Should you Diversify Your Affiliate Revenue? – By Dan Murray

I like talking to other affiliates about their businesses.  It seems that the topic of revenue diversification often comes up. 

What does diversification mean when it comes to revenue for an affiliate?  In general, diversification means spreading out risk so you don’t have all of your proverbial eggs in one basket. 

In an investment portfolio, for example, diversification can mean including different kinds of assets (like stocks, bonds, etc.) that don’t all move in tandem. One zigs, while the other zags, allowing you to sleep easier at night.

For an affiliate, diversification can happen in a number of ways.  The most obvious method would be creating a portfolio of merchants where no single merchant represents more that x % (say 15%) of your total revenue.   

Let me illustrate the flip side of this with a story.  One affiliate I know had a huge percentage of his total revenue tied to one merchant.  He had been happily promoting this merchant for years with great success.  Then one day the merchant hired a new affiliate manager to run the program and things suddenly changed. 

The relationship somehow soured and this affiliate was booted out of the program, rendering a devastating blow, to say the least.  Over half of his revenue dried up overnight.  By diversifying across merchants, you may be able to avoid this fate. 

You can also diversify your revenue in other ways.  You may choose to spread your business across a number of affiliate networks, so no single network can do too much damage if things go awry.

If you get most of your traffic and sales from SEO, you may decide to add some projects to the mix that use paid search and email lists as the main drivers.  Perhaps you are used to buying most of your traffic from Google and you move some campaigns over to Yahoo and MSN. 

Back to our original question — should you diversify your affiliate revenue?  There are two answers to this query, yes and no. 

The “yes” proponents cite all of the good reasons above for spreading out risk.  Hedge your bets.  Don’t rely too much on any one offer, product, merchant, affiliate network, business model or source of traffic. 

This is the prudent voice of reason that can save your hide if you hit turbulence in one area of the market.  The downside to this advice can sometimes be lack of focus and difficulty growing beyond a certain size.

Those in the “don’t diversify” camp are mainly focused on growth and leverage above everything else.  

The argument here is that to reach true mastery, you must focus all of your energy on one thing and do it extremely well.  Put all your eggs in one basket and grow that basket to the moon.    

Each affiliate must look at his or her business and make decisions on diversification that are best suited to their particular personality and situation. 

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