Q&A: "Which is better: direct or indirect income?"

This transcript was generated from the episode audio and may contain minor errors.

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So you've been listening to the show for a while. You know there are a lot of different ways to get paid. And today one of our listeners is gonna help us make a distinction between what's known as direct and indirect income, okay? So these terms aren't always used. So I'm gonna define them for you more specifically in my answer.

And basically the business model that our caller is developing is either a B2B, business to business, or business to consumer, B2C operation, depending on whether they choose to get paid mostly through affiliate and advertising revenue or through selling to consumers themselves, okay? So the interesting thing is they aren't two different business ideas. They're just two different revenue models, okay? So once you have settled on your idea, once you're like, okay, I know what I wanna do, depending on your project, you might have one more big choice to make, which is this choice about direct or indirect income. Again, I'll define that more specifically in my answer.

Let's see if we can be helpful for this caller and hopefully somebody else out there as well, detailed question in my answer coming right up. [Music]

Hi there, Chris, this is Shannon. And I've been listening to the show for a couple of years. I'm deciding between different business models and have come across something I don't think you've talked about. In the side hustle book, you drew a distinction between a product business and a service business.

But here's what I'm wondering. For both of those categories, there are also different ways to get paid. I want to sign a business that publishes information on sports betting. In this business, I could get paid through affiliate commissions and advertising or by selling a guide or some other kind of product directly to my visitors. But let's imagine it's one or the other.

Both options are services, but is it better to get paid by an advertising network or directly by customers for something you sell? Let's also assume the money is the same in this situation. Thanks for your advice. - Okay, so the first thing to note is in some cases, you can do both. And in fact, a lot of businesses will have kind of a multiple model where they have a B to B line and a B to C line.

And it's not contradictory, it's actually complimentary. Nevertheless, we want to narrow our focus here on the Hunt Side Hustle School for our busy listeners. So I do agree it's good to have an idea of the primary model. And as I mentioned, one is B to B like business to business and one is business to consumer. But in both cases, the end users are the website visitors who are coming to learn about sports betting in this case.

And so how do you serve them? Well, the direct income is selling a guide, selling a guide or some other kind of product directly to the visitors. The indirect income is through affiliate commissions and advertising, it's a little bit more passive. So you have traffic coming to the site, they're clicking links and such, you log in every day eagerly looking at your statistics because that's gonna determine, basically the more traffic you get, the more you're gonna make from advertising most of the time or from affiliate commissions. Whereas, building the direct income is like you were selling the product, you're selling the guide or some other type of service basically.

And you make the decision between what's better by thinking about their needs and surveying what is out there, like what else is out there. And so this industry is very competitive, the sports betting industry, just because there's so much money involved with it and people losing a lot of money typically. So just to note, I don't think it's great to be a sports gambler because you're going to lose your money most of the time. But because of that, the big companies in sports betting, known as sports gaming, usually have affiliate programs that can be lucrative. Sometimes it's several hundred dollars per referral because they really want to acquire customers and then take their money, as I said.

So that's a natural fit. That's the natural indirect fit. As for going the other route, people who are into sports gaming, they want all kinds of knowledge and tools. If there's something you could make and sell directly, you could then say, well, I'm not beholden to any of those big companies that other sites affiliate with. So your goal is to help your customers get ahead.

They need some kind of edge, right? So you could end up doing both, as I said, but probably better upfront to have an idea of which one you want to focus on. And I think that's how you make that decision. Thank you for the great setup. I think that'll be helpful for some listeners who are trying to figure out, okay, I've got my idea, but then what is the actual business model?

And just as a side note, I think it's good to think about your business model pretty much along the same time that you're thinking about ideas because they do go hand in hand. People don't buy ideas, they buy offers. And so you get to an offer by thinking about what is the business model? What's the revenue model? How am I going to actually make money from this idea?

Okay, that's my encouragement for you today. Thank you for listening. Much more is coming up seven days a week, always free. My name is Chris Guillebeau. You're listening to Side Hustle School.

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