Diversify to Manage Surprises

When you’re building an online presence, is it best to focus all of your energy on one project and one campaign – or diversify in to multiple websites and multiple sources of revenue? There are pros and cons to each approach, but for as long as I’ve been publishing on the web I’ve been generally glad that I’m working in several niche sectors with several advertisers.

No Deal Lasts Forever

And for proof of that, just look at what happened to Fastweb’s long-standing affiliate offering. After running for 10 years, they shut down the program on short notice in response to some new federal advertising regulations. And this is one of the good ones – most affiliate programs won’t even last that long.

Even when the advertising offer stood, there were often swift and significant changes to the terms. In the year before closing down, referral rates jumped from $1.50 to $3 and back down to $.80.

If that particular program had been my only source of revenue, I could have been in big trouble when it shut down. I was lucky that I could switch to another scholarship offer shortly afterward, but it only took a few more months before that one started shutting down too – and now there are pretty much no trustworthy operators in the niche that the government decided to close down. With the entire sector now void of respectable advertising programs, I’ve had to write off about 15% of my monthly income. If that were my only website, I’d be looking at about a 50% loss instead. If that was my only website and its ads weren’t diversified, I could have lost my entire online income in an instant.

The Downsides of Diversification

Unfortunately, there are downsides to diversification, as well.

The essential risk is spreading one’s self too thin. Each site needs a certain amount of content and promotion to get a decent supply of organic traffic, and it won’t do any good to have 20 websites that each end up on the second page of relevant Google searches. At that extreme, you’d probably be better off with a single site that ranks in the top three results.

Sometimes, it is just the economy

Many business sectors have their own seasonal cycles to consider, and on top of that there are bigger cycles of economic expansion and contraction. For example, tax services and Halloween costumes could be a great way to make money – but they’re only going to cash out during a very small part of the year. What will you live off for the other 11 months? One good strategy would be to promote other sites too, like Valentine’s Day, summer-related goods, and Christmas. By spreading out over the various seasons, none of the campaigns will be critical on its own nor will you be vulnerable to down time.

Another strategy is to balance businesses and services that do well during an economic boom with those that do well in recession.

Expansionary goods:

  • Business to business
  • Business loans and financing
  • Hosting and web services
  • Computers and personal technology
  • Vacations and luxury goods

Recession-safe advertising:

  • Education
  • Job searches
  • Self-help
  • Personal loans and financing
  • Cheap sources of entertainment

My websites have stayed pretty well split between the two categories, so not only do I maintain a pretty stable level of revenue, I also have some early insight toward public opinion of the economy.  Some months, education blows up like crazy – and those happen to also be the months when people are less inclined to invest in a new web-based business.  Shortly after I notice such a trend, there’s usually some kind of panic on Wall Street.

Find your balance

How far you can diversify your web publications depends on a lot of individual factors – namely how many topics you’re comfortable taking on and how many websites you can keep relevant and up to date.  That part you’ll have to figure out on your own – but at least you’ve got an idea of how to divide that up to protect yourself & limit risks!

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