Business

Revenue Diversity

Jul 23, 2023

It is always advisable to have one major source of revenue and then diversify by having multiple minor streams of revenue that de-risk you from that major source of revenue. For example, YouTube’s revenue split is 1:3 between subscriptions and advertisements.

Why it matters:

It protects against risk of ruin.
It protects against ups and downs. For example, revenue from advertisements is seasonal.

How

There are different forms of revenue models:

Digital Advertisements, where revenue is Sessions Per User x Users x Pages Per Session x Ad Impressions Per Pageview.
Subscription, where revenue is Average Revenue Per User (ARPU) x Active Subscribers (i.e., Existing Subscriber Base + New Conversions + Renewal)
Affiliate and deals
Events
Sell playbooks, courses, trainings, etc. using micro-transactions
E-commerce: For example, launch branded products
Offer services like Job Boards

Downside

Some of these revenue models can be in opposition to each other and make commoditized businesses complicated. This in turn mandates the need for propensity models.

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