I differentiate passive from residual income by the amount of time needed to maintain the program and how many, if any, employees or contractors are used to deliver the service. An example of a passive income model would be to create a website whose content is generated by a data feed. Data feeds are updated automatically by the vendor so the website is constantly changing and being updated. Unfortunately these sites don’t usually rank well in search engines so they attract little natural traffic which results in minimal or nonexistent income.
If you can invest a little capital then more passive income models come into play. Paying writers to provide original content to your site works but is not simple either. To make this work you need to find decent writers who will provide quality content that don’t cost too much money, choose the right topics and keywords that aren’t too competitive so you have some hope of getting a first page ranking and then hope that there is profit left after the exercise.
Advertising & Affiliate Model
A few companies will pay you to just to place and ad or a link on your website. Some like Google will pay if visitors click on the ad they place on your site, others will pay if that visitor fills in a form on their website and still others will pay you only if that visitor eventually purchases something from them.
To keep this a passive income model we need to avoid dealing with customers, inventory, shipping and handling returns and other customer service. This typically means either digital products like eBooks and MP3 audio that allow instant and automated download or dealing with suppliers that will drop ship the products that you sell directly to the customer with no involvement from you.
For digital products you can create your own or purchase items that allow you to resell as many of them as you like.
If you can build a website that gets traffic you can use any combination of the above strategies. Bout of course there is the rub, how indeed to build a site that gets high quality, consistent traffic.