Writing for Residual Earnings Sites is NOT a Retirement Plan

Sometimes the things I find through Twitter make me want to cry. "How to Retire on Residual Income from Writing Articles" was one such link (although I can't remember which darling follow felt it was a good idea to share).

This is an article about how writing for sites that offer residual income is an option for people who want to retire. In other words, writing now will continue to pay you indefinitely even when you want to retire. No retirement account? That's okay. You'll still have income rolling in. Better yet, you can keep working through your so-called retirement by writing more articles. I'm sorry, but there's a big difference between true retirement and simply retiring from one industry to jump into a different job because you can't actually afford to retire.

I need to point out a few fallacies and misconceptions on this one.

Stability

Retirement income must be relatively stable. You set aside what you need, and you take out $x per year to cover your expenses after retirement. Ideally you do not rely on fluctuating income streams that have no stability. Remember, most of these residual income sites haven't even been around long enough to show they can support someone through retirement.

Even those that have been around for a decade or more have changed hands, changed revenue share / pay models, and other policies every few years. Others have disappeared completely. And if you look at the contracts of some, it's clear that they can decide to pull your articles when they want to and stop further compensation (although that may depend on the site).

That is anything but stable. And it is far from a responsible retirement plan.

Pay Expectations

The article's author gives the example of earning more than $5000 per month residually. The idea is that every article will earn you at least $1.00 per month. That, I'm afraid, is a false assumption. Many articles on residual pay sites don't earn anywhere near that much (although yes, some can earn much more).

The idea that people are going to churn out 5000 articles at all on the residual front is likely unrealistic. While I have no doubt there are a handful who have or who will, that just doesn't represent the majority. Let's look at Suite101 -- one of the oldest content mill variety of sites. Several weeks ago they made their stats and top earners info public (although it may not have been intentional as it was behind a login more recently). While I won't share December stats numbers, I will share a few from the previous month -- the numbers that were publicly viewable. Just for the record I came across the data due to a Google Alert for my name as a few old articles are still published there and I appeared on one of the lists.

Out of the top 20 pageview earners in November 2010, only one wrote more than 1000 articles. Out of the top 100 pageview earners, only four writers produced over 1000 articles. I know for a fact that there are Associated Content writers who have produced more content than this, so I don't claim Suite101 represents all residual income sites. Yet it was AC writers commenting a while back about their $500 or so per month while neglecting to mention that they had to write more than 1400 articles to get to that point (not even $.40 per article each month). Writing more content doesn't necessarily equate to higher earnings.

Now let's look at the income side of writing for Suite101. The top earner in November earned a little over $2300. That's not bad, especially comparing it to the $1.00 per article per month goal the Helium author mentions. But these writers are the exception; not the rule. Keep this in mind. Suite101 claims to have content published from over 20,000 content producers. And in November's earnings report where they shared the top ten anonymously, only eight people broke the $1000 mark. That means the other 19,992 writers with content up on Suite101 earned less than $1000 during the month. Those aren't promising numbers, especially if you think you can rely on these residual pay sites to cover you in retirement. And despite my personal feelings against the company I do have to admit that they're one of the more "stable" options around. Of course many of those 20,000 writers no longer produce new content for the company. But if you really want to retire, you shouldn't have to either. And keep in mind, there's a reason people move on to other things.

So is it realistic to say that people wanting to retire (and we're not only talking about actual writers here) can just whip out 5000 articles, count on at least $1.00 per article each month, and support themselves for the remainder of their lives? I don't think the article comes anywhere close to making a realistic case for that. And any way you cut it, the majority of people writing for these sites don't fall into that boat. If "professional" writers aren't doing that, why should it be assumed that any Tom, Dick, and Harry can leave their old line of work and make it happen even later in life (meaning less time before retirement), not accounting for how long it really takes to finally reach those income levels?

Better Options for Residual Earnings

One of the biggest problems with relying on third party residual earnings sites is that you're also forced to rely on that third party to optimize ads and page formats or content styles to maximize earnings. You might assume they're the best for the job. Not so. What works with one audience often doesn't translate to others. And these sites are rarely niche-specific. They take a generalist approach of trying to be everything to everyone, and therefore don't tailor site formatting and ad placement to each topic area's specific audience.

This is one of the reasons I generally recommend keeping residual earnings to your own projects. You have the control. If something isn't working out, you can change things. You can optimize ad placement. You can increase your ad prices as your traffic increases with private sales. You can tailor things more effectively to the niche audience you write for. You can create and sell ancillary products like e-books and reports. And if you want control over your residual income you need control over the content and monetization plan.

That's not to say this is for everyone either. I've shared a story here before about taking a small business blog from nothing to around $2000 in monthly earnings in just three months (not any longer as that blog has been somewhat neglected for other projects). And while it's a good example of what you can do with your own site with some initial hard work, it's also the exception and not the rule. I know bloggers who have been at it for years without making more than a few hundred dollars. Just because residual income sounds nice on the surface, it doesn't mean it's right for you and it doesn't mean you're cut out for that particular kind of work. And it is still work.

Want to Retire? Get Up Front Payments!

There was one section in the Helium article that really bothered me.

In the mean time, while you are writing for those five years you will still be earning money.  You could just wildly spend that money, but it makes more sense to save and invest that money.  A high yield savings account is a safe place to earn interest on the money you have made, so there is very little risk in losing that money.  Imagine the amount of money you can acquire through residual income and interest over those five years.  Talk about a nice retirement!

Here's a reality check. Spending the money you make pre-retirement while writing articles is not a case of spending it "wildly." It's called paying your living expenses, and compensating yourself for the time spent working. Even if you have another full-time job and you can afford to save all the money you make writing, this is not the way to go.

If you want to put the money into savings and investments, that's fabulous. But then you're much better off getting paid reasonable rates up front and investing that money sooner. Otherwise guess who's earning on that money even though you've already completed the work. The residual income site. That interest should be yours.

For example, let's take the $1.00 per month per article rate the Helium article mentions. Now let's take a very modest professional blogging / Web content writing rate of $50 per post, paid in full up front (for the record most pros I know are charging $100+ for very simple Web content and blog posts and much more for Web-based feature articles -- the gigs are out there if you stop looking for the easy way out). Let's look at that over the course of five years.

Assume the residual income case where you need to write 5000 articles in those five years. You would have to write around four articles every week day for five years (no personal days other than weekends, no sick days, no vacation time, etc.). At that point you would finally be earning $5000 per month.

Or you could try this. Charge for your articles up front. If you were still to write the same amount of content, but charge the modest professional level rate of $50 per post, you would earn $49,800 starting your first year. With the residual income model you only earn $6474 that first year. Income from residuals doesn't exceed the yearly income from up front pay until Year 5 (and then just barely, at $54,280 -- based on 83 articles every month).

At the end of five years, the residual model leaves you with $151,890 in savings for retirement. That's not bad, but it's also not going to cover you through retirement. You have to continue working anyway. It also doesn't come close to the five year total of $249,000 from those relatively low up front payments. If you charged a more professional rate of $100 per simple Web article, you could earn nearly a quarter of a million dollars while writing only half the content the residual income writer has to churn out (again, that's with no vacation time, personal days, or other breaks beyond weekends). My base rate is $200 per post. That means I could write just about 20 articles each month and earn the same $249,000 in five years. Or by sticking to the 83 article direct comparison, that comes to $199,200 every year, or $996,000 over five years. At least the hard work would leave you with enough that you could take real time off during retirement.

I'm not saying you should strive to find clients for 80+ articles every month in up front payments. The point is that you can earn much more from the start by getting paid now rather than later for your work. And you can do that with less work. That's more money to go into savings and investments now and for you instead of for some content mill. Put it in high yield savings. Invest it in the market. Invest in other residual income streams of your own (like self-publishing e-books and books or investing in site launches that will bring in ad revenue for years to come).

What Would Make Residual Sites Really Work?

I completely understand that residual income sites look attractive on the surface. And I can practically hear some of you thinking "yeah, but after those five years, I'll be earning more than the writers being paid up front and I can stop working and keep collecting monthly payments!"

Well, maybe. But that assumes a lot. To put it simply, it would take a miracle. All of the following would have to be true:

1. You would have to be able to consistently produce 83 articles per month every single month for five years minimum.
2. Every article you write would have to successfully earn a minimum of $1.00 per article per month, and they would have to begin doing so immediately upon publication to make the numbers in this article work. That is unlikely, meaning you would fall short of the income estimates here and have to wait more than five years to be at the $5000+ per month income level.
3. The content mills would all have to remain relatively stable on the payout front not only for the five years you plan to actively write for them but for the entire length of your retirement. If you live 20 years into retirement, that means a total of 25 years. No content mill / residual earnings site has been in existence that long, nonetheless paying writers in a reliable manner.
4. Search algorithms would never change during those 25 years or so in a way that might negatively impact the rankings and therefore traffic of these sites. That is extremely unlikely considering Google (a primary traffic source in many cases) openly admits to wanting "content farms" to decrease in rankings. I would be extremely surprised if we don't see significant ranking losses for these residual payment sites among other types of mills and content farms within the next two years.
5. Every article you write would have to maintain its traffic levels (and therefore ad revenues) indefinitely. That means each would have to remain highly relevant (not timely pieces, which do a good job of bringing in quick traffic and income but a lousy job of maintaining a long shelf life for retirement planning). It also means no better content would be produced on the topic which might divert traffic and readers away from the more outdated material over the years.

The chance of all of those things happening in a way that these sites could support you through retirement is slim at best. Things on the Web have a habit of changing rapidly. Easy money doesn't last forever. Small MFA site owners and sploggers were cut off. Directory owners took a big hit years back. The big money Myspace marketers died off with the site traffic. Residual income content mills won't be around forever, and it's nothing but naive to put your faith in the contrary.

Even diversifying by using several of these sites isn't likely to help you. Why? Because the potential site killers for one can do just as much damage to all. In the end, every one of them is somewhat at the mercy of Google and the other search engines. And as social media referrals replace search, they're in even bigger trouble. That's when quality content matters even more because every link given screams "personal recommendation." And let's face it. If you're already working full-time and trying to use residual sites to stockpile money for retirement, quality is going to take at least a small hit as you try to cram in 83 articles consistently every month on top of your other job and life obligations.

While it's a nice thought on the surface, when it comes to counting on third party residual income sites to support you during retirement the odds just aren't in your favor.