Passive Income Blog: Create Passive Income Online

I'm sure you have heard this before. Just because other people jump off the cliff does not mean that you should follow them. This is like one of the those lessons that you were preached by your parents when you get in trouble in school because you listened to the other kids.

Same goes with your business. If you are an internet marketing junkie I am sure you are on many other marketers' email list. Products and coaching programs pop out one after the other like the zit of a 16 year-old. Have you ever sat in front of your computer, scrolled up and down the sales page, and asked yourself "should I get this?" Yes, the benefits are so compelling that if you don't buy it, you are going to miss it, right? Time for some acne control!

There are only a few successful Netreprenuers (woo... almost called him a "guru") whom I trust and listen to. James Brausch is one and in his post The Right Action Vs. Distraction he talks about taking the right action. Taking action alone is not going to cut it.

What business are you in? Really define your business and break down the processes and create a system for it. Owning all the software and being in all the memberships out there aren not going to make you a dime. Really ask yourself - What business are you in? What are you selling? What are you doing to grow your business? What are you doing to automate your business so you can work less and make more?

I would not be surprised if you do not have an actual business because everyday you spend hours sifting through your emails looking for the "next best thing." Start by ridding your daily distractions. Un-subscribe from lists that will only waste your time by directing you to read other people's products and sales letters. Spend time creating your own products and sales letters is what will set you on your way to make you more money online. If you need help, start with this Information Product Creation Course by James D. Brausch where he teaches you step-by-step how to create your own information product in 5 hours or less. I know this works because I have gone through his course.

In my previous post I mentioned that I recommend using free classifieds ads to drive traffic to your website. When it comes to free classifieds, Craigslist.org would no doubt pop up as the top website of choice. Indeed, Craigslist is one of the most visited website on the internet and can bring you tremendous amounts of traffic if you know how to use it.

However, it is because of the popularity that internet marketers use and abuse the most. Thus, Craigslist has since came up with more stringent posting requirements and smarter bots to detect "advertisement spam." Whenever an opportunity presents itself, it is almost always abused by marketers online. Sort of like Google is now taking helm to crack down on "spammy" looking, page generated, Adsense websites. Most marketers would then give up, some will persevere, and others will move on to another "opportunity."

Same goes with Craigslist and MySpace. If you shall choose to move on, then have a look at Backpage.com. The playing field is wide open even though it doesn't promise as much traffic as Craigslist. Does Craigslist still "work"? Sure it does. You just need to be smart about it.

*hint* As an additional bonus to bringing traffic directly to your website, it can also boost your PageRank for your website if you direct link from your ads. I was able to bring a brand new domain from PR0 to PR6 in 3 months with no other backlink promotion.

John Reese puts it elegantly - If you can make your first dollar online, then you can make your first million online. All you have to do is repeat and duplicate the process that made you that dollar.

Do you have a formula to make your first dollar online? In actuality, it isn't all that difficult. To make any money on the internet (or in any business, for that matter), you really need just two things: Traffic & Monetization.

If you have only one of the two factors, then you will not make a dime whatsoever. Think about it. If you have a great website set up to sell a hot-selling product, yet no one knows that it even exists, guess what you have? You have great monetization method, but zero traffic to your website. You end up making no money. Conversely, you can have a blog that gets thousands of visitors per day to it, yet you will make no money whatsoever if you do not know how to monetize that traffic.

When Adsense was introduced by Google, many people jumped on the bandwagon - myself included. While I don't rely solely on the income generated from Adsense, I tell absolute beginners who has no experience making money on the internet to start with their first website, drive traffic to it with free classified ads, and monetize the traffic with Adsense. It is one of the quickest way I know of to show someone to make their first dollar online. Sadly, this is where people stops. They get excited that they have found a way to make a few dollars a day with Google Adsense, but they never bothered to make it into a business.

You see, passive income comes from a real business. If you do not systemize the business process, your income will be limited to your own output, to your own time, to your own effort. Do realize that if you are going to be setting up websites, driving traffic to it, and monetizing the traffic with Google Adsense, you are actually running a publishing business. No, you don't have a Google Adsense business, you have a publishing business! I see too many software and tools being sold in the internet marketing arena that are being as "the Adsense business." Well, sorry, but software is just part of the equation to facilitate the business process. Buying a piece of software will not give you a business. You will still need an operator to make use of the software. So, unless the software also comes with an operator, you are not really buying a business!

I get asked this question all the time, "So, Steve, what is that you do?"

They know I "work" from home on the internet, but they never seem to understand how I can just "goof off" all the time and never seem to be "working."

Well, let me start by telling you how I got started in internet business. If you have some money and basic understanding of running an internet business, then the quickest way to get yourself an internet business would be to buy one.

When I started dabbling with the idea, I didn't have a whole lot of money, and I don't have a solid understand of what an internet business is. This was back in 2001, 2002, when eBay has just created a category on their website under:

Business & Industrial > Other Industries > Websites & Businesses For Sale

I was immediately sucked into this category on eBay as I try to find myself a profitable internet business. I browsed the listings day and night, daily. Then I started buying some of these so called "established websites" and boy, was I in for a shock. Let's just say that many of these "established websites" were just turn-key websites that web developers have designed and sold many times over.

I was also sucked into the pretty eBay ads stating how much "potential" these websites have. And as you can expect, 9 out of 10 of the websites I have purchased went down the drain. Did they have the "potential" that these salesmen are promising? Yes, if you know what to do with a website and know how to promote it to become profitable. Well, I learned.

However, there was one particular eBay purchased that have allowed me to collect true passive income from. When I tell people, "I get paid from casinos online, " they usually flip out. Most people do not know this, but online casino is a HUGE business. Most people would not think of gambling much other than Las Vegas, let alone gambling online! But the fact, it is out there and gamblers do gamble in the cyberspace.

"Oh, so you gamble for a living?" my friend asked. NO! Why would I gamble when I know the house has the odds? Why would I want to be a player when I can be a casino? If I let you choose, would you want to a piece of the casino's revenue?
Here is how it works. I help the casino find players on the internet and introduce them to their online casino. In turn, I get paid a portion of the casino's revenue from the players. I hope this opens your eyes to what is possible out there. Also keep in mind that online casinos are not the only business that pays you a residual income. I just happened to stumble upon this industry and it has paid out handsomely.

Now, back to eBay. There are a lot of JUNKS on eBay that you don't even want to consider buying. Occasionally you will find a couple genuine online businesses that are being sold. I like looking on eBay for those because I know a legitimate business will often be sold undervalued. As a rule of thumb, you can expect a business to be sold for 10-24 times its average monthly profits. So, for example, if a website profits $5,000/month, you should expect to shell out at least $50,000. If you want to start earning passive income on the internet by buying an existing online business, that's fine. That is how I got started. However, be careful not to buy into "potentials" - that's just marketing gimmick.

As always, post your questions in the comments section below and I will answer it in another post. Be sure to put your name & email in the announcement list (to your right) so you will be notified when a new entry is posted.

Alright, time for me to come out of the underground and share with you all on how I make money online. Let me ask you this first - Which type of income would you rather have? Earned income, or passive income?

I have been "online" and making money on the internet since 1996. Majority of that income is passive, rather than earned (as a result of me putting in work).

If you want to make a living on the internet, you can, too. However, it does take the right kind of person with the right information to achieve the same. Post any questions you have about internet business and making passive income online in the comments below and I will answer them in my post.

Also, don't forget to put your name and email (at right) so you can get an email notification when a new entry is posted.

I'm quoting the following definition of "Passive Income" by wikipedia:

Passive income is a rent received on a regular basis, with little effort required to maintain it. It is advocated by some authors, especially by Robert Kiyosaki.

Some examples of passive income are:

• Repeated regular income, earned by a sales person, generated from the payment of a product or service that must be renewed on a regular basis, in order to continue receiving its benefits - also called residual income.
• Rental from property;
• Royalties from publishing a book or from licensing a patent or other form of intellectual property;
• Earnings from internet advertisement on your websites;
• Earnings from a business that does not require direct involvement from the owner or merchant;
• Dividend and interest income from owning securities, such as stocks and bonds, are usually referred to as portfolio income, which can be considered a form of passive income;
• Pensions.

Passive income is usually taxable. The American Internal Revenue Service defines passive income as "any activity... in which the taxpayer does not materially participate." ^[1] Other financial and government institutions also recognize it as an income obtained as a result of capital growth or in relation to negative gearing.

The above lists some excellent examples of passive income.  But do you know what they all have in common?

A sales person generating passive commission from a product or service is a result of a sale - effort put out by the sales person.

Rental from property - Well, you must have some capital (most likely earned money) to invest in a property.

Royalties from published work or IP - Wells, this is pretty obvious, you have to get busy writing or inventing.

Passive advertisement earnings from your own websites - You must work and build your website, promote and get traffic first.

I'll stop here, but you get the point - In order to build passive income, you really have to put out the work at first.

Wikipedia also mentions that there are critics who deem passive income as parasitic, and how things would get done if everybody lives off some sort of passive income.

Exactly right - not everybody can live off some sort of passive income.  Passive income is not for everybody either.  There are specific risks involved with it.  Just like anything, with reward comes risk.  Although little effort is needed to maintain a passive income source, these sources can also vanish overnight (look at the last example, Pensions, and I feel bad for those who must retire soon).

The sales person may stop collecting recurring payments if the merchant/vendor should go out of business.

The income from advertisements on your websites may stop should your website lose its traffic overnight (especially if you are dependent on the search engine traffic).

Now, I'm not saying all this to discourage you to build passive income.  I just want to be realistic.  Just like any good financial advisor would say, "Don't put all your eggs in one basket."  The same could be said about diversifying your passive income sources.  Don't just build websites and collect advertisements, buy some rental properties, publish some books, buy some stocks.  Diversify!