Passive income is one of three types
of income, as categorized by the IRS. The most common source of passive income
is through online advertisements.
Advertising models
Online advertisers offer a variety
of advertising models where advertising affiliates are offered payment in
exchange for clicks, impressions or for each commission. For example, an
e-commerce website might offer a percentage of the revenue generated from sales
after a user arrives from the affiliate's link.
Generating passive income
The size of the passive income
generated by the advertising affiliates comes from the number of users who see
the link and are compelled by the advertisement or context that the link is
embedded in. The need for content
For this reason, many websites that
are advertising affiliates need content, which is most often text. Website
owners earn a passive income through advertisements either by creating the
content themselves or by subcontracting the creation of this content out to
other content creators.
Passive and active compensation
Some website owners choose to share
a portion of the website earnings with the content creators, while other
websites choose to pay content creators a flat fee, which represents an active
form of income. Flat fees provide content creators with an immediate
gratification for the content creator, but articles with a large amount of
views can earn much more passive income.
E-commerce and auctions
Advertisements are only one way in
which income is generated online. Another way to generate income is through the
selling of products and services. Many products are sold on e-commerce websites
and auction websites. Auction websites allow buyers and sellers to meet online.
Buyers can bid on products, with the highest bidders getting the item for sale.
Private contracts
The bidding concept is also used to
sell services on a variety of bidding websites. In this model, clients can post
projects and professionals can bid on the project. The client can choose
bidders based on the suggested fee, the professional's credentials and samples
that are presented to the client.
Many clients will advertise the need
for services on online classified websites, content mills and forums. While
clients might pay a flat fee for services, some clients and independent
contractors work out an hourly rate or a revenue share system.
