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.
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.
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.
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'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 wide range of products, chops it up and combines it using proprietary algorithms, and spits out useful analytics and analysis for publishers, marketers, shoppers and sellers.
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 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.
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 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.
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.