Ways to Make Money Online That Seem Great but Just Aren't Realistic
If your goal is to make money online or generate passive income through the internet, you can do better than trying these popular-but-unrealistic methods.
January 28, 2020 13 min read
The internet provides an entirely new way to make money. If you need a quick paycheck, you can try selling something on Craigslist or tapping into the gig economy. If you need a long-term means of producing income, there are plenty of suitable options — I should know, given that I’ve been making money by writing online since I graduated from college.
In some ways, though, the opportunities for making money on the internet are not so different from how people have been trying to get rich on the frontiers of society for centuries. One example: In the 19th century, many English and Irish people (mostly men) abandoned their homes to start new lives in New Zealand, attracted by not only the gold mines but also the abundance of opportunity in industries like timber, wool and hunting seals. In The Penguin History of New Zealand, historian Michael King quotes an article from that time: “Here — where the social disabilities, the exclusive caste, the overstrained competition, and the stereotyped conventionalism of the Old World have not yet taken root — there is a clear field for men of talent, skill and energy to climb the social ladder and to attain to a degree of wealth and social elevation that is possible only to the favoured few in other countries.”
Doesn't that way of thinking — the optimism, the belief in meritocracy — sound like the logic that brings people to the web? Of course, not everyone who went to New Zealand found gold or became rich. The gold mines became crowded, the seals were overhunted and, in a short time, an opportunity that seemed like free money had become wildly competitive.
The same can be true on the internet. Take a look at online gambling sites like DraftKings or FanDuel, both of which claim to give new users $500 for a “risk-free” first bet. It seems straightforward at first, but your money is refunded as site credit, which incentivizes you to keep gambling against people who probably have more resources, more experience and fewer scruples than you. If it were really so easy to make money on the internet through gambling sites, they wouldn’t need to offer you $500 to lure you in.
I probably don’t need to tell you that sports gambling is a bad way to consistently make money online. But this represents a lot of ideas about acquiring income on the internet: They all start with an easy win or a flash of excitement — something to draw you in — but then prove more difficult and competitive.
Related: 17 Passive Income Ideas for Increasing Your Cash Flow
So how can you tell whether your income-generating idea is more than a flash in the pan? Start by remembering that an idea is not the same as a business. You need to be able to outline precisely how to go from your first step to the last step (presumably generating revenue or passive income). It’s simple, but it's worth saying: If you actually want to make money on the internet, know how you’re going to make money on the internet. You can’t be these guys:
It’s certainly not impossible to earn an income online with these strategies, but it’s a longer and more convoluted road from step one to profit than you might expect.
Related: 21 Low-Cost Ways to Make Money from Home
1. Becoming an Instagram influencer
Again, it's possible to make money online as a social influencer. You don’t even necessarily need a million Instagram followers to do it: Many brands look to maximize their money by spreading their budget across micro-influencers (people with fewer than 10,000 followers and sometimes even 1,000 or fewer), who often have smaller-but-more-dedicated audiences than bigger-named celebrities. In fact, Rakuten Marketing interviewed 719 marketers across the United States, Australia, the United Kingdom, France and Germany, finding that respondents spent 40 percent of their influencer budget on micro-influencers (compared to just 28 percent for celebrity influencers).
By the numbers alone, you’d think there's plenty of money to be made online this way. Influencer Marketing Hub projected there would $6.5 billion spent in influencer marketing in 2019, stemming from 4.4 million Instagram posts using tags like #spon, #ad or #brandname, denoting that they were ads from influencers. In the same report, Influencer Marketing Hub claimed only 11 percent of influencers are currently fully compliant with legal guidelines, meaning there are likely many more than just 4.4 million sponsored posts.
That may seem like a high number, but consider this: According to Hootsuite, 1 billion people use Instagram every month, and 500 million people use Instagram Stories every day. A 2016 Reuters article claimed Instagram users posted about 95 million photos and videos every day — over the course of a year, that’s over 34 billion Instagram posts, amd that number has only gone up since 2016.
According to those estimates (4.4 million ad posts, 34 billion total posts), only about 0.01 percent of Instagram posts are actually sponsored.
Even if you crack into that upper echelon of Instagram users, there’s no guarantee you can earn a stable income from your posts: Emarketer claims that even for influencers with between 30,000 and 500,000 followers, an Instagram post only pays an average of $507. For nano influencers (500 to 5,000 followers), a post only pays about $100.
If you need to reach the top 99.99th-percentile of your profession just to earn $100, there are better ways to make money online.
Related: 18 Low-Cost Ways for Parents to Make Money From Home
2. Participating in multilevel marketing (MLMs)
You’ve almost certainly seen examples of MLMs on your social media feeds, even if you don’t know exactly what they are. You might have a cousin who posts advertisements for Avon or Tupperware on social media — or an old friend who sends you a private message and really wants you to try some “amazing” new product.
In an Atlantic article titled, “Beware of Selling Yoga Pants on Facebook,” Darlena Chenha sums up how we often experience multilevel marketing businesses in our daily lives. She writes: “Those being propositioned often think of multilevel marketing as a pyramid scheme or scam; those selling believe the business model is a straightforward way to earn extra income from home. Here’s how it works: ‘Consultants’ — sellers for a direct-sales company — solicit new recruits to sell products online, and, in addition to their own sales, those consultants then earn a percentage of their recruits’ sales. Those recruits, in turn, then sign up still more online sellers and earn a percentage of their sales, and so on.”
Entrepreneur understands how tapping into a well-known brand’s resources can help you make money: It’s why we created our Franchise 500 list. But there’s a big difference between opening a new Planet Fitness location and becoming a distributor for an MLM like LuLaRoe: You ought to make money on a good franchise investment, while you probably won’t with an MLM.
Related: 7 Online Business Ideas That Could Make You Rich
“Some MLMs are illegal pyramid schemes,” according to the FTC, and “most people who join legitimate MLMs make little or no money. Some of them lose money. People who become involved in an illegal pyramid scheme may not realize they’ve joined a fraudulent venture and typically lose everything they invest. Some also end up deeply in debt.”
In 2019, Vox published an article titled “More than 100 LuLaRoe sellers have filed for bankruptcy,” which highlights two major issues with companies like LuLaRoe:
The solution for many unsuccessful sellers is simply to recruit more people: You might not be able to sell LuLaRoe leggings, but you can sell the company as a means to easy cash … and earn a bonus for “sponsoring” a new consultant who buys even more than the initial order kit.
“My sponsor is a single mom of two kids... she raved about how she was able to stay home and support her family, and I was intrigued,” LuLaRoe consultant Sherry Evans told Racked. “I saw posts about the amount of money people were making, and I thought this was my way to protect my family's financial future.”
After a year, Evans was still in debt. As of the time of the Racked article, she was still attempting to liquidate her inventory. By contrast, “her mentor says she receives bonus checks of over $100,000.”
At the end of the piece, Evans concludes: “It is all about the money, getting $6,000 or more from every new consultant ... they don’t care about the rest of us.”
Next time you see someone posting about how you can make money online if only you start selling beauty products, or clothing, be wary. Think about this six-part checklist about pyramid schemes, which comes from the U.S. Securities and Exchange Commission:
If you know people who are considering investing in an MLM or thinking about doubling down on their initial investment, remind them that they are much more likely to lose money than create a sustainable income.
Related: 18 Ways for Digital Nomads to Make Money
3. Day trading
Here’s how the U.S. Securities and Exchange Commission defines day trading: “Day traders rapidly buy and sell stocks throughout the day in the hope that their stocks will continue climbing or falling in value for the seconds to minutes they own the stock, allowing them to lock in quick profits ... While day trading is neither illegal nor is it unethical, it can be highly risky. Most individual investors do not have the wealth, the time, or the temperament to make money and to sustain the devastating losses that day trading can bring.”
Just like the other entries on this list, it’s possible to make money online through day trading. In fact, Entrepreneur contributor Tim Sykes says he made over a million dollars trading penny stocks while in college using this method. But day trading isn’t just a side hustle that leads to quick cash. For people considering whether to become a day trader, the SEC advises that day trading is an extremely stressful and expensive full-time job. You can’t believe claims of easy profits and must be prepared to suffer severe financial losses and even depend heavily on borrowing money.
When I searched the term “day trading” on Google, the first suggested video was titled “Day Trading: How to Make $500 in 15 Minutes.” It sounds almost exactly like those FanDuel offers above, doesn’t it? Here’s free money. It’s fool-proof.
The second suggested video was called “Why 80% of Day Traders Lose Money.”
Related: 5 Ways to Generate Passive Income and Keep Your Job
Day trading is a perfect example of an online moneymaking idea that seems great but just isn’t realistic. Think about it — if day trading were truly a good idea, and if you could actually learn to time the stock market, then everyone would be doing it. Brilliant investors like Warren Buffett would be turning billions into trillions in a matter of weeks.
But that’s not how Buffett recommends someone should invest. Instead, he says there are only two rules of investing: Never lose money, and never forget the first rule.
The most important trait for a successful investor “is a temperamental quality, not an intellectual quality,” Buffett says. “You need a stable personality.”
Stability. Patience. These are the barometers of a good investor and a good investment.
When I interviewed Troy Bader, CEO of Dairy Queen (owned by Berkshire Hathaway), he said the investment company’s leadership gave DQ a directive: Protect the brand for today, but grow it for tomorrow. That’s nearly the opposite of a day trader’s mentality.
Investor Phil Town breaks down the risks (and possible rewards) in this video:
Town claims success is rare in day trading — that perhaps only one out of 100 people manage to make a profit. But those rare successes don’t happen by accident. Town points out that professional day traders “make use of expensive software, hardware and news services in order to find buying opportunities, and they must also commit large amounts of time to the pursuit.”
In all likelihood, you're not going to make $500 in 15 minutes because you want to, no matter what the suggested YouTube video says.
Related: 20 Creative Ways for Introverts to Make Money
What are some realistic ways to make money online?
If you do want to leverage the internet to create additional income, there are plenty of better options than trying to become an influencer, participating in an MLM or day trading. Entrepreneur contributor R.L. Adams broke down a few options for earning an online income, including:
If you already have a business, you can use the internet to make more money in a variety of ways. You can start advertising on social media (even using influencers) or write a book that you can use as both a product and a lead generator. You might build a website that showcases your work or offer a series of tutorials on your area of expertise.
However you choose to maximize your income-generating opportunities on the web, remember that a penny saved is a penny earned — and the best way to “make” money online might simply be to avoid losing it.
How A Yorkie Enthusiast's Passion For Pets Sparked A Million-Dollar, One-Person Business
Tiffany Williams knew her days as a senior sales consultant at a daily deals website were numbered. She kept hearing rumblings that the company planned to lay off team members in smaller territories, like the one where she worked.
Instead of waiting for the inevitable to happen, the New Orleans resident decided to go full time with a side hustle she’d started—an online, print-on-demand T-shirt business. She launched it through Teespring, a platform that lets entrepreneurs create and sell products online, in 2012, two weeks before the layoffs hit her company.
"I don't want to go back and work for anybody else," Williams said to herself. "I have to make this work."
Determined to leave the 9-to-five behind, Tiffany Williams launched a Yorkie-themed T-shirt business ... [+] that became the foundation for Rich Girl Collective, a business that educates women about entrepreneurship.
Rich Girl Collective
Inspired by her pet—an adorable Yorkie named Prada—Williams hired graphic designers on freelance platforms such as Upwork and Fiverr to design Yorkie-themed T-shirts for her. Then, by popular request, she branched out into totes and aprons.
It wasn’t easy to grow the business but her hard work paid off. Williams, 39, now brings in more than $1 million in annual revenue in a one-woman business selling her products, which have evolved beyond T-shirts to digital products, such as courses that show other women how to create businesses, under the brand Rich Girl Collective.
Williams is part of an exciting trend: the growth of the million-dollar, one-person business. The number of nonemployer firms—those with no paid employees but the owners—bringing in $1 million to $2.49 million a year in revenue hit 36,984 in 2017, a 2% increase from 36,161 in 2016, according to U.S. Census Bureau data. That tally rose 38%, from 26,744, in 2011. Most non-employer firms are solo businesses, but some are partnerships and family businesses.
How did Williams make it happen? Here are some of her strategies.
Dive right in. Williams had an advantage in starting a business because she'd earned a BA in business management and marketing from Dillard University and an MBA in technology management from University of Phoenix.
Nonetheless, she didn’t have a steady source of income or a big startup kitty available at the moment her career circumstances led her to take a leap of faith and go full time in her business. She made the decision to do her best with the resources she had available, even if circumstances weren’t textbook perfect.
"A lot of people think that they need to borrow money from the bank or write a 100-page business plan to get started," says Williams. "A lot of times you don't. You can start where you are. As your business grows, you invest more."
As Williams considered her options as an entrepreneur, growing her print-on-demand T-shirt business seemed like the smartest path at the time. “There was no money upfront,” she says.
That was because in a print-on-demand model, the entrepreneur does not have to stock inventory. When the entrepreneur uploads a T-shirt design to Teespring or a similar site and selects a selling price, customers pay the site and then the T-shirt is printed. The site takes a cut in each sale, then mails a check to the entrepreneur or direct deposits a payment.
Creating the T-shirts and finding a place to sell them was just the first step to building a successful business, though. Williams also needed to find a way to let dog lovers know the T-shirts were for sale. She had always enjoyed social media, so she started a free Facebook group for fellow Yorkie owners to chat with each other, investing about $150 in Facebook ads to attract people who shared this interest. When she had a new design ready, she would present it to the Yorkie group for sale.
Be patient. Although many of the Yorkie group members did buy her shirts, Williams did not replace her corporate salary right away. Still, she continued to show up at her laptop, day after day, to keep moving the business forward. She knew this was an important part of her education as an entrepreneur. “I was in business, but I was learning,” she recalls.
To bring in additional income, she tapped what she had learned in her past corporate life and through her experiments to start an agency, Buzz Social Media, in 2013. Between her business ventures, she built her revenue to the high five figures over two years.
Then, in 2014, she experienced a major breakthrough. She began experimenting with new revenue streams, such as running an online Kindle store where she sold eBooks, and began purchasing household items on sale at Target and Walmart and selling them at a markup on Amazon. By using this approach, she was able to grow the business to the point that once she subtracted her expenses from her revenue, her profits hit $350,000 that year. “That was my breakout year,” she says.
Take your cues from the market. As her business grew, Williams began hearing from other women who learned about it and were interested in launching a business of their own. First, she heard from a woman who wanted to leave her insurance company job to stay home and raise her children and wanted to know how Williams pulled it off. Two weeks later, Williams got another similar inquiry. Soon, the questions were snowballing.
Williams was excited to help but realized that speaking with each woman one-by-one wasn't practical as a solopreneur. "It started to take up time when I was running a business to answer everybody's questions," she says.
Her solution was to start her free Facebook group, Rich Girl Collective, to support other women who wanted to start their own businesses. That would allow her to give back to the entrepreneurial community while still staying focused on her own business. “I could answer everyone’s questions at a time in a group,” she says.
Williams chose the name of the group carefully to reinforce her view that wealth isn't about buying material things but rather building a better quality of life.
“For me, the ‘rich’ in Rich Girl Collective stands for more than money,” she says. “It is an acronym: ‘R’ stands for relationships and family. ‘I’ means ‘invest’ in entrepreneurship. ‘C’ is for community and ‘H’ is for health and wellness.”
Bring discipline to your business. Williams kept her group very active by posting three times a day, Monday through Saturday. She also live-streamed Q&A events where members could ask her questions about starting a business. Over several years, the group grew to 15,000 members, as members wrote to her to ask if their friends could join.
To make sure the discussions stayed focused on business and that no one was spamming the group with sales pitches, Williams set ground rules. Potential members had to apply to the group, answering questions that showed whether they were serious about starting a business. She also checked out their Facebook pages, to make sure the profiles looked legit. “If they have no profile picture, they can’t get in,” she says.
Anticipate what your customers need. Over time, Williams began to notice common themes in the conversations taking place on the site and tailored her messaging to her community’s concerns.
One was that perfectionism was holding some women back from starting their businesses. "They try to have the perfect logo, the perfect website," she says.
She advises followers to let the perfectionism go. “I tell them branding is important,” says Williams. “However, don’t try to be so perfect you’re taking months to get started. Learn as you go.”
With many of the women in the community percolating with business ideas and not sure which one to pursue first, focusing was also a problem for many. Williams encourages them to master one business before moving onto the next.
"We have so many passions, so many businesses we want to start," she says. "I encourage them to start with one thing. Get that one thing flowing and then, if you want to think about branching out to another business, do that. If you've never been a business owner before, you don't know how much work it is. You are going to spread yourself way too thin if you start out doing too many things."
Don’t do it all alone. Williams was fortunate in that her mother was available to help her with a wide variety of projects as she grew the business, working as a contractor. “She knows all of the ins and outs of the business,” says Williams. “She is my biggest supporter and helper.”
As the pace of the business picked up, Williams enlisted other contractors, so she could stay focused on strategy and business development. Currently, she relies on five contractors, including a personal assistant, someone who handles customer support and moderators for the Facebook group, who vet each membership application and make sure members have a good experience. “They make sure no one spams the group,” she says.
Williams’ willingness to delegate enabled her to grow the Facebook group to 37,000 women. She is now looking to add a couple more contractors in the next few months and possibly a full-time employee. The additional investment makes sense, she says: “We’re growing.”
Put your health first. Everything seemed to be moving ahead smoothly when Williams went to the doctor one day at age 37 and got a scary diagnosis. She had very early-stage ovarian cancer. “It was a shock,” she recalls. “I don’t have a history in my family. It was a tough time in my life.”
She opted not to share the news with her community at first, as she went through four months of chemotherapy, preferring to keep her focus on the business. “I wanted people to treat me the same way,” she says.
She kept up business operations throughout her treatment, maintaining her regular live streams. She didn’t tell her followers about her diagnosis until the last day of her treatment. “I wanted them to see the entire time that I still pushed through, that I got work done,” she says. “I wanted that to be a lesson: Whatever comes to you, you can push through.”
Six months after completing her chemo treatment, Williams held her first Rich Girl Live conference, a two-day event in New Orleans. “I wanted to test the waters,” she says. “I was determined to do it.” She was able to pull it off and is getting ready for the next one, to be held in Atlanta in September. This time it will include 300 attendees.
Meanwhile, Williams says her health is now excellent— “I’m back and better than ever,” she says—but she makes sure her life is balanced. She spends much of her free time outside of the business involved in community activities, at the gym or with her family. "You don't want to be so focused on your business you're not spending time with family," she says.
Productize your knowledge. Williams’ business plateaued in 2016 and 2017 while she coped with her illness. It was during that period she realized it made sense to focus more on digital products, so she could scale back her hours and focus on getting well. “I wanted to work but I didn’t want to do as much work,” she says.
With that in mind, she started introducing online classes in areas of business where she had expertise, such as starting a T-shirt business, launching an online boutique and selling products on Amazon. “I only teach what I’ve done and have gotten results with,” she says. As her digital products took off, she deemphasized the physical products, like her T-shirts.
To host the classes, she uses the platform Podia. She likes the fact that for set price per year, Podia allows her to offer classes, downloads and monthly membership groups.
Podia’s capabilities came in handy when, in response to requests from her followers, Williams introduced a live training class in 2018 called Rich Girl Academy, for which she charges $37 a month through the platform. In addition to providing personalized support to the women business owners who join, such as an analysis of their websites, she invites monthly guest speakers to talk about topics such as business finance, credit, and mental health.
“I realized a lot of people need additional help—accountability,” she says. “They need the push. They need the camaraderie to see that if other people are doing it, they can do it, too.”
With her classes growing, Williams has been moving full steam ahead this year. She registered the trademark Rich Girl Collective this year. She also recently introduced live chapters for members of the Academy that meet quarterly in seven cities, with the goal of turning it into something akin to a sorority.
Ultimately, it is all about building a successful brand.
“I really want this to be a brand that, when someone hears someone say, ‘I want to start a business. I need help with my marketing,” Rich Girl Collective is the first brand that comes to mind," she says.
That's a tall order, given all of the competition in the space, but following her illness, she says, she became very clear on how important it was to her to focus her life on helping women. “My mission now is I want to impact as many people as possible,” she says.
[EP1]
Podia - Sell Online Courses, Memberships, and DownloadsPodiaWhy Short-Form Video Is Poised to Take a Bigger Chunk of Marketing Spend
The online video climate has developed considerably, even in the past couple years. For businesses looking to adopt internet video content -- especially a personal brand ready to utilize short-form video optimized for mobile -- the iron is hot for the striking.
Rising social media platform Tik Tok, which offers a set of features for creating and sharing short videos, has seen adult users increase exponentially in the past few months, rising to more than 500 million active users.
In addition, Jeffrey Katzenberg's billion-dollar mobile video platform Quibi ("quick bites") is earning comparisons to Netflix. Beyond the hype, it has some interesting things going for it. At CES, Quibi announced a technology called "Turnstile," which allows its content to shift from portrait to landscape anytime you turn your phone. In the meantime, it remains in full-screen mode, focused on the action.
Following the Video Money Trail
Quibi has a lot of corporate money behind it -- short-form video, as an industry, is blowing up. Katzenberg knows this, as does Quibi CEO Meg Whitman, who previously helmed both HP and eBay. Their plan to capitalize on the popularity of short-form video content is timely.
If you want to reach people, short-form video is increasingly the easiest way to do so. If you've been thinking about moving your business in this direction, consider this your signal to make the move.
The Business Potential of YouTube Remains Relatively Untapped
Despite the size and reach of YouTube, there's still only a handful of entrepreneurs maximizing its potential. A few years ago, Dwayne "The Rock" Johnson became the first celebrity to develop a YouTube channel as a means to stay in touch with his fans. He launched his channel a few years ahead of the trend, and its success made it the subject of a Harvard Business School case study.
The Rock's glossy channel, which aims to show fans a more personal side of the actor, now has 4.57 million subscribers. At the time of its launch, however, movie stars weren't going to YouTube. The Rock showed himself to be a shrewd businessman, and the risk paid off. The channel was executive produced by Scott Brown and Mo Darwiche, no strangers to establishing an audience on YouTube.
Free Up the Creative Process
After the success of The Rock's channel, Brown and Darwiche founded a production company, Liquid Light, to repeat the process for other celebrities, entertainers and athletes.
"The success of these more polished YouTube channels shows that audiences want them," says Brown. "A YouTube channel is more personal and engaging than Instagram. It's also harder to produce, and a lot of celebrities don't have the time or resources to undertake that." Shoots are financed with venture capital, which frees up the creative process so clients can get the kind of content they want with fewer headaches.
"Most people don't think of this kind of production quality when they think of YouTube," says Darwiche. "The platform grew on low-fi vlogging, but it's matured into a space that holds loads of potential for curating your personal brand." And quality, as any influencer will tell you, is crucial for attracting repeat visitors.
Quibi may not fly, but with money and experience behind it, it seems poised to make a mark. If it's successful, we can expect content consumers to get more comfortable watching short-form mobile video. That makes it a good time for any company to follow in The Rock's footsteps and adopt short-form video as an extension of its brand. The more consumers get to know your voice and values, the more likely you are to strike a lasting chord.
Consider short-form mobile video a way to keep your image fresh and your audiences tuned in between major headlines or product launches. If you start production now, you may even be ahead of the curve.
Published on: Jan 26, 2020
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.
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