I am new to the world of passive income, and it seems like I am not the only one.

The idea makes sense. Find a niche in the market and create a website, a blog or a product that fills that niche. Through selling the product, allowing ads on the site or affiliate marketing you can set something in motion that will provide a continual income source with only minimal time spent on upkeep after the initial work of building the system.

The skill on which success depends more than any other is choosing the correct niche. There are equal dangers in veering to the left or the right. On the one hand you could choose something so obscure that there would be very little demand for what you create. On the other hand, there are niches that are so full of established authoritative websites and products that it will be extremely difficult to get noticed in that niche.

Passive income itself is a niche that falls into that second danger.

There is no shortage of material online about passive income and it is not hard to see why. For many people, the journey into passive income is facilitated by one or more of the prominent players in the niche. Blogs are read, podcasts are listened to and courses are attended that explain how to make money online. By definition, the people who are teaching passive income are in this niche. Then those who learn start to emulate them and because these gurus create content in the passive income niche, so many who learn their methods feel the need to operate in the same niche.

It’s like one giant pyramid scheme.

A pyramid scheme works by taking payments from members in return for the promise of greater rewards if they can recruit others. It can be profitable for those at the top of the pyramid, who got in on the scheme early but those who come in later often make significant losses.

The established experts in the passive income sphere have real value to add (unlike a pyramid scheme). They can show you how to set up in your niche and make their money in part, by affiliate links to the tools you will need: keyword research; web hosting and the like.

When somebody new enters that niche those at the top of the pyramid will make money from their affiliate links, whilst the newcomer will only recoup the money they have spent on these products if they can persuade others to click on their links. Being so late into the niche makes this unlikely. Future newcomers would also be likely to click on the same links on the experts’ sites.

Like a pyramid scheme, those at the top make the profit. Those at the bottom do not.

So how do we avoid it?

Do what the experts to. Just in a different niche.

The experts are in the position they are in because they have built an audience and developed products and services that their audience needs. We can avoid the pyramid effect by not adding ourselves to this already over-crowded niche. Instead, we can find something for which we have a passion and others have a need, reach out to people in that community and find ways to serve them.

Then, and only then, may we make some passive income.