How Passive is Passive Income?
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For the past two years I’ve been trying out a range of side hustles that are popularly referred to as “passive income”: starting 3 YouTube channels, an Etsy shop, selling stock photos, and, after AI has emerged, writing my first pieces of code in co-authorship with Chat GPT, and selling Midjourney prompts on Promptbase.
I’ve reached different levels of success in each one (also, one failed miserably). But one certain tendency became apparent to me with every single one of them: the money earned was never as “passive” as I hoped before I started off.
It All Narrows Down to 1 Thing
Putting up any business and growing its revenues boils down to one thing: you want to put your product/service in front of as many people as possible and then convert the incoming traffic into money. As the Revenue Growth Rule states,
there are only two ways for a business to increase its revenue: by acquiring new customers or by increasing the amount of revenue per customer, which can be achieved by raising prices or selling more products or services to each customer.
Making any product or service bring you income “when you sleep” means, first of all, establishing a fertile ground for incoming traffic. And this part means: you have to put in the effort. You have to do the active work to lay the basis for future passive income.
With different types of online businesses, the amount and difficulty of this initial effort is different. But from my observations, the more effort you put in in the beginning, the higher chances there will be that your future passive revenues will be greater. There is always more potential revenue in businesses that have a higher entry barrier.
For example, if we take the modern-day YouTube channel business model, the barrier to entry has grown a lot over the past decade. Most successful channels nowadays have high production value: good studio or filming setting, captivating editing, clear sound and a crisp picture. Moreover, people tend to gravitate strongly towards channels that provide value (be it an entertainment value, or educational one).
All of this is achieved with a combination of high-quality equipment, professionally written scripts, well-done research, good editing, attention-grabbing thumbnail design and a range of other important factors that are not acquired quickly and easily. Moreover, channels that have long-standing growing viewership and actually bring in money usually produce a lot of content on a strictly regular basis.
As a reward, the YouTube game, if played well, may provide comparatively high revenue streams from AdSense, sponsorships, brand deals and affiliate marketing.
On the other side of the spectrum we have something much easier, like, for example, selling AI prompts on Promptbase or other marketplaces. The barrier of entry is low: you register on the website, learn to use AI a bit better than a casual curious user, and you’re ready to submit your first prompts in a matter of a few days.
You don’t need neither big money nor time investments to do it. And, under the condition that you make many prompts and they are liked and demanded by the site visitors, you will start receiving your earnings pretty fast. For me, it happened in my 5th day on the website. But, the earnings will not be huge. (You can check my article on how much exactly you can earn with Promptbase here).
But, as different as these two scenarios are, the basis stays the same: you have to put in the work before you can make passive income. For YouTube, it can take you up to a year (unless you are lucky and one of your first videos becomes crazy viral, which, if we analyze it, is sometimes not so random as one might think). For Promptbase, it can take a few days.
But both of the mentioned business models need not only continuous new content supply, but also regular upkeep.
New Content Supply
An example of continuous new content supply for a YouTube channel would be: new videos. The more videos you produce, the better. You increase your potential of getting in front of your viewer with every new video you put up.
For Promptbase, it would be: creating and putting up new prompts. The Promptbase algorithm, at least at the time I am writing this, seems to be pretty straightforward and give creators a relatively equal opportunity to get their prompts in front of viewers’ eyes: as soon as the prompt is scheduled, it will “go live”, which means, it will be displayed in the home page of the website for some time, and stay there longer in case people view and like it. But, after the initial display, it will in most cases be gone from there forever, which means, you start all over again with the new prompt, and a new one, and so on. The more prompts you put up, the more often they will be displayed in the main “storefront”, and the higher chances you will have to sell.
The Upkeep
The upkeep efforts are less straightforward, more varied and more optional. You may opt to not do some of them, but if you do, they have good potential to improve your results.
For example, some big YouTube channels replace the thumbnails on their most viral videos from time to time to attract more viewers. Some create subtitles in more languages to engage foreign viewership. Some even create secondary channels with translated content. Some create short versions of their long videos and put them up as YouTube shorts and/or spread them out to other short-form social media like TikTok or Instagram Reels. Almost every YouTube creator has an Instagram channel with posts, links and stories. Many creators in product-focused niches also take active part in the Amazon or other affiliate programs.
Simpler businesses have smaller upkeep efforts, but they still need to be done to support and take maximum advantage = bring maximum revenue. For example, on Promptbase, you can offer your buyers support in DMs with every purchase. You can select better keywords for your prompts.
Finally, there is the upkeep part that happens separately from the platforms. The most basic housekeeping is inevitable: you need to back content up. You need to archive your videos to a hard drive to clear space on your machine. You need to manage your software subscriptions, as well as research new tools and techniques, as well as buy new equipment, as well as refund subscription charges that you forgot to cancel… The list goes on and on.
Passive Income or Active Work?
I listed a big, but far not full list of the above mentioned activities to illustrate that virtually every passive income needs a lot of active work to bring you money when you sleep. Usually, money starts coming in after a mentally-draining, sometimes awkward, often uncomfortable starting period that can last for quite a long time. This is why most of modern online business gurus insist on the fact that “consistency is key” and “you have to continue putting up content” even if there is little to no attention from others to your work.
Today’s websites, social media and e-commerce platforms are all built in quite a similar way: create a lot of content, make it useful to the viewer, publish stuff often, stick to it for a long time, become better and better at it until you finally gain your audience.
My point is: there is no money where there is no effort. Yes, big successful brands can make money in much easier ways than those at the smaller end of the food chain. For example, big YouTube creators can sign very lucrative brand deals with the smallest obligations: to wear a particular branded piece to an event or demonstrate a drink in their video. But all of that does not work without following. And high-quality, paying followers come only for creators that produce value and put in lots of effort.
Because of this, whenever I hear about “passive” income, I always take it with a grain of skeptical assessment, and invite you to do it too. It doesn’t mean we shouldn’t get excited about opportunities. But we should also understand what are we involving ourselves into, to not feel disappointed later.
Happy side hustling ✨
