Why “passive income” isn’t a good idea

alrighty, before we go into the meat of that one, here’s a quiz-question for you (highly relevant for anyone who’s in Internet marketing of course, as all things cycling are a metaphor for succeeding with Internet Marketing;-)

What’s wrong with the following picture: (I’ll give you a hint: the “wrong” part is towards the end of that ride;-)

(click on the image to see it full-size)

(click on the image to see it full-size)

Right, with that out of the way, on to important matter such as “the real reasons why the idea of ‘passive income’ is flawed – at least in the context of Internet marketing”.

In yesterday’s post I suggested that IM is inherently a “human contact” sport, and if you really want to succeed, you better forget about the “sitting on the sofa in your undies and waiting for money to fall down from the skies” idea.

Well, Mike observed that he was making over a grand a month doing exactly that: sitting around in his underwear.

Whilst obviously a grand a month isn’t anything to be sniffed at, here’s why I still think that the overall “passive income” idea sucks:

  1. Typically, the ‘passive income’ systems out there are simply shoveling traffic from one place to another, and don’t add any value in the process. Traffic arbitrage is one way of calling it, shit-shoveling another. Here’s the thing: Google and pretty much any website owner (who is taking their site seriously) wants to provide value. Driving visitors to shit-shoveling sites doesn’t add value, which is why we have things like Panda 1, Panda 3, Pingu 3, …. Sooner or later Google (or whoever is sending you traffic at the moment) is going to cut it off, and that’s that with the passive income.
  2. I may have mentioned this before (once, or twice, or a gazillion times): your #1 objective with anything you’re doing online is to build a business ASSET. Something that’s still worth something even when Google takes away the traffic. Turns out, one of the biggest assets you can have is the goodwill, engagement and TRUST of your audience or tribe. I have yet to see an “automated” system that generates any of that. Remember: people buy from people …
  3. Lastly, and most importantly (at least in my opinion) is YOU in this equation. Yes, Mike’s ‘system’ may be the exception, but most people build shit-shoveling systems. Of the kind they really don’t want to mention to their friends and families: “hey, I shovel traffic from Facebook to gay dating site CPA offers, yehaaa”. Or, taking it to the next level: take Eben Pagan’s latest offering  which is aimed at people who are *serious* about building a proper business online. Part of this is a live meeting, where he’s got a confirmed 100 7-figure earners. Now – take the advice from the Princess Leia post – and start walking up to those 100 7-figure earners, one after the other, offer to buy them a beer, and then, when you start talking and they ask what you do, your answer is: “I make over a grand a month shoveling shit”.

How do you think these 7-figure earners are going to react to that?

my view is this: shoveling shit is fundamentally selfish – it’s about YOU wanting to make money, and you don’t give a s**t how this happens.

The vast majority of 7-figure earners make those 7 figures by providing value to their audience … and they want to hang out with like-minded people – ideally people who are a step ahead, so they’re constantly challenging themselves to get even better at what they’re doing.

But hey, that’s just my take….

Veit

Facebooktwittergoogle_pluslinkedinmail

Comments

  1. Veit, you nailed it. Any person who has done anything significant in his or her field has done so by adding VALUE.

    Here’s the thing folks- Value is not a shiny object. It’s something that takes time and intention to create, and it’s the hallmark of anyone who becomes successful.

    A common but poor-quality question is- “How do I make 1 million dollars?” A better one is “How do I develop the skills and deliver the value that someone who makes 1 million dollars would render?”

    In so doing you will make the world online or offline, a better place during your journey.

    Tim Hillwood

  2. “What’s wrong with the following picture” – if you went via Munchhouse-Ensisheim it would be like 3 times faster? :p

    “…I still think that the overall “passive income” idea sucks…” – you are crashing all my dreams, Veit :[ why… 🙂

    Don’t “we” provide value by connecting (homo- and heterosexual)people who want to date? “my” link to the CPA dating offer could be that sparkle… that life changer for someone…make someone happier, find love of their life, family and all that 🙂 (yes i’m messing around but still…)

  3. Matthew Newnham says:

    Couldn’t agree more, Veit. So much of marketing is taking the short term train to irrelevance. Here’s to the alternative…

  4. Veit, I suppose a lot of us need to check and see what’s actually on our shovels.

  5. I’m not sure I get the message you’re trying to get across. Is it that you think us “advertisers” are below you “educators”? Or are you guys more worthy of the money you earn? Because if I hear another marketer say they are this to help people and not for the money I’ll scream. If that was the case then stop sending promo emails, stop trying to win affiliate contests and don’t put links in your articles.

    Marketing snobbery is something that has crept into the IM world of late. We can’t all be professors, some are shoe salesmen. Others work for advertising agencies. The money made is still the same.

    Passive income is a fantastic business model to aspire for. Though it certainly takes more work than many people think. In the end if you decide to build websites, write articles and generally work your butt off to get a link clicked then well done to you. I would rather pay to get that click, spend less time and see my results straight away.

    The end result is a sale. Which is what we are all trying to achieve.

    • Hey Mike, not at all – the intention of my original statement was not to imply that one way of making money with IM is ‘better’ than the other.

      some people are ‘better’ at the creativity required for product creation, others are more at home focussing like a hawk on the minute difference in CTR for the PPC ads they’re split-testing, and so on.

      I do agree that ‘passive’ income is great – when done right. And the ‘done right’ is the part most people get wrong. Look at the ‘real’ world: passive income is created by leveraging something of true value (interest-payments, your stock in a company, real estate appreciating or rental income, licensing IP are just a few examples). But they typically have one thing in common: they start with a value-proposition: you have something that other people want, and they’re willing to give you money (or value in another form) for it.

      I don’t know you personally, but I get the feeling you’re an *active* advertiser. In other words: you have developed marketing systems that send qualified prospects to people who want those prospects. So, you have value in that marketings system. Also, you’re are actively paying for traffic, monitoringg it, constantly improving … none of which is the ‘passive’ most people have in mind when they fall for that ‘sit on your butt and wait for the money to fall into yer lap’ hype out in the IM landscape.

      Cheers

      Veit

      PS: I think there’s a bit of a ‘jumping to conclusion’ when you say people are out there to help others and not for the money. That’s not even running a charity, even charities need to make money to keep things running. What you’re referring to is a model employed by far too many (wannabe) coaches: give, give, give and hopefully one day the Universe will return the favour. If you want to make a real difference, having/making money goes a long way. So, personally, I’m 100% happy sending out affiliate links for products I truly believe in – and if you read my emails, you know that I do my very best to tell you exactly whom it is for and who’d better stay away from it. Those affiliate commissions pay for all kinds of things, including further eduction which I can pass on and time I spend answering emails directly to me.

  6. Hey Veit,

    why did you take the biggest uphill challenge at the end, when you already used up most of your energy?

    Socializing: That’s a big thing for introverrts – but they will definitely meed like-minded people there if they really want to provide VALUE to their tribe…

    Cheers, Alex from Germany

    • Alex, hah, very close. The biggest uphill challenge at the end.
      However, it’s what happens afterwards….

      Veit

  7. Hi Veit, I do disagree with your point about IM – that in order to be a real business and make good money, with integrity one has utilize a model where one does not just use one’s computer from home.

    I love controversy, and I found your statement about IM not being about “sitting around in one’s underwear all day” (working from home and from home only) to be controversial… so let’s have a nice civil disagreement if you will. I think such gentlemen’s agreements to “agree to disagree” are often instructive and thought provoking. And I like you and think you are a gentleman so let’s continue…

    I’m glad you wrote “Yes, Mike’s ‘system’ may be the exception, but most people build shit-shoveling systems.”

    The first part of that is true, my business is an exception to what you wrote. I don’t rely on google, I am learning list building, and I plan to build more sites that sell GOOD products, not crap products. I have succeeded at making an average of $1,000 a month as a distributor for a
    great product and now my goal is to make another grand here and another grand there with different products.

    But part of my “system” if you want to call it that is to sell only products that are really good and not sell crap, nor to use spammy links to promote my sites. In fact I just turned down two other affiliate businesses after investigating them because I felt their products were not worthy – I wouldn’t buy them and so I won’t sell them.

    You seem to be against “pure” internet marketing without going out and pressing the flesh. I just don’t see your point. That way is great for those who like that and “my way” is great for those who don’t.

    Yes, there are a lot of people in IM who sell crap, in fact many of them are on the Warrior Forum where you peddle your fine products. And would you be where you are today without the Warrior Forum? And without shoveling traffic from one place to another? Are you not shoveling traffic to Eben Pagan in this very post? And did you not build your list through the Warrior Forum? I’m just saying – those who live in glass houses shouldn’t throw stones. ;-D

    My impression is that you feel very strongly that it’s best to network, align yourself with others, etc, in order to make the most money in IM, and so that is what you want to teach.

    I have no problem with that at all; you may well be right, that to make the MOST money with IM that is the way to go – and part of this has to do with creating your own products and such, in which case you DO need partners to profit the most from your products.

    And I do not doubt that creating and marketing your own product and “brand” is the best way to make the most money.

    So all I’m saying is that in preaching that gospel you can still allow that some of us – in fact many of us do want to work from home, and no, we don’t want to go out and meet people or deal with driving, cars, freeways, social graces, dressing up, and all the other stuff one has to deal with when networking in person.

    My feeling is that one CAN certainly work from home, sell purely via the net, sell good products, and make a good living doing it. It’s just “different strokes for different folks” and you don’t need to down one while promoting another.

    Some people may have good reasons to work from home and not go out to work with real people “in the flesh”.
    Maybe:
    * they are disabled
    * they are retired and tired of dealing with cars, people, etc.
    * they are socially awkward or just don’t like human interaction
    * they simply prefer to be at home most of the time – at least when working
    * they want to be a working mom and stay home with the kids
    * they live in a remote area
    * and I’m sure I could come up with many more

    My reasons? Several of the above. I live in Los Angeles and leaving home is full of frustration and hassles, potential tickets and fines, and horrible traffic. Secondly I have my friends and I see them but other than that I don’t really enjoy the general human population all that much. ;-D I enjoy being at home listening to music and watching the birds at my window.

    That said, I like a lot of the people I have “met” online (including you) and I like the fact that I have a goal of making $2k/month online and feel I can reach it while sitting at home in my underwear (it’s hot here in Los Angeles!) listening to Jethro Tull, Louis Armstrong, Mozart, etc. while I build sites, research keywords, promote here and there, place ads, etc.

    Bottom line:
    I think a LOT of people want to do what I’m doing, I think they CAN, and I think if they want to, they should.

    Cheers!

    • Veit stated clearly that providing value should be the motivating factor – and your system is all about providing value by recommending only the best. So it goes along the lines of sound marketing principles.

      Your product (water filters) is physical, so selling it to most of the people who need it in big chunks (launches) won’t work.

      The infop roduct crowd is in need of good products for their lists constantly, so networking is a profit maximizer for them. But here, the people who really provide value will socialize with like minded people and provide more value to their tribe in return.

      The post about Eben Pagan’s “Accelerate” is spiced with advice on who sould NOT consider buying it. In my eyes, Veit only shovels the right people to Eben – those who benefit the most from it, and ONLY those.

      Your product also needs a consistent marketing process, and you should – maybe – even try to build a tribe around it. This opens possibilities for physical up-sells, cross-sells or even info product
      sales about the product. Think Amazon…

      Traffic: If you don’t rely on Google, you still have to find your traffic somewhere. If this traffic is a one-off flow through your site to the product owner, you should have plenty of soucres to keep it going.
      Your work then is to watch the soucres and optimize the flow into your site, but also to optimize conversion (BTW – badmouthing competing products is NOT a good way to build trust).

      Cheers, Alex from Germany

      • Alex, thanks for your comments and advice!

        I did not intend to imply that Veit was doing anything inappropriate with his funneling the right traffic to Eben. All I meant to say was that ALL INTERNET MARKETING requires shoveling traffic! (In one form or another.) I, like Veit, believe in helping people to hook up with the right products and would never push crappy products on people. So I respect that Veit tells people that a certain product may or may not be for them based on certain criteria (the Eben thing is not for me, though mostly due to the high price) and not wanting to scatter my energy into yet another course at this time.

        Your idea of building a tribe around the product sounds good. I will have to figure out how that would be done though. I am thinking other products lend themselves to that better, though, and I have some other products in mind.

        The one part I don’t really understand in your reply though is this:
        “you should – maybe – even try to build a tribe around it. This opens possibilities for physical up-sells, cross-sells or even info product
        sales about the product. Think Amazon…”

        How would one do this with something like water filters? I assume you mean a Kindle “book”? Maybe you or Veit can explain this better, I’m not sure I understand what you mean re info product sales about the product.

    • Hey Mike,

      haha, I do like a gentlemens’ agreement to disagree – ok, kidding aside:

      far too many people take the IM gospel as preached (regurgitated without any critical thought) by the masses, and end up being stuck at square one for … ever.

      so, to get back to the main point: can you make money (the *most* money, which appears to be a central point of your argument) by not connecting to other people?

      I’d argue, that in most cases you can make money, no doubt, but if you’re after the *most* money, yes, a little human interaction goes a long way.

      Take Mike Geary of Truthaboutabs fame: he builds relationships with advertisers, so when he goes out to do media-buys, he gets the rates nobody else can. Simply because he’s put in the effort and gotten to know the person on the other side.

      Note, that this part has nothing to do with product creation – like I said in response to ‘the other Mike’s’ comment (above/below?), everyone has their own sweet-spot in IM – and my intention is not to say that ‘product creation’ is the one and only way to make ‘the most’ money. Personally, my forte is product creation, but at the same time I understand that other people are more systems oriented, so they’re very good at, well creating systems and leveraging the value in that. Others again are more people oriented, and they do things like JV brokering and providing massive value that way.

      Re-reading what you wrote above, I reckon the ‘disagreement’ we’re having is about how to ‘meet’ people: of course, meeting them in person is probably the most powerful way of building relationships. But, that doesn’t mean you can’t meet them the ‘virtual flesh’ by using skype, Google+ hangouts or even the good ol’ telephone.

      So, I guess we need to view the “in your underwear” statement as a metaphor, rather than too literal: far too many people are led to believe that it is all about sitting around lazily, watching day-time TV and drinking beer whilst the Paypal account fills up. And like you and the other Mike pointed out: it’s actually more work than you initially think.

      Cheers

      Veit

      PS: do I think I’m shoveling traffic to Eben’s offer? Nope, I hope you read my previous emails where I point out exactly who Eben’s offer is for and who better stay clear of it. Shoveling would’ve been hyping the crap out of it, and relying on over-the-top bonuses that bypass all reason and get you so excited that you pick it up no matter whether you need it or not.

      • Veit,
        Thanks for your gentlemanly reply. ;-D
        I really think we’re on the same wavelength and more than anything it is semantics that created the disagreement.

        Your mentioning “sitting around in your underwear” and “shoveling” had bad connotations for me, as if you were implying that internet marketers who work from home (“in their underwear”) and drive traffic here or there (“shoveling” traffic) rubbed me the wrong way. Also the word “shoveling” in such a context often refers to shoveling manure.

        I think we still can agree to disagree on the concept of whether or not IMers really need to “get out and meet people” in person (not email or forums or pages like these). I believe it is very possible to make very good money without ever leaving one’s computer (well, in fact I KNOW it is – I know people who are doing it!).

        But again I will give you that it depends on WHAT type of IMing you are doing, and certainly with product creation and some other aspects of IM it is best to develop a network of real people, real relationships.

        But let’s say you’re doing CPA stuff, promoting someone else’s product on the net (as I am), promoting affiliate offers via Clickbank, building AdSense authority sites etc… I really have to insist that these and other types of IM can indeed by done by sitting at home in one’s underwear! And that they can provide value to visitors/buyers as well.

        However as you pointed out – and this is where some misunderstanding may have occurred – “sitting around in one’s underwear” nor “passive income” means sitting around drinking beer and watching tv all day!

        It simply means that one can be comfortable at home while one WORKS online. And that this work can be done – to a degree – on one’s own schedule, without anyone telling you that you have to be somewhere at a particular time or you have to do this or that at a particular time.

        This is one reason I am opposed to partnering with other humans in my work and prefer to keep my work between just me and “internet people”. I have had non-IM projects which involve partners and honestly it can become a real J.O.B. – as you then are answering to other people, dealing with their schedules, their requirements, their input, etc. It can absolutely be rewarding but to me it’s more work and less fun. I prefer to be totally free and choose my own actions and schedule.

        As to “passive income” is there really any such thing other than if you have say, a million dollars in the bank and are making the interest off that? Or maybe if you have a bunch of real estate (land, not buildings – they require maintenance) and all you have to do is passively wait for the interest or value to increase on it… But generally speaking, in IM terms, there is no true passive income that I can think of other than MAYBE Kindle – if you have a best selling book, once it’s written you might be done. Although I would think even then SOME promotion would be in order.

  8. Hi Veit
    I’ve always been an admirer of your desire and ability to speak(write) as you find. We all respect that or we wouldn’t be on your list.
    However you are being quite incensed about your own point of view here I feel. I mean what about micro-memberships sites? The owner drives relevant traffic and the member subscribes to a 12 week course or so.
    This is providing value to the customer, there is no shovelling of manure. All I’m saying is that there are (as Mike) pointed out) parameters.
    What is clear about your post is your passion and focus and your ability to take on board feedback.

    As always
    Thanks for sharing your thoughts Veit 🙂

    • Yep – and the owner also builds a list of his members. Therefore, he’s got a trbe to provide more value to.

      If he doesn’t have the products, he can network with other product creators to find the products that can help his tribe to get to their goals even faster, or easier.

      The more value he can provide (up-sels, cross-sells etc), the more his tribe will love and trust him.

      Cheers, Alex from Germany

    • Hey Dave,

      nothing AT ALL wrong with micro-membership sites – in fact I’m all for it!
      you’re building an ASSET (actually, you’re building several assets, see my response to Mike’s comment), and you’re providing value. And if you’re not a product creator, just put on the ‘publisher’ hat and publish someone else’s (high quality;-) content. There are tons of ways of building high-value assets, and then leveraging those assets in many different ways, so there really is no need for the shoveling…

      micro-C sites are a beautiful model, and once they’re up and running (meaning: you have an active marketing-‘system’) they can feel like totally ‘passive’ income.

      Reality is: over time you’ll probably have to keep an eye on your traffic systems (oh, look, I’m using affiliates, and guess what, they’re humans, so I need to interact with them) (oh, look, I’m at the mercy of Google, and oh s**t, what’s that, another Panda has just wiped out my ‘system’) (oh look, I – or an outsourcer – has to keep an eye on the PPC traffic). Also, if you have a micro-C site that really gets people engaged, sooner or later they’ll want to have more of what you’ve got to offer. Dang, more work…

      Btw, just to clarify: hands-off or ‘passive’ may well mean that YOUR hands are not involved, but you’ve got an employee/outsourcer, or a team who do it. Meaning it’s hands-on, but just not YOUR hands, so it feels ‘passive’ to you, but really isn’t.

      It all comes down to this: “value in, value out” is a close to a law of nature as you can get. And too many people are sold (and buying) the “push button in, millions out” dream, and it p***es me off

      Cheers

      Veit

  9. Hi, Veit!

    In this case, I (partially) disagree with you.

    I agree with you on the fact that creating lots of crappy sites, whose only purpose is to get traffic from ultra-long-tail-keywords and funneling that to an affiliate offer or showing ads is not a real business; meaning you can loose that traffic overnight with a new search algorithm and you’ve got no customers, no list, no nothing.

    In any case, as someone pointed out before me, even the traditional affiliate business model can add value, if you write good content or reviews, and help people make good, informed buying decisions, even though you are not the product owner.

    But above all, that is not the only “passive income” model.

    What about this model:

    – Create a good, solid offer (it could be an info-product, software, an on-line service, a paid newsletter,…).
    – Create (at least) one good squeeze page that gets prospects into your list.
    – Build a funnel and an autoresponder sequence that converts a share of those prospects into paying customers.
    – Upsell those customers to higher-end products.
    – Drive traffic to the squeeze page or the sales pages using paid ads, solo ads, or using affiliates. You can make a profit if the ARPU is higher than the cost of acquisition.

    This can be passive to a large extent. Yeah, you can’t build one site like that and retire to Maldivas for the rest of your life, but the business should continue working and providing revenue even if you stay away from your computer for a few weeks, or if you only spend a few hours a week mailing your list, providing support and managing your ad campaigns.

    The only “caveat” is that you have to put in a lot of effort to build the business to begin with, but as the saying goes, “Entrepreneurship is living a few years of your life like most people won’t, so that you can spend the rest of your life like most people can’t”

    • Mikel,

      thanks for that – helps me formulate one important point which was part of my original assumption:

      what you’ve got here is something where you’ve done the leg-work, you’ve actually gone out and done the market research, really made an effort to understand what problems your target audience faces and how to solve it (so you can then make appropriate offers).

      the ‘shoveling’ approach is things like Made-for-Adsense sites where you truly don’t give a toss about who is on your site, it might as well be bots, as long as you get clicks from Adsense. And you get them because often enough the content on the MFA sites is of such low quality that people would rather hit the back-button or click on the Ads.

      Here’s the thing: what you’re proposing is great. It has one fundamental problem though:

      *IF* you do the market research properly and you do the whole squeeze-page & follow-up sequence right, you’ll start getting real human interaction! Dang those pesky ‘real people’, they’ll want to connect to you and get solutions to more problems. And out of the window goes the whole ‘passive’ idea. Not a bad place to be in though;-)

      Veit

  10. I like Fresh Air.

    I think I’d rather just Coast Downhill.

    I’d travel from East to West on your map, and enjoy the air + views!

    Doesn’t that answer both of your discussion points? … why perspire?
    [let’s add that WSO “creators” can give smelly crap too]
    .

    • Hey Larry,

      East to West is what I did, with that nice uphill at the end.

      But, well spotted: why perspire? Well, because that’s where the gold is. We all wish we could be transported to the top of the hill by a push of the button, but when you do that, you miss out on the entire journey.

      In this case, yes, it was painful going up there (we had such a rubbish winter and spring that I’m far from my desired cycling-form, so going uphill ain’t no fun at the moment;-), but it made the arriving at the top all the more worthwhile.

      Now the big ‘mistake’ (“what’s wrong”) is of course that I didn’t ‘enjoy the fruit of my labours’ by at least racing down to the bottom of the hill – because really, that’s where all the fun is in cycling.

      well, I chose to join my family in the car and drove down … which again was a nice reminder for me that the reward you *think* is going to await you isn’t necessarily the one you’re going to get (and it was lovely going down with the family and my father in law), and also made me appreciate once more that the value in the whole cycle wasn’t just the arriving at the top, but in fact the whole cycle up.

      Cheers

      Veit

  11. Good post.. Personally I think recurring income is the correct path to take but gets over rated with words like “passive” and “hands free”. The marketing world as we know it has many different “income opportunities” most of which suck! But I do feel it’s pretty easy wriggle out the bad ones and concentrate on what can actually pay you for years to come.
    Let’s say promoting the crap out of a the next CB launch which pays $77 / month or MLM program because your after the 50% cut. Normally you’ll have low EPC and if the product is not delivering value you’ll have a low retention.. bad promo.. 🙁
    But look at other things.. Domain, hosting, auto-responder, membership sites which consistently add content which people need. All these are something we should have in our funnels or at least an affiliate link close by. Let’s take a new student, family member or friend comes up to you and wants to get setup in the IM business. Your simply providing the links to the tools their going to purchase anyway. We might be educators, coaches and entrepreneurs or whatever but we’re still affiliate marketers which allows up to pay the bills.
    Then you have building your own online empire around membership sites leaving you in complete control. The biggest mistake I see here is people relaxing once they become comfortable with the amount of members forgetting that they will drop off month after month. So never stop brining in new members.

  12. Tarence Wade says:

    Great insights on what separates some from the masses! Thx for sharing!

Speak Your Mind

*

Terms and Conditions | Privacy Policy