«Types of Passive Income That Can Be Generated Online, And What To Expect - Part 3 Welcome to the 17th Session of ...»
Types of Passive Income That Can Be Generated
Online, And What To Expect - Part 3
Welcome to the 17th Session of the Smart Passive Income podcast!
This is the final installment of a three part series where we’re going over all of the
different types of passive income you can generate online, and what you can expect
when working with each.
We’ve had two really good sessions so far - #15 and #16 - and they came with a lot of
great responses too. Thank you so much for all of your kind words so far. Plus, some people have contacted me and have already started their own niche sites, their own blogs and some of the other things I talked about in those sessions which is totally awesome, and I hope I’ve set the expectations right for you as you begin your online journey. You know, a lot of people give up in this business because they don’t really know what they’re getting into or their expectations aren’t lined up with reality, and that’s why I’m here recording this podcast series for you.
And yes - I know, I’m only one person, but I’ve got my foot in a ton of different income pools and I’m happy to share everything I know so you don’t make the same mistakes.
So let’s get right to it!
In this session, we’re going over some of the more advanced types of passive income, I guess you could say - something more than just a niche site, a blog or affiliate marketing - things that do take a lot more work and upfront time and money to invest, for the most part, but - the rewards can be very very significant and for some, these things just might be more fun and interesting.
The first one I want to talk about is a membership website.
A membership website is usually some type of website that delivers content to a person who has purchased access to it. So, you know, you pay for this information, get a login name and password and when you sign in you’re granted access to all of that restricted info, and usually there’s some type of community on the site as well for members only, like a forum or something like that - sometimes tools and other software that can only be accessed after becoming a member.
My first experience with a membership website came from Internet Business Mastery, which is a podcast hosted by Sterling and Jay - I’m sure many of you have listened to their podcast before, if you haven’t I highly recommend it. Internet Business Mastery is currently 118 episodes in and counting and really their podcast is what inspired me to give internet business a try when I was laid off, so Sterling and Jay, if you’re listening to this - thank you! I can’t thank you enough...
They also taught me the power of podcasting, because really it was their podcast that led me to join their Academy, which is their membership website.
So, when they came out with their membership website in 2008, I joined and I’m still a member today.
I have always dreamed of having a membership website of myown, because it’s probably one of the most attractive business models out there.
The reason why is because of the monthly recurring income. Let’s do some match really
quick just to help you realize the potential here:
Let’s say you build a membership website and it’s about - I don’t know, autoparts. In your site you have exclusive information about where to get the best autoparts for the best prices, videos on how to install certain auto parts (I’m sorry I don’t know much about auto parts so excuse me if the example is a little off, but I think you get what I’m saying). Basically, there’s information, quality information that is for members only on your autoparts site.
Just to throw out nice round number, let’s say you charge $50 a month for membership.
In the first month, you know it’s a bit slow. Maybe you do some adwords campaigns or hit up your existing list on your autoparts blog or website and you get 10 members in there. That’s $500 a month right off that bat. Not bad!
Let’s say in month 2, you have the same kind of slow month and you only get 10 members again - the same amount. Now though, you have a total of 20 members, each paying $50 a month, which is...$1000 a month. Lookin’ good, even though you still had the same amount of sales, your income doubled.
Now, in month 3, let’s say you started to rank high in Google for your keywords finally, or you were mentioned in a news article on a major newspaper or in a magazine article or something, and you had 30 people sign up in month 3. That’s 30 people at $50 each, which is $1,500. Even better...but wait...there were already those 20 people in there paying you $50 a month from the first two months, so really you now have 50 members bringing in $2,500 a month.
That’s only 50 people...paying $50 a month.
Maybe your membership site has a ton of value, worth much more than $50 a month (maybe you have exclusive deals with some autopart manufacturers that your members can have access to to get parts for cheap, for hundreds of dollars off the normal price), so you double your price to $100 a month. Now 50 members would bring you in $5000 a month, which is $72,000 a year, and remember each month, hopefully, your membership numbers would continue to grow, and so would your income.
This is why a membership website is so powerful - it just builds on itself and as your site grows, and word spreads and maybe you have an affiliate program in there to intise people to help spread the word even more - really the sky is the limit!
Now - that’s all the juicy stuff, and really the business model is awesome, but of course, as with anything, there are some things to think about before you get all crazy and start to build a membership website.
Yes, this can be a form of passive income. You can get new members and overnight while you’re asleep if the systems are in place, however in order to keep people in your membership site over time, or in other words, RETAIN your members, you’re going to have to do a bit of upkeep.
If you simply create content for your membership site, put it on there and then leave it at that, you may have members come on board for 2 or 3 months, but if there’s little activity and no additional information to digest, chances are people will cancel their membership. It is said in the industry that the average length of membership is only 3 months, and I think this is because a lot of people set these money machines up, but don’t add anything to it that would keep people paying their monthly fee.
But, I’ve heard of some membership sites that do things like engage their community, hold monthly webinars with brand new content or answer people’s questions, add new coursework or material to the membership site each month - I’ve heard of these kinds of sites holding onto people for years. I mean, I’ve been a member of Internet Business Mastery for over 2 years now.
Just some things to think about, because you’ll always hear the math but they don’t tell you that people do cancel memberships for a bunch of different reasons.
A few other things to mention about membership sites - like I said before it does require a lot of work, it’s not a total set and forget kind of deal, but there are ways to make it a little easier on yourself if you do decide to try a membership site.
One of the best ways to retain members is to have some type of community of forum for members only. This keeps new content coming and fresh on the site (since it’s user generated), and it build camaraderie and sometimes members become friends with each other and would feel bad just cancelling and leaving the community that was built.
So, I’ve noticed some membership sites do this - they either hire someone to really just be in charge of making sure everyone’s questions or comments are addressed, and some forum mangers, as they sometimes call them, do a really good job of starting up conversations to get people involved, which is cool.
When I was a part of the problogger.com forum community, I remember Darren Rowse appointed someone who was in charge of the forum who became very active and really did a nice job of keeping us all engaged, informed and interested. I thought that was really awesome.
Another thing you can do is really try to make new members welcome. As I’ve mentioned before - first impressions are everything, so if you can give new members something that blows their mind - maybe a really personal welcome video, or something free for them as a thank you that wasn’t even mentioned in the sales letter - I think that would go a really long way.
Like I said, I don’t have my own membership site yet, but if I did these are the kinds of things I’d do. It’s the kinds of things I’d want for me if I joined some kind of membership site.
Here’s a cool idea. How about sending new members a thank you postcard? I would totally do that. It would totally blow me away actually - I mean who does that?
Something like that - out of the box, would really make a difference and probably keep people in a membership site longer.
As far as how to set one up: really there’s a bunch of different ways. Before there was this script or piece of software called aMember, which was really code heavy and something I looked into but it honestly scared me a little. Now, they have things like wordpress plugins that can turn your wordpress blog or wordpress site into a membership website. The plugin I’m thinking of specifically is called WP-Wishlist, which I actually just installed on a site for a future membership-type site and it’s working really well so far, very easy to use and it has a good support system.
After you set one up - and with WP-Wishlist you basically can create pages or posts and set restrictions to them for different levels of members, so only people who are members will see them, the trick is, of course, getting people to become members.
If you have an existing audience already, like from a blog or a podcast, it’s going to make your life so much easier, which is why you’ll see a lot of bloggers and podcasters come out with membership sites after they’ve built an audience and gained authority in a niche.
If you don’t have an audience already, it’s a tougher battle but you can still do really well with it, especially if you have quality information within your site. Of course, you could go the advertisement route - with adwords ads or facebook ads, but that will cost you some money and you’ll have to really make sure your sales page, or whatever page people land on from clicking on your ad converts well.
To increase conversions, no matter how you’re getting traffic, whether you’re getting traffic from advertisements, or naturally from search engines or by having affiliates or other people in your niche send traffic over form their blogs and email lists, one thing you could do is give away a 1 month trial. A lot of membership sites let you become a member for 1 month for free, or sometimes you’ll see a trial for only $1.00. This obviously will get more people to sign up and if your first impression is good, and the quality of information on your site is worth the monthly fee, people will pay to stay.
There’s a lot to membership sites - and I’m just speaking from my own experience as a member of several different membership sites at one point or another, so I’m sure there’s a lot more to it but I hope you can see that 1) it’s an awesome business model 2) it does take a lot of work to create and it definitely requires some time (or at least some help) to maintain it if you want to retain members, and 3) like with any other product out there for sale there is a marketing aspect to it.
Next, let’s talk about Software.
Software is a product you can sell that is great for passive income. What’s cool about code or software is that it is very scalable.
There are a lot of businesses out there that have gone huge by selling different types of software.
For example, you may have heard of a wordpress theme called Thesis. Thesis is basically a framework that one could install on their wordpress site that makes it really easy to customize and become very search engine friendly. There was an interview on Mixergy.com with Chris Pearson, the creator of the Thesis Theme (and I’ll have that link for you in the show notes on the blog), and it’s just crazy how much money just some pieces of code could make because it accomplishes something that everyone wanted (which is obviously the key when it comes to producing software - making something that solves a problem or makes someone’s life much much easier).
I think I remember in that interview, he was talking about how they paid their affiliates over $400,000...their affiliates, so you can imagine, if that’s just a little piece of the pie how much Chris and anyone else involved in the project made.
Another example is wordpress plugins (and I know I’ve been talking about wordpress “software” only so far, but it doesn’t just have to be code or script for wordpress, it could be for anything). Michael dunlop sold thousands of copies of his plugin called Popup Domination. I don’t have any numbers on WP-Wishlist, but that’s another wordpress plugin I paid a bit of money for to turn my wordpress blog into a membership website.
Market Samurai is a piece of software that I bought that helps me quickly find profitable niches and understand keyword research and competition.
There’s another piece of software over at CoverActionPro.com that basically takes any 2D image, in photoshop, and with two clicks can turn it into any number of 3D images, like a 3D book, magazine, software box, cd, dvd, you name it.
I’ve just started to get into software as a potential for passive income, and if you don’t know how to code, like me, then you’ll have to outsource your work, which obviously comes with a price. You could find a partner and agree to split any revenue that you make with your software, I guess - there’s nothing wrong with that, although I could see the potential for a number of disagreements or problems that come along with that. if you do go down that route, make sure you just have a contract or written agreement in place between you and your partner with how things work, who does what and how revenue is split. I’m not a lawyer or a financial advisor, obviously - just sayin.