Hi lovely readers. Here's a fantastic guest post on the “passive” income of the internet vs dividends by Dividend Ninja. Not only does he write great posts, he does great designing too (in case you didn't know, he redesigned my site to make it look H-O-T!)
For several years I ran an independent web design company, and spent countless hours designing and working on websites for other people. It goes without saying I learned almost everything about the web industry inside and out. After six years of pushing the mouse for others, I finally decided I had enough, and retired the business in 2010. It was an easy shift for me, because I already had a part-time position in my regular work.
In the back of my mind I had always wanted to develop my own websites for my own income stream, and I certainly had a few ides. I certainly had no idea what blogging was about, passive income, the degree to which some bloggers were earning a solid income, or even what WordPress was. In fact I thought I had pretty well missed the social media boat altogether!
So in an attempt to learn WordPress, I created a small test site about investing, which quickly morphed into the Dividend Ninja. I was surprised how quickly the site grew. I also realized that like any investment or project, things would take time and patience. So I wrote a few articles, kept writing, and hoped it would grow from there. Obviously after 16 months, it has worked out just fine. 😉 But if it wasn’t for my interest in dividend stocks, there wouldn’t be a Dividend Ninja!
What I Could Earn with Dividend Stocks?
Dividend stocks are to the investor, what passive income is to a website owner. You buy shares of solid companies and let the dividends roll in month after month. It’s not a quick get rich scheme but a long term investment plan. Let’s say I wanted to retire and live off my dividends. If I earned a nominal $500 per month in dividends, how much of an investment portfolio would I need to start out with? Currently my dividend stocks and bond ETFs create a dividend stream of around 4.5%. This means I would need a beginning value of $133,000 dollars to earn $500 per month in dividends. To be more realistic, a dividend investor with a conservative portfolio is earning around a 3.5% yield, or would require a starting value over $171,000. That’s a lot of capital for a modest monthly income.
What Could I Earn With A Website?
On the other hand, earning $500 from a website is not out of reach, and is really only a matter of the time it takes to generate website traffic, and being able to have the patience to stick with the plan. Not everyone makes it, but if you are willing to work hard and put in the time it is possible. The start-up costs for a website are virtually nothing, and cheaper than going to Starbucks a few times a month. You can register a domain for as little as $10, and your monthly hosting is about the same. So for less than
$150 per year, you can be up and running! How many businesses can you do that with?
You can even start with the WordPress site or Blogger if you’re really strapped for cash. You may decide to get a premium WordPress theme, or even buy some plugins, but you don’t have to. The bottom line is your only investment for a website is time, persistence, and some plain old fashioned luck! Of course it depends how you cost out your time, but from a bank point of view you don’t need $133,000 dollars to start!
What Are Bloggers Really Earning?
The real question is what are bloggers really earning? When I attended FinCon11 (The Financial Bloggers Conference), Wise Bread presented an excellent seminar on exactly that question. According to their survey results 34% of bloggers earn less than $500 per month, 23% of bloggers earn $500 to $1000 per month, and another 23% of bloggers earn $1000 to $5000 per month. That means that half of the blogging community earns less than a $1000 per month for all their hard work. So if you’re thinking of
blogging as a road from rags to riches – think again. 😉
Websites Have Tangible Value
One interesting point about websites is they can also become valuable – they can indeed become a tangible asset, almost like a virtual real-estate. A few bloggers have turned around and sold their websites for small fortunes. In fact if I was to stop blogging today, I know for a fact I could get several thousand dollars for the Dividend Ninja if I really wanted to. But something to consider is your website is worth 12 to 24 months of the monthly revenue it creates. So your website, just like a stock, may indeed have a tangible asset value.
Of course you can’t put a website into a 401K, RRSP or TFSA. Nor are there any guarantees in the web business. I’ve seen some pretty fast and sudden changes over the years. When I started, Google had just come on the scene as a search engine, and facebook didn’t even exist! Recently, Google made several significant changes to their algorithm. Bloggers have also been disqualified from AdSense for reasons they were not aware of. So with changes like that, I certainly wouldn’t want my entire retirement portfolio (even if it was possible) riding on my website income.
How Long Does it Take?
Creating income from a website is not a quick get rich scheme. If it is then you are extraordinary lucky. Building a website takes time and a lot of hard work and effort. If you expect to create a website, throw some Google AdSense up, and sit back while you rake in a few hundred bucks – then you are going to be sorely disappointed. You’ll be lucky if you even make $5 per month when you start! It takes time to create a website that engages readers and generates $500 to $1000 per month in ad revenue, and not
everyone makes it. I’ve seen a few fine bloggers give up after their first year anniversary – and that’s unfortunate. The perks from a website don’t really come until the second year! But to make a long story short, you can make a nice part-time income from a website if you’re patient, persistent, write good content, and have luck on your side. In my opinion a website makes a great investment!
The Dividend Ninja is a DIY (Do It Yourself) investor, who started blogging in 2010 about his journey into dividend stocks. You can learn more about his thoughts on dividend stocks and index investing at theDividend Ninja.