Monday, December 20, 2004

What is an affiliate program?

I've mentioned affiliate programs a couple of times already in this blog, but I haven't really explained what they are. Before I started talking about the concrete small-time ways of creating income streams, I wanted you to be thinking about the word "passive" in the phrase "passive income stream". And please do not forget this word. It is important for two reasons.

1) Without the income streams being passive, you are never going to earn lots of money. You only have 24 hours a day, and there is a limit to how much you charge per hour, or whatever it is you do, that you do, when you make money doing something.

2) Money isn't the real goal of this blog. Money has no intrinsic value. What would you do in a world that had no food, no love, no water, but where you had plenty of money? Not much, because money has no value other than as a tool. In this blog, we're focusing on the only thing we ever really have in life, the most valuable thing we all get -- time. The goal of this blog is to enable you to make enough money to free up your time.

Okay, that's done, so let's talk about affiliate programs. Affiliate programs are a way of getting paid for recommending something. That almost sounds like network marketing, and in a way it is really similar, but there are two main differences.

1) All Internet-based. You can recommend products and services through email or on your website.

2) Most affiliate programs are 1-tiered, a few are 2-tiered. That means, in most affiliate programs, you only get paid for the items you have recommended and which the customer then has bought. If that customer recommends the product to someone else again, you get nothing. In 2-tiered affiliate programs, on the other hand, you can have affiliates under you, and make money off of their sales. So in effect, you're then an affiliate for the affiliate-program itself. But that's as far as it goes. In network marketing, of course, you could have "sales people" under you way down-down-down.

So, let's say you have a web site about bonsai trees. You love bonsai trees. You have excellent content on your site, and you're thus rewarded with plentiful of free traffic from the search engines. You have you're visitors trust, because you are giving away free, useful information to other bonsai enthusiasts.

One day, you buy a really excellent bonsai-kit, and you find it very useful. You'd like to tell your visitors about it. So, while keeping your integrity, you recommend this product. As it happens, the bonsai kit company has its own affiliate program, which you sign up for. Now, when you publish a link to the kit, it is a specialized link that tells the bonsai kit company it was you who sent the customer, and hence, if the customer actually buys anything, you get a cut of the cake.

Now it is important that you don't start recommending anything and everything you happen to find on the net that has an affiliate program. You don't want to loose your visitors' trust. True, helpful recommendations will, in the long run, make you the most money.

How to make the most money off of affiliate programs

A lot of affiliate programs give you 5-10 % of the sales price. That is not enough. You shouldn't go below 20 %, unless you think that product will convert extremely well from your website. Some companies give you up to 70% of the selling price, but that depends on the type of products. Digital products (eBooks, software, mp3s, divxs) don't really cost much to sell after they'we been created, so companies who sell digital products often give you a bigger slice of the cake.

And if the company offers a 2-tier affiliate program, that is even better, as this really is a way of creating residual (passive) income. If you have several affiliates under you, if only a couple of them are successful, you'll be successful too!

Last, you should be tracking everything you're doing to make money from affiliate programs. Test new strategies, new colors, new heading-sizes, everything, and see when you get the most sales. Do more of what works, and stop what isn't working.

What kind of site to build to be a successful affiliate

All the gurus say it, and I can't do anything but join the choir. There's really only one way to go about it. Find a profitable niche, research that niche, and create a niche site! When you have one site about a niche, filled with useful information, the search engines will reward you with free traffic, and this traffic converts more easily into money than anything else.

How do I build such a successful site?

By far the best program I've found is Ken Evoy's SiteBuildIt (SBI) which allows anyone to create successful niche web sites. Even though you might be a programmer, this deal is so full of marketing tools that you really cannot afford to miss it, if you want to try out affiliate marketing to make money.

Sten, Oslo, Dec. 21th 2004

Wednesday, December 15, 2004

Free Bull Shit Detector #1:
Make Money on the Web without a webpage

They say you can make money online today without a webpage.

What are these methods?

There are a lot of eBooks that you can download around these days that promise to teach you how to make money on the Internett without having your own web site.

Could these methods work?

Well, sure they could. And some of them probably do, for some people. I will even admit that some of these books probably have some good info. The bullshit part is where you pay just to get to know what these methods are.

So I'll just tell you here, and if you're serious about making money online, you can try them out and test them for yourself. And then, maybe, you discover you need more information and would like to buy one of those books. By then, you can make an informed decision, which is the kind of decision I like the best.You'll never get rich if you don't understand your money-making methods.

There are basically two ways of creating income streams online without having your own web site. The oldest one is by creating your own email newsletter. You could register your newsletter on any one of a number of ezine portals, and have surfers subscribe by email. Every now and then (once or twice a week) you'll send your list some good information on your topic of choice. You build trust by giving away good information for free. As your list comes to trust you, you can sprinkle your writings with well-chosen affiliate links, recommending those products (if you don't know what affiliate links are, don't worry, I'll get to that). If you want to keep your list loyal, you should only promote products or services you have tried yourself and really like. So sure, given enough time, and that you actually have a lot of relevant info to give away, you could make some serious money this way.

To some part, this strategy could be automatized, sending your new subscribers old, but golden, newsletters. But other than that, the bad thing about this method is that you have to forever keep on working for your income to continue. Still, it is a very low-cost, low-entry threshold way to making money on the web.

Another one that has sprung up more recently, is by combining the power of pay-per click (PPC) engines like Google's AdWords program with affiliate programs.When you sign up to an affiliate program, you get a link that is personalized to you. You then buy traffic to that link through the PPC engine. This makes it easy to calculate what conversion rate you need for you to make money. If 1% of the traffic converts to a sale, a keyword costs $0.50, then you need 100 clicks to get one sale. That sale will cost you 100*0.50 = $50, so you should make more than that for one sale for this program to be profitable. Some affiliate programs actually do pay amounts like these, others convert much better. You have to be willing to experiment to make this method work, and you may loose all your money to Google. There are many people using this method these days, so you may find that the best converting, highest paying affiliate programs' relevant keywords cost a lot in Google.

What shall I say... at least this method is relatively automatic once you've set it up. Still, you would need to monitor your ads and constantly tweak your keywords. And there is the possibility that your competitors are even more eager than you -- and sits in front of his computer all day, clicking your link, so that you just end up loosing your money...

So those are the two main methods of making money online with no web site. If you can feel the adventure tingling in your blood, go for it. Write emails and spill your guts on your favourite topic, or go to Google and Overture and the rest of them to tweak keywords and experiment with the numbers. Key here is finding the right affiliate products, and then creating the right copy for your ads and test, test, and test again. Test with many programs, ads, and keywords, keep the ones that work, and test new ones.

I'll go make myself a cup of coffee.

Peace and good taste,
Sten, Oslo, Dec. 15th 2004

Monday, December 13, 2004

Income Streams

It might be possible to start a big business, use lots of leverage, and have enormous profits in not too long a time.


But, if you're like me, it's just not your style. I really, really do not feel comfortable quitting my job, taking up a huge business loan (if I can even get one), finding investors, employing people, and so on. I probably wouldn't even be able to sleep at night, knowing it just might go the way the hen kicks, as we say in Norway (I really don't know why we say that, I'm guessing it means it goes backwards, which would be bad...)

So instead of finding one big, scary way of making an enormous pile of dough, I'm looking for several, low-profile, low-risk, steadily earning streams of income.

And you know what? They are actually out there. I guess I just wasn't looking before.

Let us say you build a system that makes you $200 every month. That's like an extra vacation a year. Or you use it to make extra payments on your house, so you'll get rid of your loan quicker.

My first project is like that. It gives me something around $200 a month, sometimes more, sometimes less, but it is pretty steady. The key point here, however, is not how much I make, but that I make this money without working. Yes, I don't do anything, and every month money is transferred directly into my account. Sounds too good to be true?

Well, it isn't too good to be true. This wasn't free money. I did a lot of research, and then a lot of work that drew on that research, and only then was I able to do it.

This was my first project like that, and I can tell you about it later, if you like. But imagine if you not only made on project like that, but ten. And then imagine that your projects where ten times more successful than mine.

Is it possible? What do you think? Hm, that would be $20,000 a month. Could you retire on $20,000 a month? I know I could.

My guess is that the more income streams you are able to create, the easier it gets. Creating income streams is a skill like anything else.

Of course, if you have creative talent, you might be able to sell your stuff. If you enjoy writing, both fiction and non-fiction should be possible to sell... and would create passive income.

If you compose a jingle they play on the radio...
If you write a computer program you can sell it again and again...

These examples are not for everybody, sure, but they have something very important in common. They use leverage in some way or another... some way of duplicating the work you've done. You only have to write a book once, and then you can sell it again and again. And a song can be played again and again. And a computer program... well, enough repitition.

When other people handle the transactions, sell your books, play your jingle, you in effect have a system that works for you, so that you can go do something else. This is important. I'd rather have lots of system making me a little bit money each, without me doing anything, than having an income stream where I had to work all the time. Why? Because then I could spend my time creating yet another system.

I'll be talking more about both leverage and income streams later, but for now I think this is enough.

Remember that money really has no intrinsic worth!

Sten, Oslo, Dec. 13th 2004

Richer Than Money

A short post from the happy side of a week gone by.

My girlfriend and I have an advent calendar where we have bought each other gifts, so every other day she gets a small gift, some days a chocolate, or a scarf, and the other-other day, I get a present -- she's gotten me a really nice shirt, some candy, you've got the idea.

Last Sunday, she woke up early and called to me from bed (early for her and early for me is somewhat different). Can I have my advent calendar gift now?

My heart skipped exactly one beat. I drank some water straight from the tap and went in to the bedrom. I had put her gift beside the bed, under some clothes, so I could conveniently get down on a knee and find it for her.

It was a box wrapped in some grey paper. She opened it slowly. The box had pictures of yellow roses on it. She took the lid of and found another box wrapped in silk paper.

As she was opening this new box she knew, and I said some words, you know, good words, and she hugged me and I know I had a tear in my eye, 'cause the world was all blurry like.

Sten, Oslo, Dec. 13th 2004

Thursday, December 09, 2004

Passive Income - What is it?

In my last post, I went on and on about passive income, but I really didn't spell out what it was. It is probably pretty clear from that discussion what passive income is, but for some weird reason, I really feel like spelling it out. I guess I just enjoy thinking about.

Passive Income is also called residual income -- and when it comes to income, residual does not mean 'leftovers that nobody wants'.

When you have a job, you work, and then you get paid, and then you have to work again if you want to get paid again. Fair enough.

Residual income, or passive income, on the other hand, is different. With passive income, you work once, and you get paid over and over (and over again).

To most people, this sounds like a mad man's most delirious dream, and they spit at the idea. They say 'everybody know you have to work to make money', and they tell you about an uncle who lost all his money and his best goat on some pyramid scheme.

The thing is, you already know about several ways of making passive income. For example, you know that people rent out houses and appartments. Maybe you're even paying someone right now for the right to stay another month in somebody elses place. Well, that person has created one passive income stream for himself. Or herself. They worked really hard to buy this place, and now, that work is paying them over and over and over. Isn't it beatiful?

Let's take another example. That guy down the street who opened his own shop. Now he struggled for years, but lately, business has been going so well that he has hired someone else to stand in the shop all day. Actually, he also has an accountant, and, come to think of it, some other people as well who are doing most of the work running his shop. He worked like hell, but now that work is paying him over and over, and his money has started working for him.

So there are ways of working "once", and then getting paid over and over (and over again). Hm, that is interesting.

You just think they are not for you.

Maybe you are right. Maybe you are comfortable in your work. You like going there every morning, your colleagues are real nice, your salary is more than sufficient - you even save some every month for your kids' college education and your retirment fond, and still you get to spend money on yourself and your better half.

That guy who opened the shop, on the other hand, he took huge risks. You don't want to take risks like that. You can't just quit your job, you've got mouths to feed, bills to pay. You wouldn't know how to start a shop, and even if you did, what if there where no customers?

I agree. I don't like risk much. Maybe I can risk $20, but I'm not gonna risk my job, my future, anything like that.

So I start small.

Real small.

Just to see if I can find other ways of making money. The passive kind. The kind where I work an hour or two every evening for a couple of weeks, instead of watching CSI (which is a huge sacrifice, I love CSI). And then I see if that work starts paying me once, twice, three times.

Because the hardest part can sometimes be just to find those sort of income streams. What are they? If you've never looked for them before, you've probably never seen them. And so it is really hard to imagine what they will look like. What forms do they take? Will they jump at me in the middle of the night as I am falling to sleep, just as my leg twitches? Or do I have to go looking for them? Where do I look? What will they look like? How will I know of they are real?

This is why we must educate ourselves. You are doing it right now by reading this. I have found some ways that I am going to share with you the following days. And I am out there trying to find more and better ways.

Calling this a journey is a cliche. But hey, we will get somwhere, won't we? And if we get somewhere, we must have been travelling. And if we are travelling, then this is a journey.

Love & green grass,
Sten, Oslo, Dec. 9th 2004

Tuesday, December 07, 2004

A Programmer's Guide to Wealth?

What separates us from the rich?

Lately, I've been very interested in something that never interested me before. It was, it used to be, just a necessary evil, something I acquired and which then disappared again shortly thereafter. I needed it, but I didn't wont it.

It is, of course, money.

Now I still don't think "money" is such a very good idea. It is really rather fucked up. The whole economical system is based on everything always expanding. For today's economy to work, we always need more, no matter what it is, we need more of it. We have to make more, and people have to buy more, and then we have to make even more, or else the economy collapses. Yes, it collapses if it doesn't constantly expand.

This is really silly.

Now, I am no revolutionary. I like quiet time. Reading a book, snuggling up with my fiance. I can't be bothered changing the world. (If you can, good on you. Stop reading and start changing.)

And I enjoy working, and working hard. But what I hate is having to work. I don't want to have to work. I want to work because I enjoy it. And if I one day don't enjoy it anymore, I want to quit.

Simple, really.

So what is it that separates us normal, working people, who receive a pay check once or twice a month, and the rich, the "economicaly independent" -- the ones who don't have to work? What do they do differently? How come we are fighting for the bread crumbs from the rich people's tables, when there is so much money out there. How do the rich do it? I'm talking about the ones who built their wealths themselves here, not people who inherited money (I'm talking about their great grandfather, maybe, but not them).

This is information people pay for. I'm going to give it to you for a little less than that. Actually, I'm just going to write it down, and you can have it for the cost of the energy you use to read it.

There are several ways to wealth, and I'm going to talk about one thing here today. It is often referred to as "what the rich buy on pay day" or something like that. Robert Kiyosaki (the man who wrote the Rich Dad / Poor Dad books) talks about his own definition of assets and liabilities to say the same thing.

Well, this truth is easy, but it may still take some time to get used to, if you're not in the habit of thinking like this.

What is an asset? According to Kiyosaki, it is something that puts money into your pocket. Simple. It is something that puts money into your pocket.

And a liability? Well, it is something that takes money out of your pocket, isn't it?

In standard financial teachings, your house (if you own a house) is considered an asset, maybe your biggest asset. But does it put money into your pocket? No, on the contrary. So your house is a liability.

Maybe you have monthly downpayments on your car. Then your car is a liability -- it also costs you when you fill it up with gas, and pay the insurance.

Now I'm not saying that you shouldn't own a house or a car, I am defintively not saying that. What I am saying is that they are costing you money.

So what kinds of things are assets, then? I mean, really, concrete examples of assets. I'll just give you one for now, and you can see if you can come up with more. Also, I'll get back to this over the next couple of weeks. We're not really in a hurry, are we? We haven't even developed a game plan yet. Things do take time, so please be patient with me.

The asset example is:

Real estate.

"What?" I hear you say. "You just said my house was a liability!" And yes, I did. And I meant it. But if you own an apartment or a house that you can rent out, it is an asset. It puts money in your pocket. Just because you own it.

Now I can hear you saying that you can't afford an apartment, or a house, to rent out. And that's okay. We'll take it slowly, there are plenty of other, low-threshold ways of making money. I just wanted to make a point. The money you get from renting out a place is so-called passive income. You don't do much to get the money, after the initial work is done (financing it and buying it, and making sure you have well behaved tenants). The money just arrives. Every month. You do the work once, and get paid again and again.

So this is the answer the the question "what do the rich buy on pay day". They buy assets! They accumulate things that put money in their pockets.

If you have more passive income than you have living expenses -- you become financially independent. You don't have to work if you don't want to.

But it is going to take time, and it is going to be a lot of work. My plan is this: Today is Tuesday December 7th 2004. In 10 years time (yes, TEN years), I want to be financially independent. I am going to have more passive income than I have expenses. And yes, that vision includes the expenses of my bride-to-be.

My vision also includes you. I want you to become financially independent too. I'll tell you everything. What I'm doing that's working, and what isn't working. Maybe I'll let you in on projects -- I don't know yet. Time, though, will tell.

Because I have some skills as a programmer (I've been programming since I was 10), I'll see if I can put my skills to use to create passive income streams.

Income streams. Plural. Yum.

So probably, if you're a programmer, these pages are going to be extra interesting to you. But as this is a bigger game, many thoughts shared here will probably be of use to many people.

Maybe it won't work out. Maybe I'll fail miserably. At least, I'll give you someone to laugh at. Remember what I said at the beginning - I don't really like money all that much. In and of itself, it is not important. Love is, and green grass is. Money is silly.

But we live in a system controlled by money. Let's see if we can have money work for us, instead of us working for money.

Will you join me on this journey?

Sten, Oslo, Dec. 7th 2004