What is diversification
There is often talk about the need to diversify your internet based businesses - as with any business, online or offline, you don’t want all your ‘eggs in one basket’ because there is a risk that your income will disappear following a change in advertisers, search engine algorithms, natural demand, seasonal factors, new competitors, and so on.
So what does diversification mean and what do you need to do?
Diversification is a means of reducing risk - the risk that your income can substantially reduce due to conditions beyond your control.
It is often suggested that to diversify simply means not to be over-reliant on one source of income. If all your income comes from google adsense, or from one particular clickbank product, for example, you are exposed to significant risk.
It is not impossible that clickbank will go out of business tomorrow, or that CJ will fold, or you will get banned from adsense. Not probable, but not impossible.
But if you market several different affiliate products; use kontera, say, as well as adsense; accept direct advertising, and perhaps sell text links as well, your income is much less likely to collapse completely if one of the affiliate products becomes unavailable or if you get banned from adsense.
But there is more to diversification than this.
If your income comes from multiple sources, but is based around one website, how well will you cope if the site disappears from the google search engine results? It can happen and frequently does.
If you are reliant on one site, you need to have diversification in the sources of traffic to your site. Other search engines, online advertising, regular visitors who keep coming back, all can help reduce this risk.
The ideal is to have more than one site - so if one disappears, the other(s) can step in. But this is easier said than done, since maintaining one quality site is challenging, maintaining two or three will be very difficult and time-consuming.
The third aspect of diversification is industry related. If all your sites are based around, say, travel in Spain, they will all be subject to the same seasonal fluctuations and the same general risks. Also someone else might come along and do sites about ‘travel in Spain’ that are bigger, better and more interesting than yours.
So the third aspect of diversification is to have sites on more than one completely unrelated topic. A travel site, a cooking site, and an internet script site, for example are all completely unrelated, and will prepare you for a downturn in any one of these areas.
So the key is - identify which parts of your business are over-dependent on a particular external factor, and reduce that dependency. That way you will have a much more steady and reliable income stream.