Niche websites are a great way to make money online. Whether building them from scratch, buying and improving sites to flip, or keeping a portfolio of affiliate sites for passive income, websites have created income and financial freedom for thousands of people.
However, the idea that niche websites create pure passive income can be misleading. While there is truth to the idea that niche websites can become relatively hands-off income at a certain point, it’s important to understand the full story.
I’m diving into the pros, cons, perceptions, and realities of buying websites for passive income and what any new buyer needs to know.
Let’s get into it!
Passive Income Comparison: Stocks vs Real Estate vs Websites
There are certainly pros and cons to all of these investment options. At a certain point, it may even make sense for many people to go with two or even all three.
However, it’s important to understand the differences between all of them upfront.
| Niche Websites | Real Estate | Stocks | |
|---|---|---|---|
| Cash Flow | Very High | Low | Nominal (dividends) |
| Activity Level | Active short-term, then relatively passive | Active, passive if hiring a full-time team | Passive if investing long-term, very active if not |
| Volatility | High | Moderate | Moderate to High (depends) |
| Cash Barrier for Entry | Low | Very High | Moderate |
| Maintenance | Very Low | Moderate to High | Varies |
| Average Profit Potential | Very High | Moderate to High | Moderate |
5 Myths of “Passive” Income Websites
There are many myths around using niche sites for passive income. However, these five myths stick out as being some of the largest ones that seem to be widely believed when they shouldn’t be.
1. Myth: Websites Are Evergreen
Get your website to a certain point and then you never have to touch it again. Sounds too good to be true, right? There’s a reason for that.
There are websites that haven’t been touched for years and still make money for their owners, but this is the exception as opposed to the rule. The sites most likely used to make more when they were still being updated and cared for.
Websites require TLC both for keeping content up to date and ranked by Google, as well as making sure monetization is on point. The work can be much less while in maintenance mode versus ramping up the website but to stay in Google’s good graces the site needs to stay current.
In many cases, this includes a minimum of 1-2 articles a month, updating the site theme and plug-ins, as well as keeping an eye on monetization issues or Google ranking updates. This can be outsourced to someone you train, like hiring a website operator, which is what I tend to do with niche sites I keep for longer periods, but it’s still necessary.
That’s just for ordinary sites, too. What if the site is on a topic that loses popularity or becomes obsolete over time? The traffic losses in those cases will be inevitable.
2. Myth: Websites Are Low Maintenance
Websites require technical maintenance, and the consequences of ignoring this can be catastrophic.
WordPress needs to remain updated to a current version, as do all the plug-ins used on a site. This optimizes performance and is important for security.
Regular backups of the site need to be taken in case of hosting failure or other website issues. Changes and updates can cause past optimizations to no longer work or even break. The technical side of maintaining websites takes work, care, and skill – and I know from early experiences that I ignore it at my own peril.
3. Myth: There Is Plenty of Traffic to Go Around
While there is an incredible number of potential topics or niches out there, it’s not true that there’s plenty of traffic to go around. Only so many people are going to search for a given topic. That finite traffic has to be split up among the sites that rank for those keywords.
Then, there are the huge SEO updates caused by Google’s algorithm changes. The history of Google changes wiping out 70%, 80%, or more of a site’s traffic overnight is a long one. Even the most experienced niche website builders or owners get nervous when another algorithm change is announced.
Here is a Google Search Console snapshot for my dating case study site for the last 16-months:
As you can see, it’s a roller coaster ride of ups and downs. Every update can wreak havoc on your site. You need to prepared!
4. Myth: Even in a Worst Case Scenario, You’ll Make Something…
Most people who put a serious effort into verifying stats when buying a site or learning how SEO works will make something. However, terrible keyword research, shooting for keywords a new site will never rank for, and bad writing can sink a niche site’s chances of making even pennies.
There’s also the more common situation of giving up early because the payout isn’t worth the time invested. This can happen easily – especially to individuals building from scratch or buying niche sites without learning anything about optimizing for revenues or how SEO works.
5. Myth: Nice Websites Are Cheap to Buy
This one might be considered a half-truth based on the situation. There are plenty of cheap websites out there. Most of them are cheap because they aren’t making anything. Or they were just hit by a massive manual penalty and the site owner is trying to bail.
Good niche sites that are already earning revenue often start at a 35X multiple and get adjusted based on upsides or downsides. The typical range is 30x-40X multiple. The good deals come from finding sites that have massive potential to grow and are under-optimized for revenue.
Even in that situation, a site earning $1,000 a month might be a great deal at $40,000 for someone who knows how to turn it around.
However, I realize that $40,000 is not considered cheap for most people. While deals do exist for the very poorly set up sites that can go from very small monthly payments to huge payouts with a few changes, those deals are hard to find.
4 Realities of Niche Site Investment
1. Reality: Websites Cash Flow Better Than Other Investments
The cash flow with niche sites is amazing. Especially compared to stocks or real estate. When I buy a niche site, that investment is paying money from day one. Whatever ad revenue or affiliate sales it is making go into my bank account.
This continues through the process of improving traffic, improving optimization, and making the website more valuable for when I flip it. Sometimes it only takes two or three months of work to take revenue from $1,000 a month to $4,000 a month, as I did for my outdoor case study site.
2. Reality: Websites Do Not Require IMMEDIATE Fixes (Mostly)
While websites do require maintenance and work, they don’t have the emergency fixes (most of the time) that happen with other assets. There are no “toilet is broken and leaking water at midnight” phone calls to deal with (or pay for).
There’s no “CEO said something stupid” and the stock plummets 70% and cancels dividends.
3. Reality: Websites Do Not Require Large Teams to Maintain
There’s no need for accountants, stock traders, active trading portfolio managers, plumbers, electricians, or other maintenance services. Websites require basic maintenance but there’s no need for a large team.
4. Reality: Websites Offer More Control Than Other Investments
There are many factors that affect the value of stocks or real estate that are completely out of an investor’s control.
The auto industry shuts down in Detroit? No matter how smart a real estate investor was, they were out a fortune at that point. CEO says something stupid or illegally cooks the books? There goes the stock value.
Those are things beyond anybody’s individual control. While niche websites are affected by Google and affiliate programs like Amazon Associates, I have a lot of control over whether my sites rank well, whether I use techniques Google likes vs that Google penalizes, and how my sites are monetized.
In other words, while some things might be out of my control, most things are in my control.
The Fallacy: Niche Websites Require Work, Not Perfectly Passive
This doesn’t change my opinion that niche websites are my favorite investment option. Niche websites require work, but the pay-off can be amazing.
However, it’s important to know that the myth of niche websites being 100% hands-off passive income is just that: a myth.
There are many benefits to going with niche sites, and there is a degree of low-work, high-income potential that is very close to being passive. Especially with the right systems in place.
However, getting even to the “maintenance” point of a group of niche websites requires an enormous amount of upfront work.
Wrap Up
Niche sites are an incredible investment and can be used to set up relatively passive income.
Getting to that point requires skill, a budget, and a lot of work. By fully understanding the common myths and realities of niche websites, and which are which, you will be better prepared to make the decisions that are right for you.
