These stories highlight the fundamental problem with the popularized "passive income" approach: the goal is usually to support a lifestyle, not to provide value to customers. This can easily result in a huge disconnect between the business owner and the realities of the business. Unfortunately, if you don't handle your business, it's bound to handle you.
It is absolutely possible to run a sustainable, highly-profitable business without working 16 hours a day. But there are relatively few businesses that will run themselves completely, and people who want to spend the vast majority of their income every month probably lack many of the traits of successful business owners to begin with.
> Unfortunately, if you don't handle your business, it's bound to handle you.
That is what many people who get into affiliate marketing don't understand. The most successful affiliates I know have 5-20 people working for them and have built a business around what they do. Most solo affiliates spend huge amounts of time trying to figure out how to do things and/or keep ahead of the churn.
Exactly, its also the biggest flaw i found in Tim Ferris' 4 Hour work week. If you dont care for your business, others will overtake you and your business is slowly going to die.
Yeah, when I was working on affiliate websites, I created a web framework and then paid people to be researchers for me. I made about $3K over 4 months for each $250 I invested into people doing research for me.
I think about my business all the time. I love my customers and spend a lot of time talking to them. I do this because I love my business. I just happened to have built a business with a high degree of automation. It's also successful, growing and I'm working on scaling it even more. So I suppose I'm a counter example?
Here's the kicker about affiliate marketing: the unethical practices exist because the system is set up in a way that there is no real incentive for mitigating fraud.
The merchant who pays the bottom line might have no idea that fraud is happening - they only see the traffic numbers going up without realizing that this was already coming in through other means (bought or organic).
The fact that the affiliate management or program might get their salary or bonus based on the size of the program (ie. traffic) does not help the situation at all. The largest affiliate in the program could be a sophisticated thief without anyone knowing any better!
There's also the issue of technical illiteracy from the operating parties - they all claim that they fight fraudulent practices, when in fact they might not even know what is affecting them specifically. This is obviously to lure in more affiliates, clueless-hopeless people who bought in (often literally in the form of SEO and other infoproducts) on the dream of passive income. They've read two-three books on white hat practices and are trying to compete with, say a mob of savvy blackhatters buying Pay Per View (read: adware) traffic and stealing the commission.
And don't get me started on the numbers.
And then you realize that to the merchant itself, it doesn't really matter, because the profit at the end is so high that throwing millions out the window still doesn't even put a dent in the side of the business.
Thanks for bringing that side of the table to this discussion.
I saw the same. I ended up only working with 2-3 affiliate networks, and even then only with those where I had a long trustworthy relationship with the affiliate manager.
Fraud is so rampant, sometimes all you can do to escape it is own the whole chain from top to bottom.
Hi, any chance you'd be willing to chat a bit about your experience and the PPV/CPV stuff you were seeing? I'm an investment analyst and I've been doing some research into that world, so I'd love to pick your brain a bit, if you're up for it. My email is in my profile ([email protected]).
Amen. I knew of affiliate managers and their employers (CEOs of companies) who knowingly allowed certain types of activities for high-rollers and openly condemned it for the rest. Affiliate marketing is a shady industry where the only person who benefits is the scumbag who started his own program and succeeded at attracting a few large blackhatters to promote some offers. I've been on both sides of that fence as a publisher and an advertiser. ( I guess I should mention that advertising pays quite well and takes far less work once everything is set up ie. coreg)
One pretty simple lesson: Save some of your money even if it's from passive income. Nothing lasts forever.
BTW: What's up with the "only make something meaningful" propaganda lately? Nothing wrong with profits, just keep in mind that you can't outsmart the whole world forever: like arbitrage in an efficient marketplace, your low hanging fruit are eventually picked by everyone.
Of course there is something wrong with it. It is a zero-sum activity (or negative-sum, since it takes work) that moves value around instead of creating it.
Ah, I was that guy. Doing affiliate marketing, cashing $20k checks per month in my 20s, not saving a penny & partying endlessly. I was in the online meds industry. When someone's site went down you didn't know if it was a network issue or a raid by the DEA. In one example I had a series of spam sites that represented 0.5% of all pages index by Google. Google announced they indexed 1B pages & 50M of those were mine. You could throw a dart & hit those crappy affiliate links. Pretty funny looking back on it. Those were some sleazy fun times.
1) In a capitalist economy, the low-hanging fruit tend to disappear fast. This is by design. Unfortunately, the design is such that you can't have 1 great idea and then just rest on your laurels forever. On the bright side, this compels you to give more to the world, even as it challenges you to maintain balance.
2) In a career with a large creative (read: risky) component, it seems that booms and busts are the norm. I've seen this in web dev a lot- one year I'm unemployed for almost the whole year (but hey, I was the first death knight to level 80 on the server, sigh), another year you're making six figures at a hot-shot startup.
I think that the pros outweigh the cons, but you MUST be pragmatic about money and save for the downturns. I'm psyched that you enjoyed your boom times, but I think your lesson was well-learned.
I don't see how mkrecny can consider pay per click affiliate marketing "passive income", it can extremely lucrative as Will Holloway has displayed but it is by no means passive.
Here's how you "passively" earn money with PPC affiliate marketing:
1. Get conencted with advertisers and sorting through offers to promote
2. Set up landing pages
3. (Probably) create your own ad images and/or write your ad and landing page copy
4. Identifying your target market, whether it's keyword based in Google or demographic based in FB
5. Run traffic and then split testing just about everything to increase your conversion rate.
6. Monitor stats to make sure the advertiser isn't capping or shaving you (if you don't monitor this on a very active basis you run the risk of sending traffic down a black hole and all the ad spend the goes along with it)
7. Scope out new markets/offers/traffic sources for when the existing dries up.
8. Repeat some or all of steps 1 through 7 ad nauseum.
It is indeed a grind. How you make it passive is by finding campaigns that require little maintenance once set up.
The passive nature is that you can maintain some campaigns with 30 minutes or so per week, each. This allows you to take a break from the churn (making new campaigns) anytime you like, so long as you understand your falloff.
At one point I had 40+ campaigns running and generating a lot of cash flow. I knew that on average, 1-2 campaigns per week would fall-off (stop being profitable or worth working on due to competition). This let me take a nice vacation with my wife without worrying that much about making new campaigns, because I knew what would probably stop working in the interim and I could catch up.
It is a lot more difficult now because of the number of people competing, so the rate of falloff is much higher in general.
Some campaings can run for years without being monitered. You basically just watch the income stream, if it starts going down you know something is up (someone might have found the same niché/keyword etc.).. It _can_ definitiely be pretty passive.
One thing I find frustrating is when people associate passive income with non-value producing shortcuts, scams, and poor ethics. Passive versus active income and scams versus providing real value are independent characteristics of a business; it's perfectly reasonable to create a "good" business that creates real value and earns passive income.
Passive income is one of my primary goals, so maybe that's why I feel like defending the term. Maybe the phrase just has bad connotations these days, but I don't think the idea of making money without having to actively work should come with immediate thoughts of shady affiliate programs and scummy endeavors.
Moral of the story doesn't have anything to do with passive income. The moral is to save some freaking money instead of spending every dime you have, and this is true whether you are making tons of money or just a little. (passively or not)
Also, why has "Passive Income" become such an evil thing around here? It doesn't have to be a scam or BS or something. It could just be someone did a ton of work on the front end and then gets paid for it over time "passively". I make money off of software that I spent lots of time on that creates value for people. The fact that people keep buying it now that it's done makes the income somewhat "passive" (still have to update things over time, but minimal relative to initial investment of time).
There is nothing wrong with passive income. There is something wrong with doing scammy fraudulent things with affiliate marketing. These 2 things don't overlap entirely so stop acting like they do. Frankly, both of these stories sound like they mostly didn't do anything scammy. They just made a lot of money and then spent a lot of money. Lots of people do that all the time with non-passive 9-5 jobs, but they don't get on the front page of HN.
> why has "Passive Income" become such an evil thing around here?
In general the lifestyle business is criticized here, but ironically at the same time people who build startups are acquired by their skills/talent more than from the startup itself. At the end both are lifestyle businesses except if you are the next Google/Facebook/Microsoft/Apple/IBM or if you are Dropbox and refuse to be acquired by Apple!
It was a bit surreal to see two of my HN comments in a blog post on the front page of HN.
Since people are interested, here's another tale of my year running affiliate campaigns on Facebook.
By the time I got into the game the competition was already heating up. I spent most of my efforts scaling my dating site campaigns internationally because global traffic was a far more fertile field, with less competition and cheaper clicks.
After I had maxed out all the nations of the English speaking world, I started running campaigns in France (and I unwittingly and unintentionally advertised hard core porn on Facebook in France for at least a month because of the geographic based redirect of the dating site I was advertising, with a US based IP you saw a tame site, with a French IP explicit hardcore porn)
My greatest success however was in expanding my operation to Latin America.
In the industry the concept of banner blindness is crucial to understand. Click through rates go down over time, both for individual ads and for entire nations. Because a site like Facebook wants to maximize its CPM, higher click through rates are the way to get cheaper clicks and profit.
I took my profitable ads in English and ran them through Google translate into Spanish. It was something simple like "Meet Hot Girls".
The hardest part was finding a dating site that accepted South American traffic. Credit cards and e-commerce have a ways to go in the global South, and therefore the traffic is of much lower value because it converts much less.
I found a tame version of Adult Friend Finder without any nudity on it's landing page. At the time Friend Finder Networks stated that they accepted traffic from almost all of the South American countries.
The first day I ran my campaigns in Columbia & Venezuela the response was incredible. Just astounding.
In an English speaking country you would be lucky to get three people out of a thousand to click on one of your ads. That first day in Columbia I was getting ten people out of a thousand to click and the clicks just cost one penny each!
I was converting at a rate that Friend Finder was paying me 14 cents per click and in that first day I made over $5000 with very little ad spend.
A small ad spend was important because I had to pay FB daily but was only paid out every two weeks and I was just out of college with very little credit.
I could have made so much more in those days with an American Express Plum card and unlimited credit.
As the South American ad campaigns went on the click through rates trended closer to the rates of their Western counterparts. It is for this reason I think I might have been the first person to run dating ads on Facebook in Columbia.
You have no idea how true your story is to my life, lol. I was in the same situation. When you make $40k a year at your job and start bringing in $40k a month in revenue it's a bit shocking. I didn't handle it right. Traffic and offers dried up. I still ended up bringing in about 80k over a 4 month period after the FTC crack down, by running game install offers. During that time I almost quit my job. I'm not sure now if it was a good or bad idea. It's probably good because I still have the security of a job, but if I would have focused full time I might have been able to really scale. Lately all I do is lose money testing offers. I didn't invest that money back into my business (or arbitrage scheme if you will). After being "rich" for a few months I couldn't really handle normal life. I mean my family never had money, we always lived paycheck to paycheck. So in the end that's what I did with the money. Then I didn't adjust to not having that income and ran myself into debt. I'm actually dealing with some pretty severe depression right. Now I'm just working my normal corporate job day to day trying to figure out how to escape.
In what way were these passive income stories? I think the moment they went to a conference or "obsessively" researched anything should be a fairly large clue.
"...An acquaintance in the biz once bribed a Facebook employee whose job it was to approve or deny ads on the platform. His inside man set his account to auto approve any ad he wanted. ..."
Just wait till some NSA employee starts selling gossip to TMZ or HR departments.
A couple of years ago, I was extremely ill and couldn't work. In my periods of relative lucidity, I was able to hack together websites and make approximately $4K/month, which was enough to live on if you ignored the $8K/month in medical bills.
My experience with them suggested that you needed to go through and do an entire new thing every three months, because that's about the time it would take any efficient scheme to be overwhelmed by other people discovering the efficiency of that scheme.
I hope you have asked for the agreement of both the authors to republish these stories.
I wouldn't want to see hn becoming your goto place to stuff your personal blog via copy&pasting and not adding yourself a single additional thought or idea.
Hearing the term "passive income" just reminds me of the Warrior Forum. What an ugly place. Especially when affiliate marketing is mentioned.
I understand someone can create an actual business, a SaaS or product (not some get rich quick e-book) and make passive income like that, but when I hear of affiliate marketing it just leaves a sour taste in my mouth. It just reminds me of people ripping off others or selling them sham, snake oil e-books for their own gain.
This isn't true, there's lots of legitimate ways to bring in passive income if you know the right niches to explore. Look at this screenshot of my Adsense earnings for last month, where I brought in over $13,500!
"Learn the tricks to uncovering the top undiscovered niches for making a fortune! Click here to buy the e-book. Special offer for warriors!"
There are a bunch of legitimate affiliates out there who aren't spamming "get rich quick books". There are also infoproducts that do create value for the people that buy them. It's a shame that "affiliate marketing" has this negative connotation associated with it because of things like WaFo.
My biggest potential profit was during the American Idol reign of terror. At the time, the keyword in Adwords was 1/cent a click. You read that right. Literally, 200,000 impressions/minute with a click-through rate of 1.3%. Nearly 150,000 clicks in one hour. Given a dance related affiliate product, I could have turned $6,000 into $250,000 in less than a day. Sigh.
Oh yeah, another day, long ago, "Face" was not costing very much. The Face keyword shows up for 'face' and 'facebook'.
The "passive" aspect is having something that requires a small amount of time to maintain and runs over long periods of time with little overall attention paid to it. A good example is a PPC campaign with a static site that only needs to be checked up on once a week, at maybe 30 minutes max each time.
I would assimilate it as writing a book. Writing the book is a lot of work, but when done it becomes "passive income" in the sense that you earn money while you sleep. Consider it as the opposite of earning money by installing radios in cars. There is no money earning while you sleep.
I don't have a goal of passive income, rather trying to turn my personal obsessions into an actual business. The nice thing about the OCD approach is you're going to do that hobby anyways. Job gets demanding I just take a break from the project but still I get 100 new users a month, which isn't tough for a free product but using the google play store I have no hosting costs for my app. Plus 100 users a month builds out a base for me to market my much more complex commercial app to once I've competed it.
Imagine if the navigational system of the web could be improved to the point where most users could easily find what they were looking for... so much so, that there was little room for middlemen ("affiliates").
Imagine further that the "calf-cow" model of the web could be replaced with something more decentralized, e.g. a "content-centric" network instead of a "source-centric" one... such that there would be little room for "selling" traffic.
[+] [-] 7Figures2Commas|12 years ago|reply
It is absolutely possible to run a sustainable, highly-profitable business without working 16 hours a day. But there are relatively few businesses that will run themselves completely, and people who want to spend the vast majority of their income every month probably lack many of the traits of successful business owners to begin with.
[+] [-] kposehn|12 years ago|reply
That is what many people who get into affiliate marketing don't understand. The most successful affiliates I know have 5-20 people working for them and have built a business around what they do. Most solo affiliates spend huge amounts of time trying to figure out how to do things and/or keep ahead of the churn.
[+] [-] kayoone|12 years ago|reply
[+] [-] temporary201308|12 years ago|reply
[+] [-] snoonan|12 years ago|reply
[+] [-] yuhong|12 years ago|reply
[+] [-] throwawayfraud|12 years ago|reply
Here's the kicker about affiliate marketing: the unethical practices exist because the system is set up in a way that there is no real incentive for mitigating fraud.
The merchant who pays the bottom line might have no idea that fraud is happening - they only see the traffic numbers going up without realizing that this was already coming in through other means (bought or organic).
The fact that the affiliate management or program might get their salary or bonus based on the size of the program (ie. traffic) does not help the situation at all. The largest affiliate in the program could be a sophisticated thief without anyone knowing any better!
There's also the issue of technical illiteracy from the operating parties - they all claim that they fight fraudulent practices, when in fact they might not even know what is affecting them specifically. This is obviously to lure in more affiliates, clueless-hopeless people who bought in (often literally in the form of SEO and other infoproducts) on the dream of passive income. They've read two-three books on white hat practices and are trying to compete with, say a mob of savvy blackhatters buying Pay Per View (read: adware) traffic and stealing the commission.
And don't get me started on the numbers.
And then you realize that to the merchant itself, it doesn't really matter, because the profit at the end is so high that throwing millions out the window still doesn't even put a dent in the side of the business.
[+] [-] kposehn|12 years ago|reply
I saw the same. I ended up only working with 2-3 affiliate networks, and even then only with those where I had a long trustworthy relationship with the affiliate manager.
Fraud is so rampant, sometimes all you can do to escape it is own the whole chain from top to bottom.
[+] [-] hncommenter13|12 years ago|reply
[+] [-] cgman|12 years ago|reply
[+] [-] OldSchool|12 years ago|reply
BTW: What's up with the "only make something meaningful" propaganda lately? Nothing wrong with profits, just keep in mind that you can't outsmart the whole world forever: like arbitrage in an efficient marketplace, your low hanging fruit are eventually picked by everyone.
[+] [-] gohrt|12 years ago|reply
[+] [-] unknown|12 years ago|reply
[deleted]
[+] [-] iblaine|12 years ago|reply
[+] [-] dualogy|12 years ago|reply
[+] [-] bybjorn|12 years ago|reply
[+] [-] lectrick|12 years ago|reply
2) In a career with a large creative (read: risky) component, it seems that booms and busts are the norm. I've seen this in web dev a lot- one year I'm unemployed for almost the whole year (but hey, I was the first death knight to level 80 on the server, sigh), another year you're making six figures at a hot-shot startup.
I think that the pros outweigh the cons, but you MUST be pragmatic about money and save for the downturns. I'm psyched that you enjoyed your boom times, but I think your lesson was well-learned.
[+] [-] jbigelow76|12 years ago|reply
Here's how you "passively" earn money with PPC affiliate marketing:
1. Get conencted with advertisers and sorting through offers to promote
2. Set up landing pages
3. (Probably) create your own ad images and/or write your ad and landing page copy
4. Identifying your target market, whether it's keyword based in Google or demographic based in FB
5. Run traffic and then split testing just about everything to increase your conversion rate.
6. Monitor stats to make sure the advertiser isn't capping or shaving you (if you don't monitor this on a very active basis you run the risk of sending traffic down a black hole and all the ad spend the goes along with it)
7. Scope out new markets/offers/traffic sources for when the existing dries up.
8. Repeat some or all of steps 1 through 7 ad nauseum.
PPC affiliate marketing is a grind.
[+] [-] kposehn|12 years ago|reply
The passive nature is that you can maintain some campaigns with 30 minutes or so per week, each. This allows you to take a break from the churn (making new campaigns) anytime you like, so long as you understand your falloff.
At one point I had 40+ campaigns running and generating a lot of cash flow. I knew that on average, 1-2 campaigns per week would fall-off (stop being profitable or worth working on due to competition). This let me take a nice vacation with my wife without worrying that much about making new campaigns, because I knew what would probably stop working in the interim and I could catch up.
It is a lot more difficult now because of the number of people competing, so the rate of falloff is much higher in general.
[+] [-] bybjorn|12 years ago|reply
[+] [-] bubbleRefuge|12 years ago|reply
[+] [-] m1ndeater|12 years ago|reply
Passive income is one of my primary goals, so maybe that's why I feel like defending the term. Maybe the phrase just has bad connotations these days, but I don't think the idea of making money without having to actively work should come with immediate thoughts of shady affiliate programs and scummy endeavors.
[+] [-] clarky07|12 years ago|reply
Also, why has "Passive Income" become such an evil thing around here? It doesn't have to be a scam or BS or something. It could just be someone did a ton of work on the front end and then gets paid for it over time "passively". I make money off of software that I spent lots of time on that creates value for people. The fact that people keep buying it now that it's done makes the income somewhat "passive" (still have to update things over time, but minimal relative to initial investment of time).
There is nothing wrong with passive income. There is something wrong with doing scammy fraudulent things with affiliate marketing. These 2 things don't overlap entirely so stop acting like they do. Frankly, both of these stories sound like they mostly didn't do anything scammy. They just made a lot of money and then spent a lot of money. Lots of people do that all the time with non-passive 9-5 jobs, but they don't get on the front page of HN.
[+] [-] wslh|12 years ago|reply
In general the lifestyle business is criticized here, but ironically at the same time people who build startups are acquired by their skills/talent more than from the startup itself. At the end both are lifestyle businesses except if you are the next Google/Facebook/Microsoft/Apple/IBM or if you are Dropbox and refuse to be acquired by Apple!
[+] [-] willholloway|12 years ago|reply
Since people are interested, here's another tale of my year running affiliate campaigns on Facebook.
By the time I got into the game the competition was already heating up. I spent most of my efforts scaling my dating site campaigns internationally because global traffic was a far more fertile field, with less competition and cheaper clicks.
After I had maxed out all the nations of the English speaking world, I started running campaigns in France (and I unwittingly and unintentionally advertised hard core porn on Facebook in France for at least a month because of the geographic based redirect of the dating site I was advertising, with a US based IP you saw a tame site, with a French IP explicit hardcore porn)
My greatest success however was in expanding my operation to Latin America.
In the industry the concept of banner blindness is crucial to understand. Click through rates go down over time, both for individual ads and for entire nations. Because a site like Facebook wants to maximize its CPM, higher click through rates are the way to get cheaper clicks and profit.
I took my profitable ads in English and ran them through Google translate into Spanish. It was something simple like "Meet Hot Girls".
The hardest part was finding a dating site that accepted South American traffic. Credit cards and e-commerce have a ways to go in the global South, and therefore the traffic is of much lower value because it converts much less.
I found a tame version of Adult Friend Finder without any nudity on it's landing page. At the time Friend Finder Networks stated that they accepted traffic from almost all of the South American countries.
The first day I ran my campaigns in Columbia & Venezuela the response was incredible. Just astounding.
In an English speaking country you would be lucky to get three people out of a thousand to click on one of your ads. That first day in Columbia I was getting ten people out of a thousand to click and the clicks just cost one penny each!
I was converting at a rate that Friend Finder was paying me 14 cents per click and in that first day I made over $5000 with very little ad spend.
A small ad spend was important because I had to pay FB daily but was only paid out every two weeks and I was just out of college with very little credit.
I could have made so much more in those days with an American Express Plum card and unlimited credit.
As the South American ad campaigns went on the click through rates trended closer to the rates of their Western counterparts. It is for this reason I think I might have been the first person to run dating ads on Facebook in Columbia.
[+] [-] johnward|12 years ago|reply
[+] [-] helipad|12 years ago|reply
[+] [-] mkrecny|12 years ago|reply
[+] [-] SCAQTony|12 years ago|reply
"...An acquaintance in the biz once bribed a Facebook employee whose job it was to approve or deny ads on the platform. His inside man set his account to auto approve any ad he wanted. ..."
Just wait till some NSA employee starts selling gossip to TMZ or HR departments.
[+] [-] Uhhrrr|12 years ago|reply
[+] [-] temporary201308|12 years ago|reply
My experience with them suggested that you needed to go through and do an entire new thing every three months, because that's about the time it would take any efficient scheme to be overwhelmed by other people discovering the efficiency of that scheme.
[+] [-] stfu|12 years ago|reply
I wouldn't want to see hn becoming your goto place to stuff your personal blog via copy&pasting and not adding yourself a single additional thought or idea.
[+] [-] willholloway|12 years ago|reply
[+] [-] ZiadHilal|12 years ago|reply
[+] [-] alxndresp|12 years ago|reply
I understand someone can create an actual business, a SaaS or product (not some get rich quick e-book) and make passive income like that, but when I hear of affiliate marketing it just leaves a sour taste in my mouth. It just reminds me of people ripping off others or selling them sham, snake oil e-books for their own gain.
[+] [-] Anonymous238|12 years ago|reply
"Learn the tricks to uncovering the top undiscovered niches for making a fortune! Click here to buy the e-book. Special offer for warriors!"
[+] [-] johnward|12 years ago|reply
[+] [-] Axsuul|12 years ago|reply
[+] [-] 1337biz|12 years ago|reply
[+] [-] ambiate|12 years ago|reply
Oh yeah, another day, long ago, "Face" was not costing very much. The Face keyword shows up for 'face' and 'facebook'.
[+] [-] bemmu|12 years ago|reply
[+] [-] tomrod|12 years ago|reply
[+] [-] kposehn|12 years ago|reply
[+] [-] chmike|12 years ago|reply
[+] [-] snoonan|12 years ago|reply
[+] [-] radley|12 years ago|reply
[+] [-] jacques_chester|12 years ago|reply
Edit: however he has gotten permission to republish, so I guess it's OK.
[+] [-] shams93|12 years ago|reply
[+] [-] jingo|12 years ago|reply
Imagine further that the "calf-cow" model of the web could be replaced with something more decentralized, e.g. a "content-centric" network instead of a "source-centric" one... such that there would be little room for "selling" traffic.