One of the most common myths about affiliate marketing is that it is an easy way to make money online without putting in much effort. The truth is that in this sense, affiliate marketing is NOT passive income. It requires a lot of work to setup and a moderate amount of work to maintain a successful affiliate business.
In this post I’ll outline why affiliate marketing is not passive income in the common sense of the word.
Two Definitions of Passive Income
The problem, i think, it that different people mean different things when they talk about passive income. There is the traditional definition and the common definition, and they imply completely different aspects of the word.
Traditional Definition of Passive Income
Originally, the idea of passive income simply referred to income streams that earned revenue after the initial work or investment was placed. That is, income that is earned gradually, over time rather an up front resource (like a salary or hourly wage) that delivers results immediately, but only once.
Using this definition, affiliate marketing is a source of passive income, because building a website is an investment that pays returns over time. This investment can either be made in terms of money or labor (or both) but it is an upfront investment.
The best way to think this is to think about stocks and dividends. When you buy a stock, you put in an upfront financial investment. This investment as a value (the asset value), but also will pay out additional earnings in the form of dividends. The upfront investment is necessary, but indirectly related to the size and timing of payouts. Affiliate sites function in this manner.
Common Definition of Passive Income
When I say that affiliate marketing is not passive income, I mean that it isn’t passive in the commonly used sense of the word.
In today’s world, the common use of passive income is to refer to income that is achieved without a lot of work. This is not really the correct use of the term, and certainly doesn’t apply to affiliate businesses.
Successful affiliate businesses are a lot of work, but they delay the timeframe when that work is rewarded. Also, unlike truly passive income streams, like stock dividends, in which no ongoing work is required, successful affiliates spend a fair amount of time and/or money on the sites well after the initial site is developed.
So, no matter how you look at it, affiliate sites aren’t really passive sources of income. While they bear some similarities to the traditional passive income definition, they still require ongoing maintenance and upkeep.
Before you start a new site, you may want to step and ask yourself if you should start an affiliate business, and understand exactly what’s involved.
That said, affiliate websites can be an incredible investment, and there are tons of examples of successful affiliate sites out there. If you’re ready to make the investment you should read on about how to get started with affiliate marketing.