What does the word PASSIVE INCOME really mean to you? Philosophy Question...

37 replies
Obviously much of the Internet Marketing community seems to be on some constant quest for this elusive goal of "passive income."

I've been thinking about this phrase a lot lately.

And what's been becoming clear is that the definition of this word seems to be highly subjective, and perhaps has totally changed (maybe in the last five years...)

What "Passive Income" used to mean:

An example of traditional passive income business model might be something like:
  1. I own an apartment building.
  2. I pay a guy to fix things there that break.
  3. I pay another guy to collect the rent.
  4. I pay another guy to do my taxes.
  5. A check comes to me once a month and, even after I pay these three people, I still have a bunch of money left over.

However...

However, in Internet Marketing, the definition of Passive Income seems to be.
  1. I own 45 websites.
  2. I "work on" these websites constantly (often 14 hours per day)
  3. I pay several 3rd parties to do things like produce content, build backlinks, manage writers, fight off spammers, prevent me from getting hacked, and handle general computer issues that come up hourly.
  4. I have NEVER worked harder in my life. But, I work in my pajamas so, this is Passive Income.



Obviously I'm exaggerating.

But, seriously, not much...

Just curious: Does anyone have the same feeling about IM sometimes?

How do YOU define "Passive Income" and has anyone hear obtained it yet?

Thanks!
#income #passive #passive income #philosophy #question #word
  • Profile picture of the author TryBPO
    Hey OP,

    I saw the title of this post and it instantly reminded me of a post I read from Foolish Adventure:
    What You KNOW About Passive Income Is Wrong And How To Really Make It

    He gets into this point pretty well and basically concludes "Leveraged Income" is a better term.

    I'd definitely say that this new term better describes what it is that we do...it's just that "passive income" is the better known word to describe it, hehe. Good thoughts here, though...agreed.
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  • Profile picture of the author jbsmith
    The example you give is what I would call HELL rather than passive income...

    To me, it meets none of the criteria I use when setting up businesses...

    The criteria I use are:

    1. Leverage. I want to get as close to working once and continue to make money forever. Product creation is my favorite here along with purchasing rights (exclusive - not public) and licensing follow closely behind. Once you OWN the intellectual property you can leverage it via multiple monetization models and continue to sell it again and again

    2. Low Risk - Passive income (or the term I prefer - Leveraged Income) is only good (in my mind), if the model lasts longer than 1-year...with many of the "automated", business opp and tactic based models out there, the income may be relatively passive, but won't last.

    This philosophy governs all activity (niche market research for exmample - niches must be long-term for me to get involved, product creation, marketing, etc...) and thus far, has led to consistently increasing sales/profits for 5+ years even as many others using so-called "passive" income approaches are either burned out or their model has evaporated because of SEO, PPC or Affiliate program changes.

    Jeff
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  • Profile picture of the author WebPen
    IMO, the best option for true passive income right now is Amazon Kindle.

    Once you write it, stick it up there, and promote it a bit, it can do pretty well with no promotion.

    There are people still making money from Kindle books written YEARS ago

    ....and no, I wasn't smart enough to do that back then
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    • Profile picture of the author AdwordsMogul
      Originally Posted by Justin Stowe View Post

      IMO, the best option for true passive income right now is Amazon Kindle.

      Once you write it, stick it up there, and promote it a bit, it can do pretty well with no promotion.

      There are people still making money from Kindle books written YEARS ago

      ....and no, I wasn't smart enough to do that back then
      Hmmm.... and they got rich that way?

      I don't think so!

      In any case, if you have money, you can spend less time in your business and pay people to do stuff.

      If you don't have money, you have time, and you put it in.

      Also, the apartment building thing is not true - you'd still have to make sure things work. If not for any reason other than the fact that it's your building, and no-one cares about it more than you do.

      Other people may stop working for you, or start their own businesses as well.
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  • Profile picture of the author misstan
    For me, in IM, passive income means: money from adsense, recurring commission every month from affliate product without me doing anything after the customer buy 1 time,
    blog or video that generate traffic that lead to sales.
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  • Profile picture of the author ryanman
    For me passive income means simply this - You make money even when you aren't actively involved in your business and your business grows regardless of whether you are around or not. Now that's truly passive.
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  • Profile picture of the author Jeff Schuman
    Do your work 1 time and get paid over and over for it. In theory network marketing is supposed to be like this although very few people attain that level.
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    • Profile picture of the author AdwordsMogul
      Originally Posted by Jeff Schuman View Post

      Do your work 1 time and get paid over and over for it. In theory network marketing is supposed to be like this although very few people attain that level.
      "In theory" sounds about right. In order for network marketing to work others have to be active. However since those in your downline ( I cringe as I write the 'd-word') are also sold on the idea of passive income they aren't active enough to make you money.

      So in the end ain't nobody doing nuthing... so the only thing that's "passive" is time and gas.
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  • Profile picture of the author sbucciarel
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    Originally Posted by thatkeywordguy View Post

    However, in Internet Marketing, the definition of Passive Income seems to be.
    1. I own 45 websites.
    2. I "work on" these websites constantly (often 14 hours per day)
    3. I pay several 3rd parties to do things like produce content, build backlinks, manage writers, fight off spammers, prevent me from getting hacked, and handle general computer issues that come up hourly.
    4. I have NEVER worked harder in my life. But, I work in my pajamas so, this is Passive Income.



    Obviously I'm exaggerating.

    But, seriously, not much...

    Just curious: Does anyone have the same feeling about IM sometimes?

    How do YOU define "Passive Income" and has anyone hear obtained it yet?

    Thanks!
    Yes, that's pretty much an exaggeration. I launch websites with content and occasionally add more content and make a passive income with Adsense and ads. I don't have to fight off spammers and hackers. Software takes care of that quite handily. I've got a bunch that just keeps making Adsense income that I never visit again after launching them.
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    • Profile picture of the author marciayudkin
      Hmmm.... and they got rich that way?

      I don't think so!
      The question didn't have anything to do with getting rich.

      Any passive income, defined the way Jeff Smith defined it, is a very good thing. If you work at creating lots of passive income, you can create income streams that can continue for years or even decades.

      Diversifying your sources of passive income gives you a very comfortable cushion against economic changes. It becomes highly unlikely that everything would fall apart at once.

      Remember, not everyone here is trying to get rich. Some are trying to create the lifestyle of their dreams. For example, I have been in Maui since January, swimming with giant sea turtles every morning, working for about two hours in the afternoon and then reading novels on my lanai until sunset. Partly that's possible because of passive income.

      I am not rich. But I don't know a single other person I went to school with who has this kind of a lifestyle prior to traditional retirement age.

      Marcia Yudkin
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    • Profile picture of the author PLRExpress
      I suppose the true meaning of "passive income" is making money without having to do anything. However, I actually like what I do so I wouldn't want to leave it running without me! haha!

      For me, "passive income" is when you're in a place where you don't have to work all the time if you don't want to and when you're working it's because you enjoy working on it.

      There are many people that are working and spending many more hours on their business than they "need" to in order to survive and keep enough money coming in - they're working on it because they enjoy it.

      That's where I am right now. I don't need to be working all the time but I often do because I like doing it. I think that "passive income" is the ability to be able to work more freely and enjoy what you're doing because you know that you don't have to be doing it. It's a passion, not a necessity for survival.
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  • Profile picture of the author CDarklock
    Originally Posted by thatkeywordguy View Post

    However, in Internet Marketing, the definition of Passive Income seems to be
    "I do not get paid for what I do."

    Certainly you do something, and certainly you get paid. But what you do and what you are paid have no relation to one another.

    What's going on here is largely that people have lost track of why you do this. When you decouple your hours from your pay, you can be paid more money for fewer hours.

    But most people are idiots, and they think that just breaking the link is sufficient. Then they keep working like dogs, because that's the only way they know how to work.

    And it doesn't matter how tiny the paycheck is, because it's passive. Don't you understand anything?

    So you get morons working 14 hour days doing nothing useful because they are accustomed to pretending they're working. 12 of those 14 hours are spent hitting F5 on a Google Analytics page, and the other two are spent changing crap on some site or other for no good reason.

    If you really wanted to make a difference, you'd spend that 14 hours building more sites. But what am I, insane? How could you POSSIBLY make sense of the Google Analytics graph for so many sites?!

    You couldn't. But you don't try, either. All you care about is how big the cheque is. If the cheque is too small, you need more stuff. When you buy rental property and rents in the area go down, you don't mess around with the property trying to come up with an excuse to raise the rent. You buy more rental property.
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  • Profile picture of the author Randall Magwood
    It means recurring income coming in on a daily basis with me doing nothing except for handling more sales/customers/refunds/etc... i shouldn't be working more than 1 hour per day doing this. My definition of passive income.
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  • Profile picture of the author thatkeywordguy
    One hour per day would be pretty good.
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  • Profile picture of the author wolfmmiii
    For me, passive income really isn't passive. It simply means that I've leveraged my time in a manner that produces income that is inversely proportionate to the amount of work I do.

    In other words, I make very good money while spending very little time doing so.
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    • Profile picture of the author fin
      For me, it means you aren't working for an hourly wage.

      Your just working away each day, while money hits your account as and when.
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  • Profile picture of the author Trehee
    If you have to continue to work to obtain it, then it isn't passive. You either need to leverage more from others or find a new market. "Set it and forget it" was already mentioned but it is worth restating. Passive, residual income should take hard work to set up and obtain so that it will sustain without hard work in the future. Otherwise you are just still working.
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  • Profile picture of the author Michael Ten
    Passive income would mean that I would have the option of retiring and still be able to meet my basic needs and more...
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    • Profile picture of the author thatkeywordguy
      Originally Posted by Michael55555 View Post

      Passive income would mean that I would have the option of retiring and still be able to meet my basic needs and more...
      thats pretty much my definition

      i'd like to retire early too
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  • Profile picture of the author Ron Douglas
    An example of passive income is a webinar I did with WebinarSwaps like a year ago that is still bringing me $97 sales everyday from affiliates making a killing promoting the recording.

    Do the work once and get paid over and over for it. That's passive income.

    Another more obvious example is the book royalties that I'm still getting from books I wrote years ago.
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    • Profile picture of the author thatkeywordguy
      Originally Posted by Ron Douglas View Post

      An example of passive income is a webinar I did with WebinarSwaps like a year ago that is still bringing me $97 sales everyday
      I've taken a look at that site

      seems really interesting

      anyone making any money being an affiliate for it?

      Also, how long do you think you can sustain the 97?
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  • Profile picture of the author Tadresources
    To me, passive income is ONLY when you get to the point described in the first scenario but with IM. You gotta get through the hard work state first of course, and the passive stage may not lat forever (ie Google Panda, etc)
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  • Profile picture of the author Raydal
    Passive income is simply working once and getting paid over and
    over again for that same work. It comes from royalties for example
    and selling digital products that are automatically delivered-- so Fiverr
    doesn't quality.

    The most "passive" income I ever made online was Google Adsense.
    Considering the amount of work and the returns.

    -Ray Edwards
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    • Profile picture of the author thatkeywordguy
      Originally Posted by Raydal View Post

      The most "passive" income I ever made online was Google Adsense.
      Considering the amount of work and the returns.
      i made pretty good adsense income before panda

      now, it aint too passive anymore
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  • Profile picture of the author Sharyn Sheldon
    Passive income means income you're earning without any active involvement (active being the opposite of passive).

    You may have to spend a lot of time setting up that income, but the returns in the future should be much higher than the amount you put in at the beginning. That includes any out-of-pocket expense and the value of your time.

    For the income to truly be passive, you should only need to spend minimal time once in a while to monitor that income and make sure it's on track. In some cases, like book royalties, you may not need to spend any time at all.

    One example is a wedding favors website that I set up. It's all based on affiliate feeds and took a decent amount of time and effort to design and automate so all runs smoothly. Now I have one person who spends a little time on SEO each month, but I do next to nothing other than to check in on her. I'll probably have to update the feeds once in a while too (like once in a year). Meanwhile, I earn affiliate income every month and expect to for years to come.

    On the opposite end of the spectrum is something like my PLR site. Sure, I'll earn income in the future on products I create now. But I have to actively create new content on a regular basis, send broadcast messages to my list (not autoresponses), market myself, and nurture my affiliate program. Nothing passive about it at all, but I enjoy it.
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  • Profile picture of the author thatkeywordguy
    Steve Pavlina’s Personal Development Blog

    steve pavlina has started a series of posts on passive income

    we'll see how this goes...
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  • Profile picture of the author WriteMyOwnCheck
    When I think of passive income Tim Ferriss' book "The 4-hour workweek" comes to mind. As entrepreneurs there's realistically no way that we'll reach a point where we'll never work, but genuine passive income shouldn't require strenuous work to maintain the income you desire. If set up right, and depending of course on what it is you do as an entrepreneur, you should be able to have minimal work and be left with alot of free time. To paraphrase something Robert Kiyosaki said once, "True passive income is the ability to go on vacation for an entire year and come back and you either made the same amount as the year before or increased it."
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  • Profile picture of the author thatkeywordguy
    I've been figuring even getting the stream to work for 10 years is pretty good. Tough to predict what the world will look like even 4 years from now...
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  • Profile picture of the author dlo2592
    When I first heard of passive income, I figured it to be an antithesis of earning by wage. Paid on the hour. A "passive" income to me means that what I earn doesn't necessarily always come from when I'm working. I suppose it's different in that it measures pay by value delivered rather than time.
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    • Profile picture of the author LloydC
      Nothing is really truly passive, pretty much everything requires a bit of maintenance and supervision here and there. If something was truly passive, you could lie in bed for the next year and not see a change in income.

      Passive or not, stability and enjoyment are the most important sources of income in my opinion.

      Guess you could class benefits as passive income, all you have to do is walk down to the office.
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  • Profile picture of the author michaeljcheney
    Passive income is still possible but you need to work hard at it to set everything up in the first place. You can replace yourself on just about everything and have systems running themselves but it won't happen over night and you still need to at least oversee everything too.

    The whole "make cash in your underpants on the beach" philosophy is still rife in IM but I think less people buy into that now and more people realize that what you really need is a workable system that you can learn, apply and potentially outsource down the line.
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  • Profile picture of the author thatkeywordguy
    Steve Pavlina is still chugging away at his new passive income posts.

    I wish he would report some stats though.
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  • Profile picture of the author Maurene
    The traditional definition of a passive income you first mentioned falls neatly in line with my personal definition of the term. On the other hand, I do view internet marketing in the same vein as owning an apartment. The only difference between the two is that you found others to do most of the upkeep for your apartment but have yet to outsource any of your internet marketing workload to others. I believe that there are quite a number of internet marketers who have reached a stage where much of their work is outsource. Those are the people who I believe are really making a passive income.
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  • Profile picture of the author thatkeywordguy
    Well i'd like to get to that point - thats for sure
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    • Hi Guys and Gals,

      I agree that it IS possible to create that elusive passive income. In fact, it's exactly the way the really rich folks like Bill Gates and Donald Trump have done it.

      They spend time creating an income producing asset. In Gates's case, it was his Windows software that made him, at one time, 'The World's Richest Man. I think he actually outsourced the creation of the later Windows's scripts. And Donald Trump creates assets in the form of Hotels, Golf Courses and the like. And I can't quite picture him out there, laying bricks, on a New York winter's day, so - once again - creating assets by outsourcing.

      But whether you outsource or do it yourself, there is a key element that puts most folk off ever getting to that stage of enjoying a passive income. Let me demonstrate ...

      I have web site 'assets' which I built five years ago. And I've done nothing to them since - not even any traffic generation.

      Yet, despite that, I've today received my weekly ClickBank wired payment, which includes the funds they still generate. Maybe it's precisely because they have nothing to do with internet marketing (they're in the alternative health niche) that the income is being sustained.

      But, of course, I did spend unpaid time originally, creating the product, setting up the site and did a lot of work putting the traffic generation assets in place (creating videos and the like).

      But - just like Messrs Gates and Trump, once those assets were paying me an income, I was free to invest my time in creating more assets to add more income.

      But here's the uncomfortable truth:

      I did all that work without any guarantee I might ever receive a single penny. But it paid off. And now, five years later, I'm still enjoying the holy grail of passive income.

      That's maybe easier for me, because I've been in business on my own account since 1972 and been in marketing all my working life, so I'm used to working hard without the immediate prospect of any return.

      And that's a problem for most folks. Because the only way they have made any money - until now - is in a job, where a certain number of hours worked guarantees a certain payment.

      So that's quantum shift in mid set you need to make to reach that passive income Nirvana.

      Here's to your great success!

      Paul
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  • Profile picture of the author Gambino
    To me, passive income is income that requires no work to very little work to make. I wouldn't call a website you work on everyday passive income. I would call a website that you did a lot of work on but now you only spend less than about 10 hours a month working on truly passive.
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  • Profile picture of the author CurtisSWN
    To the little lazy man who lives inside of passive income is the Holy Grail.
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