Diversifying your websites and their revenue streams can be so, so important. By the end of this video, you’re going to see two real-world examples of why it’s so important to diversify your sites and revenue streams.
What is diversification?
Diversification is the process of allocating capital in a way so that you can reduce the exposure to any one particular asset or risk. So in other words, it’s making sure that you’re spread out widely enough so that if something bad happens to one area that you’re going to be okay overall, because you’ve got enough things going on in other areas of your business.
Digging into the websites
Digging right into one of my websites, you can see that in the year 2020, this website generated around five and a half grand in affiliate revenue. In other words, for all the commissions, in terms of commissions for individual items, as well as bounties, this site earned 5.5K. However, what you’ll notice is that over the next year, what happened was that this pretty much cut in half. So far this year, this site has only generated around 3.2K in revenue from the affiliate side of things. And so just goes to show you that with no real major changes to this website, we’ve seen a cutting in half of all of my Amazon affiliate payments for this particular niche site.
On the flip side of things, though, what you’ll see in this other website of mine is that in the year 2020, I only made $205 in Amazon affiliate commissions. And yet in the year of 2021, we have pretty much tripled that number where it’s been about $666 so far this year. So at this point, you may be wondering what exactly caused these drops and how does this relates back to the key point that I’m trying to make in terms of diversification?
What caused the drops?
Well, what happened in 2020 was that Amazon actually drastically cut the affiliate commission rates of a lot of major product categories for their affiliate program. So in other words, one day you could have been making 8% for a particular category, and the next day you were making 3.5% or something like that.
The second thing that happened was that during this time and around early 2020 Google actually deemphasized affiliate websites or websites that were highly focused on affiliate content. So going back a few years ago, you could’ve had a website that covered a lot of best of content and done really well for yourself however as Google started tweaking their algorithm, they wanted to make sure that they were feeding quality information for all these different niches. And so one of the ways they addressed that problem was by directly attacking sites that had a ton of best of content.
For me, that first site that I showed you was one of those websites where I covered a ton of best of content in a variety of different topic areas related to my niche. So immediately I saw a hit in terms of when Google started prioritizing these tweaks in their algorithms.
Whenever you have a situation in which you have a website that’s highly reliant on one particular SEO strategy, and the next day, Google changes that algorithm, it can have a drastic impact on the overall organic rankings of your site and as a result, you’re going to get less organic traffic and with less organic traffic, you’re going to have less opportunities to convert that traffic into some form of monetization. So that’s exactly what happened in the case of the first site.
How does this relates to diversification?
So how does this connect back to our core lesson in terms of the importance of diversification? Well, just goes to show you how quickly things can change. In one situation, I’ve got a website where the Amazon affiliate revenue has essentially been cut in half because of the changes last year. And on the other side, I’ve actually seen affiliate commissions more or less triple from the prior year.
And just goes to show you that if you were just to rely on a single way of making money on your websites, that you might find it difficult to actually forecast how well you’re going to do in a particular year.
There are a few other lessons that I would include along with this takeaway in terms of the importance of diversification.
- The first lesson you can take away from these two examples is that you really should try not to solely rely on others. That will often come in the form of affiliate programs. Tons of YouTubers and other people online will tell you that affiliate programs are the holy grail of making money online. And the reality is that it can be a great way to make some money, but overall, you don’t want to be overly reliant on these programs for your revenue streams. The reason why that’s so relevant is because you can see, in my example, one day Amazon was paying me 8% or so for a particular product category, and the next day that was cut more or less than half.
- Another key takeaway from these two examples is that nothing good lasts forever. And so you always want to be aiming to continue to grow whatever it is you’re working on. In my case, I had actually already been moving away from affiliate content for some time. And so it didn’t actually have a huge impact on me, even though my overall affiliate commissions were going down from Amazon. I was starting to see increases in terms of display advertising as well as infoproducts that I was introducing into each of my respective websites.
- Another lesson that I learned from this particular example is that lasting long enough to play another inning is crucial when you’re creating an online product or service or website. Overall, a lot of times, these sorts of things will take time. They will go through ebbs and flows because everything can be very subject to volatility. And so it’s really important that you’re optimizing for just staying in the game long enough to get to the next stage of growth for your particular project.
- The last lesson is that you should continue to take bets. You really don’t know which of these particular projects of yours might hit next. And you see, in the example, even on the Amazon affiliate side, that the first website took a cut in half in terms of Amazon affiliates. And yet the second website, pretty much tripled the Amazon affiliate revenue in the next year. Both of them were using more or less the same core strategies. So it just goes to show you that you should continue to take different bets with different projects and see exactly what might stick, figure out what gets you traction so that you can then invest deeply into getting to the next traction point for whatever project that you’re working on.
From this example, I hope you learned that you shouldn’t rely on just a single source of revenue for any online project that working on. Nowadays, my websites are much better diversified to include things like info products, as well as other affiliate programs that have higher margins than Amazon, and also display advertising.
If you found this article helpful, be sure to check out my YouTube channel to get new videos every single week. I’ll help take you from zero to self-starter as you grow your business, get more customers, and hone your business acumen. Also, feel free to share this with anybody that you think might also benefit from the importance of diversification when it comes to your niche website.