Software developers have long had an unfair advantage when it comes to generating passive income online. Beyond creating and selling apps and custom plugins, the possibilities are endless when you’ve got the coding skills.
Web developers are the architects of the web. For them, using web technologies to build online products and services comes as natural as water to a fish.
App developers are the masterminds behind mobile apps. Whether it’s an iPhone or Android app, there’s always something that can be packaged and sold for mobile devices to a plentiful audience of customers eager to download something fresh.
Regardless of what type of programmer you are, the idea is the same: you build something that people want, and sell it.
But passive income isn’t just about making income online. Otherwise, that would be no different than having an extra job. It’s about making income passively…
What is Passive Income?
Passive income is the holy grail of making money online. If you can generate an income passively, it means that you’ll make money even while you sleep. It doesn’t mean that you never have to work. But it means that your income is not directly correlated with how many hours you work.
The idea is to build an online product or service in which the process of acquiring customers, serving customers, and collecting payment from customers is all automated. Luckily, computer programmers are pretty good at automating things. And modern technology makes it feasible for a single computer programmer to build a scalable service that generates reasonable monthly revenue.
Being a computer programmer means that you can create digital products that you can sell online. The best online products help users conveniently solve a problem. These products can consist of apps, plugins, themes, and more. Let’s go over the different forms of passive income streams that a computer programmer can offer.
5 Ideas for Generating Passive Income
1. Build a Mobile App
Apps (applications), also known more generally as “software”, have taken the world by storm. Apps are digital and don’t need to be stored physically. Apps can also be downloaded by millions of people at virtually no cost, making it a great way to generate passive income.
Although technically all software for all devices are technically “apps”, most of the time we actually mean mobile apps– specifically made for iPhone and Android.
While there are indeed millions of mobile apps, there is always room for new apps that solve a unique problem that is relevant today. There are different platforms that you can choose to build apps for:
- Google Play Store (Android)
- App Store (iOS, macOS)
- Microsoft Store (Windows)
Direct App Sales
The most direct way of generating passive income with an app is by selling it. Depending on how polished, unique, and useful the app is, you might be able to successfully sell it.
Simple apps and games often sell for $1 to $5 USD while an app for professionals can sell for upwards of $30 USD. Pricing depends on the target audience and how much value you can offer them through the app.
Freemium with In-App Purchases
But generally, the world of software has moved towards the “freemium” model of giving users some basic functionality for free, then charging for any additional functionality. This form of paid functionality is known as “in-app purchases.”
For example, an iPhone racing game where you start with 3 car models to choose from, with the option to buy additional car models for $1 each.
The freemium monetization model is a great way to get a lot of users to initially download and use your app, with the possibility of up-selling them later as they become more engaged with the app. The use of in-app purchases is considered a fairly effective way of profiting from a mobile app nowadays, and a great way to generate passive income.
Monthly Subscription Plan
Arguably the best method to monetize an app is through a subscription model. When your app offers a subscription plan, then users must pay monthly in order to continue using your service. This monetization model is particularly popular with video streaming apps like Hulu, HBO Max and Apple TV.
You can apply the subscription model to your app, too. If you can acquire just 100 users at $5 per month, that’s $500 a month in revenue. Imagine if you have thousands of subscribers!
You just have the make sure that your app is suitable for subscriptions. For example, a calculator app would not be a good choice for applying a subscription model. But a video streaming app or collaborative tool could work.
The idea is simple. You place 3rd party advertisements inside of your app, and get paid any time a user clicks on one of the ads. Millions of apps use in-app ad placements every day to generate income for the developers.
iPhone and Android games tend to use ad placements as a method of monetization quite heavily.
Mobile games will often implement ad placements in-between levels. Right after an exciting victory, the user sees a full-screen advertisement– typically in the form of a video lasting a few seconds. The user can pay for a premium “ads-free” version of the app for a small fee.
Yes, advertisements are annoying for users. But with the internet being an ocean of free content and entertainment, creators need to get compensated somehow.
2. Build a WordPress Plugin
Plugins allow users to quickly and easily perform tasks on a platform without much technical knowledge. Like apps, plugins are easy to distribute, and are therefore another nice way to generate passive income.
3. Build a Shopify Plugin
Shopify helps users launch and manage an online store with ease. But once again, it’s a platform built on to top of web technologies and can be tricky to customize precisely. There are numerous Shopify plugins that help store owners to do things like integrate Instagram into their website, show product recommendations on a page, or show an image gallery. The sky is the limit. If Shopify users find your plugin to be helpful, you can get a lot of sells.
Other notable plugin marketplaces include Mailchimp, Wix, and WooCommerce. With all the different marketplaces to sell plugins, it opens up plenty of options for generating passive income.
4. Build a WordPress Theme
Possibly one of the most popular and easily monetizable things you can sell online are themes. Themes allow users to change the entire look and feel of their website with ease. There are a variety of themes being sold for different use cases.
Take WordPress for example. There are themes to make your website look like a magazine, newspaper, and more. WordPress themes can save a user hundreds of hours of tinkering, so that they can focus on adding content to their website. Theme Forest is the main marketplace for selling WordPress themes, and a common place where programmers have successfully generated passive income.
Shopify has a theme marketplace that offers free and premium themes for online Ecommerce stores. You can create Shopify themes for all sorts of industries, like fashion, auto, entertainment, and more. Since Shopify users are guaranteed to be in the business of making a profit (not necessarily like all WordPress users), then you can justify a higher cost when selling Shopify themes.
There are a few reasons why themes are considered one of the best forms of passive income: 1.) themes don’t require complicated code because the purpose of a theme is only to change the look of a website instead of functionality and 2.) there is no strict review process required to sell themes, unlike the strict guidelines and review process required to publish an iOS/Android app.
At the end of the day, if you have a knack for good web design then you can create a few themes and put them up for sell on Theme Forest. If they gain popularity, then you can make some good money from it.
5. Build a SaaS (Software as a Service)
Now we’re getting into the big leagues. Building your own Software as a Service gives you full control over what you want to build, and how you choose to acquire new customers.
What exactly is a Software as a Service, you ask?
It’s generally a subscription-based service that gives you access to software. For example: back in the day, you payed a one-time fee for a copy of Photoshop. Nowadays, Adobe has shifted to a SaaS model, where you pay monthly at a much cheaper price. Once your subscription is cancelled, you no longer have access to the service.
Here are a few ideas for a SaaS platform:
- Project Management
- Chat/Video Conferencing
- Content Creation/Editing (Documents, Videos, Photos)
- Research Tools (Data Aggregation, Analytics)
- Integrations (e.g. Shopify + Alibaba)
- Nutrition/Health Tracking
- Finance Tracking
Your chances of success are highest if you have domain knowledge/experience in a particular industry. For example, someone who is knowledgeable about logistics (transporting cargo via trucks) could think of many ways to provide value to that industry.
But if you aren’t familiar with a particular industry, then you won’t be able to effectively solve the right problems for that industry. Try to think of industries that you are an expert in. Or partner up with someone who can fill that role.
The goal of a SaaS platform is to provide a service that users are willing to pay for on a monthly subscription basis. Whether it’s $5/month or $500/month, the pricing model depends entirely on the target audience and the value that you provide.
The potential profit can be calculated by looking at:
(number of users) × (price of subscription) = profit
If you have 300 users each paying $5/month each, then you’ll make a profit of $1500/month.
If you take the B2C (business to consumer) approach, then it means you are targeting the average Joe. You can gain a large number of subscribers at a low price. However, if you go the B2B route (business to business), then you charge substantially higher, but with a potentially lower conversion rate.
With a custom SaaS, you don’t need to worry as much about a 3rd party marketplace like ThemeForest skimming off a chunk of your profits.
However, you do need to take more responsibility over payment processing, possibly through a platform like Stripe or Chargebee. Marketing is also entirely in your hands, as you won’t be able to leverage an existing audience to attract new customers. You’ll need to focus more on Google SEO and ranking.
The Truth About Passive Income
Although generating passive income is a dream sought by many, there is still a hard truth to be learned.
Generating passive income requires you to run a business. And most people fail at running a successful business.
You have likely read articles (like this one, ouch) claiming that you can simply build a thing, sell it- then sit back, relax and collect the paycheck. But there’s actually more to the process.
Legal & Taxes
If you want to take payments from customers, it opens a big can of worms in terms of legal and financial responsibility. You may need to get an EIN (Employer Identification Number) if the payment platform requires it. And that ultimately means filing to create a legal business entity.
Taxes become a bit more complicated because you are now technically self-employed. Even if you earn a profit from your project, you will need to set aside cash for Uncle Sam. Fortunately, there’s a financial app that can help with the banking aspect of things.
SEO & Marketing
Even if you have the best product in the world- you won’t be able to make a single cent until someone knows about your product. Understanding SEO (Search Engine Optimization) will help you to spread the word and attract new customers through search engines. There are other forms of marketing to consider as well, such as social media marketing,
Generally, all forms of marketing require some form of content creation. This means maintaining a blog of relevant content to attract readers and convert them into customers.
On the other hand, there’s a shortcut to all of this… You can buy ads. That means you’ll be spending money to make money. You’ll need to ruthlessly optimize your sales funnel to get the most ROI. It’s nonetheless an effective and predictable way of targeting a specific audience.
The unsettling reality is that luck is a factor in all of this. Having the right product at the right time requires some form of luck. But the interesting thing is that “overnight success” usually comes after a lot of work has already been done. For example, the developer of the popular Angry Birds game made a whopping 51 titles before becoming an “overnight success” with Angry Birds.
Don’t worry about being lucky. You can’t control it. But you can control your own actions. You’ll find that the more active and strategic you are, the luckier you get. Hard work and strategy win in the long term.
What is the Best Form of Passive Income?
The best form of passive income… is whatever works best for you.
Some developers enjoy solving complex problems and working with backend systems, databases, and API integrations. For them, building a WordPress plugin could be a fun endeavor.
Some folks resonate more with the creative side of software development. Developers with a keen eye for graphic design can design and build WordPress themes with ease.
An ambitious coder might even try building a full-blown Software-as-a-Service platform that can scale to support thousands of users. Or an iPhone app that can potentially go viral.
One way or another, you can see that there are several paths to building passive income as a computer programmer if you have the skills. Which one will you choose?