A Welcome Surprise: Additional Passive Income

So a few weeks ago I'm just going about my daily routine, checking email, when I see a notification that HubPages has sent me a payment. 

Say what?

Yes, I had actually received money for doing...nothing.  Okay, not exactly nothing.

I wrote about HubPages before on this blog in a post about earning passive income. HubPages is an article-writing site, where you create web pages called hubs about various topics. (You can write about anything you like.) Several years ago (before I turned my hand to novels), I had started writing articles on various sites, including HubPages. I created what I consider to be a fair number of hubs in a short period of time, and - as proven last month - those hubs have continued to produce income.

To be frank, however, my start on the site was rather inauspicious. My first month, I wrote one article. It earned me a penny that month - nothing to get excited about.  However, the next month, with me still doing nothing, that article earned something like 20 cents. Now it was getting interesting - not because of the amount of money, but because now I had a better idea of the potential.

Liking what I was seeing, I wrote something like a dozen articles after that, which earned me around three bucks the following month. Shifting into high gear, I cranked out 25 articles the next month, and earned about $8. I did almost nothing the month after that (6 articles) and made (drumroll please)...$60! Yes: dollar sign-six-zero! Needless to say, that was a major leap forward and validated what I had been doing in terms of trying to earn passive income.

Fast-forward a bit in time, and at the end of my seventh month on the site I had written about 80 articles, which were earning me about $40 per month. (Not a whole lot of money, but better than nothing.)  Since then (about 4 years ago), I've written exactly one article on Hubpages.  However, my work is still published on the site and continues to earn me money every day.

How much money, you say?  Well, after the last payout (which was - as I said - unexpected, because I haven't done anything on the site in years), I went back and looked.  Turns out my 80 articles were no earning me roughly 7 cents per day.  Yes, 7 cents.  Go ahead: yuck it up.  But if you put $1000 in a savings account earning 1% interest (which is well above the national average at the moment), you'd only earn $10 after a year.  My 7 cents a day would total over $25 at the end of a year - twice what someone would earn with a grand in a savings account, and I didn't have to lock up thousands of dollars to do it.

Anyway, I blame Google for the diminishing returns I'm getting from my hubs.  Google seems to update its algorithms regularly, which tends to have an effect on the discoverability of articles on sites like HubPages. (If I find myself with time on my hands, I may go back and tweak my articles to make them more Google-friendly, but I prefer to devote that time to writing novels these days.)

That said, the fact that I'm still earning passive income on work that I did years ago speaks volumes about the potential of sites like Hubpages - especially for someone willing to put in the time to write decent articles.  I figure that a person with just a little hustle could write a decent article every day capable of earning at least what I was getting early on (which was about 50 cents per article per month).  So, at the end of a year, you'd have 365 articles earning $6/day, or almost $2200 per year. But if you can manage that for two years (or write 2 articles per day), now you're earning $12/day.

Or maybe you can write killer hubs capable of earning more than $1/month each. It's certainly possible. When I got started with Hubpages, I wrote an article for my wife that - early in its life cycle - was earning over $1/month. In fact, during its best month, I think it earned $3. Again, it may not sound like much, but imagine that you've written 100 articles like that, or better yet, 1000. Now you're talking about earning $1K - $3K per month, which is far from chicken feed. And, if you can stay on top of things like Google algorithm changes, you might keep earning that amount indefinitely.

But even if you can't maintain that level of earnings, whatever you get is still free money. (Or as close to free money as you can get.) And to be honest, when it comes to free money, I'll take it - even if it's just 7 cents per day...

Indie Publishers: You're Doing Print Wrong

I've mentioned several times on this blog how - even though I sell way more ebooks - I continue to pursue the print market as well. Some authors eschew print altogether, often citing various reasons for doing so: they can't sell enough to make it worthwhile, they don't want to learn how to format for print, and so on.  Not me. All I've ever seen are on-going reasons to make sure I produce print versions of all my work. Basically, it costs practically nothing, it's another revenue stream, and it allows me to reach additional readers. Plus, I'm still conscious of the fact that there may be readers who simply can't afford an ereader of any type. (In which case, they can always request that their local library order print copies of my books.)

Bearing all that in mind, and having been at this indie publishing thing for over three years now, I thought I had a pretty good grasp of how print worked. In essence, my approach was to make sure I priced the books high enough to make a small profit, but low enough to encourage sales.  That sounds like the formula for a winning strategy, right? I thought so, but even though I was making sales, I was wrong in that regard. Wrong, Wrong, Wrong!!! 

However, it wasn't until very recently that I discovered just how poorly I - and probably a lot of indies - understood how the print market really works.  I came across a passage written by Julie Ann Dawson of Bards and Sages Publishing, and it was eye-opening. It made me reevaluate my entire approach to putting my work in print.

Now, with Julie's kind permission (and because I found it to be extremely valuable), I am reposting the passage she wrote on the subject:

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We actually sell more print with many of our titles than we do ebooks. The print market is a completely different creature than ebooks.

First, print is still sold on the wholesale model. Manufacturers set a retail price, and vendors pay a percentage of the retail. Retailers then can sell the book for any price they want. Indies lose site of this because all of the POD services call their money "royalties." More accurately, POD is more of a consignment deal that a royalty deal. But that is just a matter of semantics. The point is, Unlike ebooks, you don't set the "selling" price. Retailers do.

(***KH: I added the emphasis to the last sentence in each of the above paragraphs because I think they are very important points to remember.)

What indies tend to do is set the retail price of their books to match the Amazon SELLING price of books in their genre. Don't...do...this. Look at the retail prices of the books instead. THAT should be your baseline. You want to set your retail price to match the normal retail pricing for your genre. For example, typical trade paperbacks have a retail price of between $12.99-$16.99, depending on how long they are.

Second, don't bother trying to mimic smaller formats with POD. The mass market paperback size is not cost effective in POD. To understand why, you need to understand the role that size played in print traditionally. Go LOOK at an actual mass market size book compared to a trade paperback or a hardcover. You'll notice two things. One: the covers tend to be index stock, not heavy card stock. Two: the paper tends to be thinning and more like newsprint. Until the rise of ebooks, mass market paperbacks filled the role of ebooks in the marketplace as the "low cost" alternative.

POD services use the same materials for mass market sizes as they do trade sizes, which means you are simply increasing your manufacturing cost for no real benefit. Stick with the trade paperback formats.

Third, on the matter of price and sales. If you price your book correctly, retailers will place it on sale for you. And unlike digital, when a retailer puts a print book on sale, that comes out of their profits, not yours.

(***KH: Emphasis above added by yours truly.  The next few paragraphs are also critical to understanding how the print market works, but it seemed easier to note that here than highlight so much text.)

Retailers will determine whether to put a book on sale (either individually or including in store-wide promos) based on their profit margin. The profit margin is the difference between the final sale price compared to the cost to purchase the book + its markup. ALL RETAILERS add a markup to the wholesale cost to cover their overhead (rents, utilities, wages, etc). For the sake of discussion, we will set that overhead at $1 per book. We'll assume a standard trade paperback at 200 pages through Createspace as the book. We will also assume a 30% discount to the retailer.

If you set the retail price to $14.99, the retailer pays $10.49 for the book. Through expanded distro, that means $2.74 profit for you. Including the retailers markup, that leave the retailer with $3.50 of room to play. That is plenty of room to include the title in sales promotions, like 10% off deals.

Let's say you decide "I'm going to sell my book cheap to encourage sales!" and price it at $10.99. You make $1.14 per sale. Now the retailer is paying $7.69 for the book. With his overhead, his profit margin is now only $2.30. There is less room for him to play with sales, but still some.

At $8.99, you are only making 34 cents on a sale, but you are hoping to make it up on volume. The problem is that now the vendor is paying $6.29 for the book. Which means, with overhead, there is only a profit margin of $1.70. At that price, it stops being practical including the book in sales. The book won't be included in most sales promotions, and, in the case of brick and mortar stores where shelf space is a premium, it won't even be considered for stock because the profit opportunity in relation to shelf space is too low. Why take up shelf space on a book that makes almost nothing for me when I can stock other titles with high profit potential?

It doesn't help you to price your book low if A. stores won't stock it since they can't make money and B. stores won't include it in their sales promotions because the profit margin is too low.

(***KH: Once again, emphasis added by me.)

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After reading Julie's passage (more than once, I might add), I revamped my approach to print and have been pleasantly surprised by the results, to say the least. More than anything else, however, it's shown me that this is a business in which I still have a lot to learn. To that end, it's nice to know that this old dog is still capable of learning a few new tricks.