Business • Prescription

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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