How to earn a passive income online. Pic by John Haler

Passive Income: 6 Top Ways to Make Money Online

The Web is arguably the best medium from which to earn a passive income because content, software and online services can persistently drive traffic and revenue for years at a time.

In other words - build once; earn indefinitely.

The downside is that because there is this great potential to make money, a lot of people are trying it. And, with a lot of people, comes a lot of competition that makes starting out tricky. One thing's for sure; if you're not prepared to put in work upfront, forget about earning a passive income online.

Before we get started let's take a quick look at what a passive income really is.

Passive income is derived from a business that does not require ongoing participation in order to generate revenue.

While there are plenty of opportunities to set up fantastic passive revenue streams, it's also worth bearing in mind that, despite the above definition, nothing is truly passive. There will always be something for you to work on - even if it is simply growing the business to attract more people and earn more.

Passive Income Starter Pack

Start earning passive income with your own online business right now.

  1. Research & compile a business plan (quick, free & easy)
  2. Get a domain name
  3. Create a website
  4. Start marketing with the best marketing tools & services
  5. Grow your business & make money

Let's take a look at the best 6 strategies to make money online in such a way as to end up with a sustainable income stream without having to put in a sustained effort.

1. Buy Penalized Websites

There are plenty of high quality blogs and websites out there that get no traffic at all. In most cases, the owners and webmasters simply give up and move on to something else because they cannot afford to continue, leaving potentially valuable resources hanging around doing nothing.

The Internet is full of decent websites that have been ruined by unexplained and unwarranted Google penalties. Once webmasters have given up hope, fired their staff, etc, those sites can be snapped up for next to nothing because they no longer hold value for the owner.

The thing is, Google changes its mind. Pretty much on a daily basis. This can lead to unpredictable Web traffic volumes.

There is always a chance that a penalised site can snap back into the rankings and start driving hugely valuable organic search traffic, literally overnight.

Erratic Google Web traffic

Unpredictable organic search traffic volumes can temporarily lower the value of a Web property.

In order to succeed with this strategy you would need to be able to identify websites that have good quality content but very low organic traffic levels. After negotiating to buy the site at a rock bottom price, you would then set about repairing any potential SEO problems (i.e. spammy links, thin content, etc) in order to improve the chances of a recovery.

Then, sit back and wait for one of the many algorithm updates to take effect. If and when a site bounces back, work on developing effective sales funnels to convert the organic search traffic being sent by Google.

2. Join a Recurring Payment Affiliate Program

Affiliate programs are often touted as a great way to earn passive income because, so long as a site continues to get decent Web traffic volumes, there will always be conversions leading to commissions - while you sleep, when you go on holiday, pretty much any time day or night.

That's great, but it's also quite risky because commissions dry up the instant traffic does. If you experience a catastrophic server failure, or accidentally block Google from indexing your site (it happens more often than you think), traffic stops and so does your income.

However, some affiliate programs offer lifetime commissions on any referrals you send their way.

Recurring affiliate payments generating passive income

Affiliate commissions with recurring billing.

In other words, as long as the client continues to use and pay for the service, you, as the referring affiliate, make a percentage in commission. This type of affiliate program is far better suited to entrepreneurs seeking truly passive income because the commissions themselves continue independently of the website and its traffic.

The trick to succeeding here is to find a good quality service that offers a recurring commission in a niche you are interested in and passionate about. This is not as easy as it sounds because it only really works for ongoing services as opposed to once-off product sales.

Two I know of that are worth looking at are Shopify (although they are changing their policy to a once-off commission in the near future) in the eCommerce space and SEMRush in the SEO industry.

You will have to create a Web property that is both useful and interesting and attracts the right audience who would be interested in using the service(s) you are promoting. Remember that affiliate marketing is a challenging field that relies on an ability to produce great content and use that to build trust and authority with a targeted audience.

3. Give Away a Free eBook

The Internet has changed the way people consume information. Previously, we were all quite happy going down to the local bookstore and paying for a new recipe book, a new mystery thriller novel, and so on.

Nowadays, not so much.

We all want information for free and there is money to be made in giving people what they want.

While traditional publishers are still trying to publish paid content that gets copied and redistributed around the Web for free within 24 hours (I know this because the last book I ever wrote for a traditional publisher was available for free download on the same day it was published), you can offer the same (if not better) absolutely free.

Think of offering an eBook for free as a marketing strategy. People are far more likely to download a PDF book that gives them the information they need than they are to pay for it. There are actually a whole host of knock-on benefits to offering a free eBook.

By giving an eBook away for free you are earning the opportunity to get your content in front of people.

Once someone is reading your content it is possible to recommend products and services (i.e. affiliate links) that they might need, or sell advertising, and so on.

In order to succeed as a publisher you need both the technical skills and expertise of your chosen niche (i.e. you might be writing kindergarten lesson plans, or tips on how to exercise more, etc) as well as the ability to plan and put together a fantastic body of content.

You have to be able to produce content at least the equal of established media companies because that is the level of quality that consumers have been trained to expect.

People will end up paying for quality content if they cannot find what they're after for free. Your job is to match the quality of paid content and deliver it for free in order to capture the attention of a valuable niche audience from which you can generate ongoing revenue.

4. Blog About What You Do (you're doing it anyway)

To some extent the blogging industry is saturated. People have been setting up blogs for ages, and to be perfectly blunt, most fail.

But there is a difference between blogging for money and blogging about something you love, and do every day. Focusing on something that you are already good at and enjoy makes it easy to stick with it long enough to build up a following. That, and the fact that your passion for the subject will shine through in the content and make the blog that much more likely to succeed.

It also means that whatever the topic of your blog - it could be gaming, weddings, gardening, baking, entrepreneurship, etc - is not really hard work for you since it's something you enjoy already.

Don't believe me?

Well, apart from my own blog, I have read plenty of good examples of how people converted their passions into a blog, which in turn generates sometimes stellar amounts of cold hard cash. The most recent being the story of a guy called Johnny Ward who earns upwards of $20 000 per month from his travel blog.

Johnny Ward makes money blogging

Johnny Ward's successful travel blog - One Step 4Ward.

You can read the whole story on Bored Panda at Man Who Quit 9-To-5 Job Makes $1 Million While Travelling The World.

Ok, so Johnny's income isn't really passive in the sense that his work keeps him pretty busy. But is doing something you would do anyway really work? I don't think so, which is why I definitely count this as passive income.

To succeed in this field you're going to need to start a blog about something interesting or useful and write about it in a compelling and engaging way.

5. Create an Online Subscription Service

The nice thing about subscriptions is that, provided you can offer something of ongoing value to customers, it is easy to setup a direct debit that brings in money each month using any number of online services (like PayPal).

Unfortunately, the problem is not how to set the service up, but what you can offer to customers to get them to sign up. It also has to be completely automated from start to finish - otherwise the income won't be passive.

One of my companies does exactly that. It gathers freely available sales and price data for any product sold on Amazon, chops it up and combines it using proprietary algorithms, and spits out useful analytics and analysis for publishers, marketers, shoppers and sellers.

Subscription bases online service

Data and analysis based online subscription service.

People visit the site, register an account by setting up a recurring direct debit payment, and start consuming the data the system provides to receive alerts, build charts, and so on. Since everything is automated, the only thing I need to do is answer the odd support query - taking up approx 20 - 30 minutes per week.

Not bad for a business that caters to nearly 6000 clients around the world.

To succeed in this field you'll need programming and software development skills combined with good Web design in order to automate the entire system. You can save time by integrating with one of the top website builders.

It's also worth considering an information based subscription service, although if you are going to focus on a content oriented community then email marketing will become a vital aspect of your business model.

6. Sell Royalty Based Creative Works

I'm not much of an artistic designer, but I know someone who is. And man are they good. So good, that I saw an opportunity for them to start their own website doing what they love - being super creative.

The artwork they produce is freely available on the site for anyone and everyone who wants to use it as a background for their PC, Mac, tablet or smartphone. This makes it an awesome bit of soul-food and eye-candy that people can browse through over lunch.

Check out at Strange Fox's free wallpapers for a dose of real creativity.

Free creative works generating paid royalties

Free creative wallpapers for any device.

But where does the money come from if all the creative works are available for free?

Well, some people would like to print a valentine card, or decorate their living room with printed cushions, or office with canvas prints, coffee mugs, pens, glasses, t-shirts, or even sell a range of custom designs from their own stores.

In all of these instances, and many more that I haven't mentioned, it is possible to generate a small royalty or affiliate commission on the item being produced. So, if someone decides they love a picture, they can have it printed on a t-shirt and delivered to them for, say, $10 - of which $2 is commission.

Generate revenue by selling paid versions of free creative designs

3rd party sales platform retailing creative designs.

Because the commissions are generated via the website and all of the production, warehousing and delivery costs are handled by a third party service, the income is essentially passive. This means that so long as people are visiting the site, commissions on sales and advertising will continue to roll in.

To succeed in this field you're going to need to be creative and have the experience and skill to work with the software, tools and service required to generate great quality pieces that people will be willing to pay for - in one form or another.

7. Bonus Ideas

Every now and then we see a great idea on other sites that are worth mentioning in this list because they might be just the thing that suits your skill set, resources, and lends itself to a passive or residual type income. So, if you haven't found a way to make money yet, check back here regularly for updates.

7.1. Create & Sell an Online Course

Are you skilled? Are you qualified in a specific field? Perhaps you have years of experience working in specific industry? If you have knowledge, tips and experience to share then an online course might be a fantastic way to earn a bit of extra money.

Manta has an excellent article, entitled How to Expand Your Business by Teaching Online Courses, highlighting everything you'll need to know - including how to create a course, and where to sell it.

7.2. Sell Photographs Online

Publishers of all sizes are always on the lookout for great images to include in their content. While there is no shortage of royalty free stock images, there is still a large market for paid photos (i.e. earning royalties). The College Investor recommended this idea, along with 19 other great ideas in their article, entitled 20 Passive Income Ideas to Build Real Wealth.

What's nice about this idea is that it is super easy to get started (all you need are some original photos, or other creative images) because contributing to online image platforms like shutterstock and iStock Photo is a cinch.

7.3. Dropship with eCommerce

This idea comes from RealPassiveIncomeIdeas and their fantastic article entitled 43 Best Passive Income Streams & Opportunities.

The beauty about drop-shipping is that you don't have to worry about stock control, warehousing or delivery. Simply concentrate on marketing and making sales. The dropshipping company will handle delivery to the customer on your behalf. Since marketing and sales can be done online, dropshipping eCommerce is a business you you can do from the comfort of home.

There's a guide on how to start a small dropshipping ecommerce site you can check out to learn more.

7.4. Buy a Blog

Good Financial Cents is a great source of information for small business owners and entrepreneurs, and this idea came from their article entitled 23 Passive Income Ideas You Can Start Today.

Buying a blog is a fantastic idea if you know a bit about affiliate marketing and sales funnels. Before buying a blog, take a look at its traffic and decide is there is a way to generate cash from it (that the current owner is missing). Different Web traffic has different values to different people, so it may be that you can pick up a blog for next to nothing because it has hugely valuable traffic that isn't being properly converted.

So those are, for my money, the top 6 ways to generate a decent passive income online. They may not make you a millionaire, but having a few thousand dollars coming in each month without having to devote a significant amount of time can be a life changer.

7.4. Hyper-Niche Affiliate Site

There are a huge amount of price comparison and price check type websites that all offer a similar type of experience - huge automated databases of discounts and deals of dubious quality. These big automated systems are filled with inaccurate data and lack any sort of human touch.

Instead of following the crowd, offer shoppers a better quality experience in a specific niche. Don't try and be everything to everyone. Amazon and eBay have that market cornered and competing with them is not only unpleasant, it's all but impossible for a startup entrepreneur.

Find a niche that has some potential. There are literally millions of them. I regularly use Google's Keyword Planner to get an idea for the size of the search market for a given search phrase.

Here's a screenshot showing the size of the market for gaming laptops - a niche within laptops, which in turn is a niche within computers, within electronics.

Gaming laptops niche with over 100 000 monthly search in the U.S. alone

Gaming laptops generate over 100K monthly searches in the U.S. alone.

Gaming laptops are still an incredibly large and competitive space. But you get the picture, right? Find a small area you can really make a difference in and then offer shoppers data and/or content that they don't get elsewhere. For example, gather pricing and review data to help shoppers decide whether current discounts are in fact the best deals available.

RankTracer's Amazon Price Tracker does this very well. It offers human curated comparison groups (of between 5 and 30 of the best products) across a range of categories. Gaming laptops happen to be one of them.

Price tracker and deal comparison for gaming laptops

Price tracker, price history and deals for gaming laptops.

By offering human edited comparison groups, shoppers can immediately cut out white noise that comes with big, automated sites (like Amazon and eBay themselves) and focus only on the best stuff. From here they can quickly get a sense for how well each of the leading products sell, how well they are reviewed, how much they are discounted by, and if those discounts are better or worse than those offered in the past month.

All of this together means shoppers can tell precisely when the best time to buy is because it is immediately obvious when a product is priced at or near it's all time lowest. This makes it quick and easy to save money, which in turn makes a service like this very valuable.

You can use this service to save money shopping, and it's as easy as sending a tweet to request they add a comparison group of stuff you are interested in buying (i.e. toasters, ovens, headphones, shoes, ..., anything you can think of). If they can do it, so can you.

What other strategies and ideas do you have that offer a good chance of earning a passive income? What would change about the ideas above to make them more effective?

Share your thought in the comments.

Top ideas from university entrepreneurs

Encouraging younger people to become involved in entrepreneurship by holding business idea competitions is, in my opinion, one of the best ways to innovate our way out of the current financial doldrums the world finds itself in.

The creativity and energy exhibited by the students who enter the top business idea competitions from around the U.S. have shown the rest of us just how easy they can make it look when it comes to generating a new idea, putting together a plan, and pitching it to the world like pros.

Small business ideas by students. Pib by Melissa Petrie

Universities and colleges across the U.S. are brimming with new business ideas from student entrepreneurs that can be a fantastic source of inspiration for every aspiring entrepreneur, from school right the way through to retirees looking to start their own business.

We want to shine a light on the creativity and innovation being demonstrated at universities across the nation by students with a passion for entrepreneurship and sharing new ideas.

The best part?

Free beginner guides for entrepreneurs. Pic by James Jordan.

It’s hard work trying to find the time to develop a new business idea, create a business plan, build a website, create content, marketing, promotions, networking, investments, and everything else that has to get done.

Gap in the market startups. Photo by Robert S. Donovan

Being an entrepreneur is one of the best vocations in the world because it encourages you to view everything as an opportunity for innovation. And, once you have an idea, you have to challenge it. Break it down. Make it better. Throw it away. Start again. Fail. Fail. Fail. Until you succeed.

Whatever you can imagine, you can do. Provided you have the drive and determination to see it through.

University business startup competitions. Pic by tableatny

Starting a business can be a daunting task - often made all the more difficult by a small advertising/marketing budget and an insufficient network of contacts to help get things off the ground.

It's a good thing then that there is always one fantastic, free strategy to generate some high-quality buzz and exposure for your startup that will not only put your idea in front of plenty of the "right" people, but also, potentially, lead to some much-needed funds, influential connections, and media coverage.

I'm talking about university business competitions.