$3,202.52 in Online Income For July 09

Summer is flying by really quickly. It seems like I just wrote about my $7,353 in Q2 online income and now its time for another update! July has been a stellar month and I managed to pull in just over $3,200 in online income.

As usual, Ebay was my biggest earner with nearly 33% of the online income. I’m glad I’m not dependant on only one source for the majority of my income, especially since I found out that one of my friends got booted from the Ebay Partner Network (EPN). While the real reason is a mystery, I can only guess it was one of the following:

  1. He wasn’t promoting related products on his blog. This tells the EPN that you’re not a serious affiliate marketeer and that you don’t know how to internet traffic conversion works.
  2. Some of the other sites were thin-sites. A site with no content and just affiliate links to products doesn’t usually rank well in the search engines and as a result gets no traffic. This also indicates that you’re a novice.

Ebay is facing problems increasing their revenues. They desperately need people to market their products for them. However, they don’t want people to sign up for the affiliate program and use it subsidise their own purchases.  If you make it seem like your internet marketing skills are non-existent there’s a pretty high likelyhood of their rejecting you. But you do have 60 days to try out BANS and get a refund if you don’t like it. If you don’t like BANS you can try this other Ebay plugin for wordpress that is pretty decent.

For more information read  my 1,000 word guide on how to make money from BANS

Anyway, here’s the monthly breakdown for July’s online income:

Direct Ads were a huge portion of the income as well. But this number goes up every July! Check out last July’s online income numbers. This July, the online portion is almost 40% higher while my dividend income is 40%! Speaking of dividends, I need to write a post about that!

My “other affiliate” is pretty low. It’ll probably be higher next month since I won’t be working and can devote more time to it. Lets see how that works out.

In the past year I’ve experimented a lot on different sites and I’ve found that Ebay’s affiliate program is pretty easy to implement. I’m also experimenting on new things, many of which just don’t work so I scrap them and move on. One of the things I did try a while ago was automated blogging. You create a site that pulls content from other sites and you put adsense around it. Not only did I get little traffic, the site was de-indexed from google and adsense blacklisted the site. Essentially I was warned that my adsense account might be shut down if I continued such blatant theft of content! While I don’t make much money from Adsense, it’s still $1000+ a year.

Anyway, let me know how you guys are doing and what seems to be working for you (or not!).

How Passive Is Your Passive Income?

I’ve been lumping in my online income with my passive income, but it isn’t really passive. It may not be very strenuous and it gives me geographic flexibility and I don’t have to show up for work every day, but there is some effort involved. Unfortunately I’m not as clever as Courtney Tuttle, who says he has a site that makes $3,500/month with no ongoing maintance. (If you’d like to buy an existing site that generates income, check out the online businesses for sale on my business & investment store). I’ve just had some limited success with Domain Parking, buts that the extent of my truly passive online income.

Simply put, my online income isn’t really passive. It’s a lot more passive than the website and seo consulting work I do by a huge margin, but its not as passive as dividneds or royalty checks.

So what are the best ways to earn really Passive Income?

1. High Dividend Stocks
There are a lot of stocks that paying quarterly or yearly dividends. Over time, the power of compounding (with a little help from inflation) can substantially increase the value of your dividends. My mother bought the Indian subsidiary of Unilever (Ticker: UL) called Hindustan Lever about 20 years ago. She’s being reinvesting most of her dividends and today her annual dividends are larger than the value of the original stock purchase. American Capital Strategies (ticker: ACAS) has been growing its dividends approximately 10% every year. According to The Dividend Investor,

If we invested $100,000 in ACAS on December 31, 1997 we would have bought 6906 shares. Your first quarterly check would have been $1,726.50 in March 1998. If you kept reinvesting the dividends though instead of spending them, your quarterly dividend payment would have risen to $17,095 by December 2007. For a period of 10 years, the quarterly dividend has increased by 300 %. If you reinvested it though, your quarterly dividend income would have increased by 890%.

Yes, reinvesting the dividends in companies that have historically kept increasing their dividends is key. Even though you might get only 2.5% return today, eventually with the increase in stock price and rise in dividends, your annual return should be greater than 12%. This concept is very well explained in Prof. Jeremy Siegel’s excellent book, The Future for Investors, which I highly recommend.

2. Oil & Gas Royalties

While there is a lot of fraud and speculation in direct oil drilling programs, they can be very, very lucrative for investors. Charlie Munger invested about a $1,000 in such an oil drilling program in the 60s and he’s estimated that its paid out over $500,000 in royalty payments since then. Apparently it still pays out $2,000 a month. Of course, most people NEVER see these sort of returns, but for the average person, investing in Canadian Oil & Gas Royalty Funds (or Income Trusts) is the next best thing. I’ve invested quite a bit of money into both the direct oil wells and the Canadian Income Trusts (or Canroys) and the overall result has been pretty positive in both (which is in excess of 12%).

3. Royalties on Books and Patents

Royalties on Books and Intellectual Property Rights can be even more lucrative. However writing a best-selling book or creating a something thats worth patenting can extremely time consuming and expensive. For most authors and inventors, its a labor of love – something that they would pursue even if there was no monetary reward to it. But many ebook writers who sell get-rich-quick books about “making money online” are getting very wealthy. Most of these books are garbage and the only people getting rich are their authors and resellers. Not a very ethical way to make money.

4. Rental Income on Properties Bought at the Bottom of a Real Estate Cycle.

If you bought rental buy and hold property in California, Nevada, Arizona or Florida during 2005 and 2007, my heart goes out to you. A lot of smart people got suckered into buying at the top of the market and are paying for it. However, if you buy correctly, preferably at the bottom of a real estate cycle, real estate can provide excellent passive income and fantastic tax advantages as well. According to Charlie Munger at the 2008 Wesco Financial Annual Shareholder meeting, “most real estate investors don’t pay any income tax, except once every 20 years or so“. Bought correctly (that is based on value, not speculation), rental properties can provide a steady stream of cashflow that is somewhat inflation-indexed. I say somewhat, because in the short-term anything can happen, but over a long period of time, real estate is going to match the rate of inflation.

5. Investing In Timber

Similar to Canroys, there are companies that grow trees specifically for timber and pay pretty decent dividends. There are also direct tree-planting programs where you can invest a minimum of $5,000 and own a portion of a timber operation. The company does all the work for you and supposedly cuts you a check once a year after a specific time interval. The endowment funds of Harvard and Yale have apparently been investing in timber for several years now with great returns.

6. Domain Parking (or Embarking)

There are many people who buy and hold hundreds of domains (I know a guy who owns 750). They either park them with Sedo or another domain-parking service. These services stick relevant (and sometimes not-so-relevant) ads on your site. The idea is that if someone comes to the site through browser type-in traffic and clicks on an ad, you get paid a portion of this ad revenue. I had hosted several sites with Sedo and made a whopping 2 cents per month. I’ve recently been trying out a new service called Domain Embarking that is working pretty well for me.

Making $3,000/Month In Passive Income

One of my near-term goals’ is to create $3,000 in passive income. (Since writing this post, I’ve broken that record. Check out this post to see how I made over $3,000 in a month) So far I’m about half way there, with income from various sources like blog advertisement revenue, Canadian Income funds and stock dividends,  and direct oil and gas drilling programs. Serial-blogger, Derek Beau, has already reached this target and his goal is to now make $10,000/month! Unlike me, he’s chosen to generate this income solely from blog ad revenue.

Over the past 2 years, he’s created 23 blogs on various topics ranging from golf balls to pregancy (apparently personal experience or expertise isn’t a deterrent!). He outsources the content creation using sites like Elance, and pays between $3-$5 per post. After waiting for a few months, during which time he lets the traffic build up, he begins to monetize it using various companies like Google, Text Link Ads, Kontera and direct advertizers . He’s making $3,000 every month and his eventual goal is to have 100 blogs pulling in $10k every month.

This isn’t by any means a unique or novel concept. However, I haven’t met anyone who actually have put in the effort to create so many sites and successfully monetize them.

Anand of TheAnand, has taken this automation one step further by suggesting that you can even automate blog posts by having google alerts send emails directly your blog auto-post email address! He even has a disease site on Avian Flu thats a really good example of a topic specific information site. I’m not sure what his traffic or conversion numbers are, but its still quite well implemented. [Updated note August 2009: I tried my hand at autoblogging and nearly got my adsense account shut down. It didn’t work for me. I’ve been able to create $3000/month in online income using other methods so make sure you go through all my posts!]

While creating 20+ blogs takes an awful lot of time and may not be possible for everyone, there are still ways to make passive income online.

This post describes two ways for you to earn passive income from your domains with a minimal amount of effort. If however, you’re interested in running a website that actually makes money passively by selling stuff, be sure you check out this link where you can buy existing online businesses.