s use an example.
I love Etsy and I can apply to be an affiliate through their affiliate program. If I’m approved, I receive an 8% commission on anything purchased by new buyers on my recommendation. (I would also get paid 5% commission on anything purchased by existing buyers, but for simplicity’s sake let’s look at new buyers only).
The Etsy affiliate program will give me a unique link which I can share with my readers. When my readers click the link, they are taken to the Etsy website and it looks just as it would if they had gotten to the site from Google. But there’s a code built in that tells Etsy that the shopper was sent by me.
It’s a win-win-win:
- Etsy gets a new visitor to their site who is likely motivated to buy since I’ve referred them and spoken about how much I love their site. If the customer buys anything, paying an 8% commission on the sale is well worth it. This is because a) they probably wouldn’t have gotten the sale otherwise; and b) they keep the rest of their revenue.
- The affiliate (me in this case!) gets rewarded for their recommendation and is therefore incentivized to recommend products and services they love.
- The reader gets a recommendation from someone that knows the brand. And they don’t have to to pay anything extra to buy the product recommended. By that I mean that there’s no fee to the shopper if they buy something through a referral or affiliate link.
Affiliate marketing is passive income in that one blog post or email with affiliate links can make the blogger regular income on a repeat basis without any additional work. If one person clicks an affiliate link and makes a purchase versus if 100 people do, there’s no change in work for the blogger.
Like the very first example shows, advertising can be a great source of passive income. Bloggers can add display advertising to their websites in a few different ways:
- Working with ad networks (like Google AdSense) to place ads on their websites;
- Working directly with companies to place ads on their websites;
- Manually placing ads on their websites from companies they are affiliates for.
There are other types of advertising (like sponsored posts), but they require more up front work and are less passive.
Looking to start blogging?
My post on the best way to start a blog in 8 easy steps covers everything you need to know as a beginner. It walks you through step by step how to go from concept to reality. Once you’re set up, I’d suggest checking out the best blogging tools I recommend as well as this list of free tools. In these posts, I share my favourite products and services for beginners based on my 5 years of blogging.
#2. Self Publish eBooks on Amazon.
While some of you may know I published The Confidence Toolkit earlier this year, you may not know that I’ve also published six other eBooks. That’s because I had them written by ghost writers and then published under pen names.
In short, I did keyword research to find out what topics were popular but underserved on Amazon. Then, I hired authors on Upwork to write short eBooks to specifically address these topics. Using graphic designers on Fiverr, I had cover artwork made and then uploaded everything to Kindle Direct Publishing. I earn about $150USD per month passive income on these books, each of which cost no more than $60USD to have written and packaged.
The great thing about eBook publishing is that you can publish as few or as many books as you’d like. While there’s a bit of an up front investment in getting the book created, it yields passive income on an ongoing basis without much ongoing work or oversight.
If you want more information about publishing eBooks on Amazon, I’d recommend reading Kindle Money Mastery by Stefan Pylarinos. He also has a YouTube channel where he posts videos about publishing Kindle books.
#3. Sell a digital product.
Like eBooks, digital products can yield passive income if you automate the delivery mechanism. In other words, if a system can send the digital product out to the buyer, you don’t have any additional work to do for each item sold.
Let’s look at my Etsy shop, for example. Although most of the products I sell are physical items that I ship out manually, I do have a few printable planner stickers for sale. These are digital products in that they are files that buyers can purchase and download instantly. I create the file once and it can be downloaded an infinite number of times.
When someone buys a digital product, Etsy will release the file for them to download. I’m notified that the sale has been made, but there is no work required on my part.
While I typically see self publishing eBooks on Amazon as more of creating a self publishing company, it’s technically also an example of selling a digital product.
Digital Product Types
There are a TON of different types of digital products you can sell, but here are some ideas:
- Online course
- Template (for a resume, media kit, craft project, website theme etc.)
- Clip art or digital art
You can sell digital products on your website, or on a site like Etsy. If this is something you plan on doing, investigate your options and the fees associated with them. My post How to Sell Things on Etsy: What You Need to Know offers an overview of the fees associated with selling on Etsy.
Do any of these opportunities resonate with you? Have you ever earned passive income before from the online world? Leave me a comment and let me know!