Passive income from volatile online marketplaces

Everybody loves making money. Even more so when it’s near effortless.

Passive income
As defined by Wikipedia circa April 2015, passive income is “an income received on a regular basis, with little effort required to maintain” the income-generating method itself. What comes to the forefront of most people’s minds is probably a steady, interest- or investment-based source of income, such as investment portfolios and/or property rentals. Buying and keeping ahold of rapidly appreciating assets (such as housing in New York or Silicon Valley) are also common ways of making long-term money.

Both of these methods, however, are rather risky. What if the housing market crashes the month you finally piece together enough cash to buy that rental? Or perhaps the set of stocks you invested in goes in the wrong direction? RIP your hard earned money…

A solution: online marketplaces
While these “standard” methods for generating passive income clearly have their shortcomings, I think that there’s more risk-free methods for doing so, simply by looking towards the interwebz. Simply put: when it comes to the e-goods, highly volatile open markets are your friend. Why? Because prices are reflected the instant they are put online, and with an appropriate bot and/or web scraper, you can have rapid turnarounds on the dollar. I’ll use the Steam Community Marketplace as an example, with a specific focus on medium-cost Counter-Strike (Global Offensive) weapon skins. For the purposes of this example, define “medium-cost” as any skin with a steady median price of between $1-$10. On this particular online marketplace, many popular skins have drastic price fluctuations which can occur in a matter of seconds. There are various reasons for these price fluctuations which I will not go into – perhaps a future article if anybody is interested. For situations such as these, using a bot is actually not uncommon at all; many script kiddies login to their Steam accounts and then use browser plugins to nab a desired item the instant it goes below a certain threshold (these guys are also highly likely to get banned for doing so, as it violates the Steam Community Marketplace ToS).

But once these users get the item that they want, this process usually stops. What seems to be less common is applying such scripts to make money off of the online marketplace itself. A better way to do it is to automate the price checker from a remote, logged-out server (in my case, an AWS instance), so that the Steam police can’t link your account. The great part about AWS is that, even if it gets blocked, you can always assign it a different IP and continue raking in the $$$. In fact, for all you code-savvy people, I put together some spaghetti code to do this using Python and CasperJS, which you can access on Github. Simply input the weapon, skin, and exterior you’d like to track, the desired threshold on the price in USD, and your phone number into the command line, and the script will automatically send you a text message the moment the item drops below the threshold price. Once that happens, simply navigate to the buy page on your computer or mobile device and nab the item. For maximum effectiveness, sell it immediately in case the price goes back up, which it likely will due to your constant buying and selling. This is both simple and a non-violation of the ToS (since you are not using an automated buy/sell process), meaning that Steam cannot, for all intents and purposes, ban or suspend your account.

Now, there are caveats. Steam charges both a CS:GO and marketplace fee, which equates to a total of 15% the selling price of the item. I’m fairly certain that it’s implemented partially to combat making returns on the marketplace, but don’t let that stop you; it simply means that, when you buy low, you have to take this extra 15% sell fee into consideration. This is where the volatility of the online marketplace comes into play – if price fluctuations of > 15% ever occur within a short period of time, you can instantly turn around the buy price of that item for more money. The speed of the internet is truly a beautiful thing.

Two words of warming: 1) once you’ve made the money, turning it back into real cash requires another 10% fee through a third-party service, and 2) money made off of online marketplace transactions likely counts as taxable barter income, so don’t blame me if the IRS suddenly appears at your door.

Preliminary results
After a test run of one week on the CS:GO marketplace with a starting inventory of around $20, I’ve gotten a 20% return on the starting value of my Steam wallet. While this may not seem like much, imagine starting with $2000 and applying this method over a variety of items in the community marketplace. Making back $400 within a week doesn’t sound so bad now, huh?

As the title of this section suggests, these are only preliminary results. I’ve decided to apply this to a variety of marketplaces, and perhaps extend this method to barter real material goods such as eBay and Craigslist in the future. The principle remains the same: 1) buy low, 2) sell high, and 3) profit. And no, this is not a South Park episode or random internet meme – I mean profit in as literal a sense as possible.

In conclusion…
Right, so I know what’s going through your head right now. “If this is such a good idea, why the hell are you sharing your code with us?” As it turns out, you reading this is another source of passive income for me, assuming you don’t have AdBlock or some other anti-ad browser plugin. Both ad views and clicks on this site count towards income, which, in the long run, will likely provide me with a greater amount of passive income than quick turnarounds on these relatively short-lived online marketplaces. I also enjoy building my site much more than monotonously buying and selling e-items, so this provides me with a moderate level of entertainment and fulfillment as well.

Happy selling (and buying)!