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
- 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.