Photo by wannes deprez
The idea of blogging as a source of passive income has always seemed a little off to me (and others). In fact, I’d suggest that most bloggers earning significant money from blogging devote as much time to it as a part-time or full-time job.
That’s not as close as we can get, though: passive income should be just that, passive, meaning income for no hands-on work, or income that is hugely disproportionate to the hands-on work required.
If you’re writing blog posts each week, moderating comments, answering email and trying to propel your content forward on social media, you’re not earning passive income. You’re still exchanging time for money.
I’m also skeptical about people who claim to earn passive income from dozens of small niche, SEO and AdSense optimized blogs.
Despite some question marks about the value being provided to visitors, I’m also not sure this is passive income, either.
Most of those maintaining dozens of these blogs do seem to spend a lot of time on them! Darren Rowse has said it can be a full-time job and more.
The above scenarios show bloggers running their blogs in a traditional small-business style: cutting costs by doing everything themselves.
The only way to create genuinely passive income is to flip this model on its head and remove yourself from the equation. An inspiring real-life example of this is the entrepreneur Derek Sivers (who runs an amazing blog, despite stolen Favicon… tsk tsk), who created a hugely successful music service in CDBaby.com.
However, Derek wanted more time to share his marketing knowledge with musicians and travel as he did it. After working long hours, seven day weeks and sleeping in his office, Derek decided to re-invent his life by removing himself as much as possible from CDBaby.com.
He still owned the company, was still profiting from it, but he hired someone to do all the hands-on work for him.
Assuming this resulted in work commitments being cut down to just a couple of hours a week–enough to keep the company humming along smoothly on autopilot–he had created a genuine source of passive income.
I have no idea how much the owner of something like CDBaby earns, but I’m guessing the total amount was initially less than what he would have earned doing everything himself.
After all, you have to pay people to replace you. I’m also guessing that pay-cut became a phantom compared to huge percentile increase–probably over 1000%–in time he freed up to enjoy the money he had (by riding around Vietnam on a motorbike, for example).
Someone else might have used the time to start up yet another entrepreneurial venture and repeat the process again.
Real passive income, not delayed rewards
Let’s look at how we could translate this scenario into what we are all in the business of: blogging. The end point is to own a blog that you can run like big business: hands-off, by employing others to do your work and taking the left-over profits.
If you start out half-way there by employing writers for content creation but managing the blog personally (answering email, promoting and so on) you will initially run at a loss, which might be $250 a week if you are publishing one feature article each week-day.
If you take yourself out of the equation completely from the beginning, that loss will run deeper, as you’ll need to cover the cost of a manager.
This isn’t something to be overly afraid of: the same goes for any business–small or large. You should be comfortable with running at a loss initially, and be careful to ensure the blog moves out of the red as it grows.
After all, entrepreneur literally means someone who is accountable for both outcomes and risks in the business they own.
Alternately, you might choose to run the blog on its own profits alone if you don’t have available capital (or aren’t willing to put it at risk).
This model might see you follow a classical small business trajectory, wherein you start off doing everything and gradually reinvest your blog’s earnings into replacing yourself.
You might start off writing five articles a week, then four, then three, then two, then one, then none, paying for staff writers from your blog’s earnings.
When you have enough left over from paying staff writers you could then promote one of them to an editor role: someone who will manage the other writers, answer email, moderate comments and keep the blog running smoothly from day to day.
Regardless of which route you take, either re-investing profits or starting with seed capital, the end point to aim for is to assume a ‘director’-type role, where you spend a couple of hours a week checking in with the editor and providing feedback and instruction.
If you’re brave, you might relinquish this role to someone who knows your vision and can limit your involvement to a weekly progress report.
If your bank balance is climbing at the rate you hoped for, then you have no reason to be any more involved than this.
To reach this point, though, your blog will have to be successful and well trafficked. At a minimum content will cost $200 a week. An editor will cost another $200, at the least.
To turn a profit, your blog will need to be making at least $400 a week, or about $1600 a month. This is equivalent to six banner ads costing about $270 a week each.
Your blog doesn’t need to be in the Technorati Top 100 to reach this kind of level, but you will need either a) around 300,000 page views a month, or b) a niche that encourages the spending of money (it will either be highly productized or read by those who’re willing to spend money to make it).
Niches that create a higher ROI for advertisers mean that you can charge more for your advertising impressions, even if you have less traffic.
Once you have on blog running passively in this way, you can start another, and repeat the process. The two key elements of success here are, firstly, your own savvy for creating popular blogs, and secondly, your sense for good people and good content.
You shouldn’t abide an editor who lets your blog stagnate, or a writer who rarely receives more than a lukewarm response. Work with them to rectify the situation, or find someone else: either way, never let yourself become complacent.
If you’re interested in running a big business model blog, here are some principles to keep in mind:
- Small niches probably won’t work here unless you’re selling an expensive product or service. If you’re relying mainly on advertising, you need to have broad appeal (which = good traffic). This isn’t to suggest you blog about ‘business’ or ‘technology’, but rather that you don’t blog about super-specific topics.
- Always think about ways to weave in income streams that go beyond advertising. This includes job boards, eBooks, products, subscription-only content, courses and video seminars.
- If you earn most of your profit via privately negotiated advertising based on page views, search out and treasure writers with a knack for social media optimized content. You don’t necessarily have to charge advertisers for social media page views, but charging the same price for more traffic can make your advertising plans much more attractive.
- Your writers are the lifeblood of your blogs. Eventually you will want your editor to handle the hiring and (if necessary) firing of them, but initially you will probably be in charge of putting a writing team together. Scrimping on your authors is like scrimping on fresh ingredients in a restaurant–it only lowers the quality of your product.
- The best writers are people who run their own flourishing blog. You should also look to have a social media maverick amongst them: someone who knows how to write headlines that kill.
- You should pay a minimum of $30 for a 500 word article, and at least $50 for a 1,000 word article. A good strategy is to work out your pricing based on a minimum rate or more. I think $50 posts that are 750 words or more is perfect if you’re publishing long-ish feature posts.
- Don’t always look for the cheapest deal. If an author is asking for $75 or $100 per article it probably means they’re receiving a lot of offers and can afford to have you say no–which probably means they’re also bloody good. Don’t be afraid to pay more for writers with that certain star quality.
Most important of all is this: treat your blog like a real business. Invest money in it. Hire a good consultant, hire a marketer, get a professional design and logo.
If you want to play it safe, only re-invest what you earn. Fundamentally, though, the old saying is as true here as it is anywhere else: you have to spend money to make money.
Business owners who boast about their minuscule expenditures are probably only talking about money: usually, they trade time in its place.
Sadly, they don’t believe their time is worth anything. The web is at the forefront of a new culture that says time is infinitely more valuable.