Last Updated on July 20, 2022 at 12:17 am
In this article, we shall discuss how to earn one lakh a month as passive income and why methods like running ads or writing books will not work! In previous articles in this series, we defined what exactly passive income is and why it is a gamechanger for our future.
We then discussed the importance of gradually building an income that would last a lifetime; considered passive income examples that work in more ways than one and looked at automation example for passive income.
The following assumes one has the passion and can back it up with the necessary time management, consistency, patience and effort. One does not need intelligence to make money. The eagerness to be useful and the tenacity to constantly create content is good enough.
No one is ever going to start something (online or offline) and immediately starting making close to a lakh a month. No one (esp those who sell training programs) can guarantee sales or profits in a few months. Building a framework of passive income requires expertise that others trust and the patience to build an audience that would buy. It may take one year for someone and four years for another in the same niche!
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Only those willing to put in ten lakh worth of effort expecting nothing for months and months often end up successful.
Why Ads will not work!
Let us first eliminate display ads on websites or on YouTube. Yes, there are many websites and YouTube channels that earn ad revenue of one lakh a month. So it is certainly possible. The problem is (1) the probability of starting fresh and hitting this mark is quite low via ads and (2) it is not quite passive income.
Typically news sites earn primarily via ads and subscriptions (ignore paid campaigns for now!). Many of them are aggressively pursuing after paid readership in the last few years as you would have noticed. The reason is primarily heavy competition and not ad-blockers.
Today the distinction between a registered news site and an unregistered portal has vanished. Everyone is into news and gossip reporting about the latest celebrity tweets. So the ad revenue has become distributed. They may still be making a tidy sum, but the point is if someone new starts out hoping to make money from ads they need to keep expectations low.
The problem is the quantum of ad revenue. Most viewers would not click on ads and so the main money is from impressions. It would take tens of lakhs of page views a day to hit the one lakh a month ad income mark. For a newbie, it may never happen or could take years. Ad revenue via AdSense or other agencies should be treated as an extra income that takes care of the overheads and not the main goal.
This is true of YouTube too. I had recently shared my YouTube earnings report. To gain good revenue from ads, virality is essential. It is not about subscribers or views. It is about how quickly views increase and how long the video typically gets watched. This is what determines whether YouTube decides to feature it in the feeds or not.
A YouTuber can make significantly more money via ads directly inserted in the video, via paid promotions. To do this, they need a vibrant community of subscribers and engagement in the videos. This can happen with from 10K subscribers onwards. This should be the first goal of Youtubers. Of course, the paid promotion also comes with the possibility of affiliate income (see below).
Why writing books will not pay!
There is practically no money in writing books. I am referring to the traditional kind with a publisher and editor set up. The publisher would take most of the sales money leaving you with peanuts and that is assuming do you make some sales! Readership for print books has dropped dramatically and it would a huge following or expensive ad campaigns to get some visibility for the book.
The logic here is the same as with display ads. You need to sell a ton of books to get one lakh once. You can forget about getting it every month. Not unless you can generate best-sellers every quarter.
That said, writing a book with a well-known publisher is a good visibility strategy. Going into the details now would distract us from the main aim of this article. There is money in self-published books (say a pdf file) but it requires careful planning and execution.
Methods to generate one lakh a month in passive income
- Affiliate Marketing
- Paid Collaborations on YouTube
- Sale of digital products
- Online courses
Naturally, this is not a full list. I have not included supply chain management (eg dropshipping) methods as it requires a little too much management. Even in the above shortlist, the first and second depend on external parameters, particularly competition.
Affiliate Marketing
I am not referring to sharing amazon links on social media. If you want to make Rs one lakh a month affiliate income, you need to sell high-end products to a specific audience. For example, just a few sales of a luxury yacht trip a month can help hit the one lakh revenue mark. However, it is seasonal, dependent on pandemics and you would need to consistently drive traffic to your info pages.
To earn the big bucks, you need the right product and need to create trustworthy content for the right audience. This will take significant market research, patience to create trust among an audience. There are many courses which claim to teach, they are expensive and come with no guarantees.
The main problem with affiliate marketing is competition – both from other product manufacturers and other sellers. Each marketer is selling the same product and the same features. If the product is popular then individual revenue would drop.
Digital Products and Courses
To make consistent passive income, the product should be completely in our control. This way we can make it showcase it better to a specific audience. The overheads are also in your control. You can decide to spend anything from zero to say 30% on promotion and creating/hosting the product.
It would take just the same amount of time as it takes an affiliate marketer to make consistent income and the payout would be more since you are the product creator and not a sales guy.
The process is also the same. No one would buy from your affiliate link unless you display your expertise about the product. Might as well create your own product and make more.
Many assume they cannot create products or online courses. If you can write an article or create a podcast or video that others will find useful (why else would they watch!) or entertaining, you can develop a product around that requirement.
For example, if you are in the personal finance area for a while, you recognise that initially want the best stocks or mutual funds. Once they mature, they would need more advanced portfolio management concepts. So it is easy to create products around that. We just need to make readers aware of these future needs.
Suppose you create a course for Rs. 10,000 back up the high price with your experience and free content in the form of articles or videos elsewhere in your site. You just need to aim for ten sales to hit the one lakh mark.
Assuming only one per cent of all those who view your product page, you need to aim for 1000 views a month. You can get this traffic for free if your site overall gets about twenty thousand views a month.
If you price it at Rs. 5000, the labour is obviously higher and it would take a few more months to hit your target. More the price point, what matters is the USP of the product and how many people are looking for it. If your market is so narrow then a low price will not help you. It is all about showcasing value for the price tag you place on it. A smaller but willing audience is more useful than a large but random collection of viewers.
If you post one helpful, useful article a week regularly, you can achieve this in one to two years (depending on the topic). Your aim during this period should be to build a regular audience that trusts you. Some of them should be saying “why are you offering this content for free!”. That is when you are ready to make one lakh passive income a month.
It is passive because product creation is a one-time task. If you do not wish to write regular content to ensure newer audiences get to see the product page, you can consider advertising on Google or Facebook (again success is heavily topic dependent). This will reduce your profits but if the product fits even a small market segment well, the sales will compensate for it.
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