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

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

There are many, many different ways to get paid. Today, one of our listeners is going to help me make a distinction between direct and indirect income.

Basically, the business model our caller is developing is either a B2B or B2C operation, depending on whether they choose to get paid mostly through affiliate and advertising revenue, or through selling to consumers themselves. These aren't two different business ideas—they're just two different revenue models. So if you've settled on your idea, depending on your project, you might have one more big choice to make.

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 start a website 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.

I suppose I could technically do both, but let's imagine it was 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.

In some cases, you can do both! But I agree that it's good to have an idea of the primary model. As I mentioned, one is B2B and one is B2C in terms of revenue, but in both cases the end-users are the website visitors who are coming to learn about sports betting.

You make the decision by thinking about their needs, and surveying what's out there. This industry is very competitive—extremely so—but that's because there's so much money in it.

The big companies in sports betting usually have affiliate programs that can be lucrative. Sometimes it's several hundred dollars per referral. They really want to acquire customers—so that's a natural fit for the indirect route.

As for going the other route, there are options there too. People who are into sports gaming want all kinds of knowledge and tools. If there's something you could make and sell directly, you could argue that you're not beholden to any of those big companies. Your goal is to help your customers get an edge of some kind.

You could end up doing both, but it would be better upfront to have an idea of which one you want to focus on first.