The portfolio theory is something I've mentioned before in webinars and forum threads to illustrate the need to diversify your business. This concept is important if you want to last as an affiliate in this day and age. When you learn to treat your business like a portfolio, you'll have a well diversified affiliate business.
When we talk about a portfolio, the first thing that comes to mind might be a stock portfolio. This isn't too far off what your affiliate business portfolio operates like. A good stock portfolio would have your money invested in different types of stocks – some risky, some stable, different sectors, etc.
Just for example purposes, look at this stock portfolio
If you took your money to an investment professional, they would do something like this. Now, imagine you took your money to someone and they invested it like this:
Congratulations, 100% of your money is invested into Walmart! It's not that Walmart is a bad thing to invest in. It's that you don't want to invest all your money in Walmart. What if the people of Walmart decided to stop shopping there and the stock took a nose dive along with your money? You could lose a lot very quickly, and have no other investments to offset the loss. Pretty easy to understand – your investment guy (or girl!) is terrible.
You decide to take your money to another investment professional, and they invest your money like this:
Looks much better right? Your money is evenly invested in 5 different stocks. Great, this looks well diversified! Then in the not too distant future, you get a call from your stock broker saying your holdings took a massive hit, and you lost a bunch of money. How could this have happened? You didn't have more than 20% of your money invested in one company, so what gives?
If you look at the chart above a little closer, you should notice something about the companies you're invested in. They're all from the same industry. So, no matter how well you're diversified within that industry, it's not diversified enough from an overall business perspective. What if the economy took a big hit, and people started shopping less? The whole industry takes a hit, not just one or two companies.
Hopefully you can see the failure of the above investment scenarios, and already have some ideas about your affiliate business.
Look at an affiliate who is just running 1 campaign (The dating offer be2)
Not well diversified is it? Now, just like in the stock example, there might be a lot of money in this offer. The problem is, if you're devoting all your money and time to just this one offer you end up with 2 potential problems:
1) The offer dies for whatever reason, leaving you back to square 1 looking for a new offer.
2) Since you devoted all your time to this one offer, you have no other campaigns or areas of your business developed.
That's not a fun situation to be in, trust me. That's not to say, you shouldn't put more time and effort into a campaign if it's going to mean a lot more money. However, it does mean you have to think about a few things.
1) It's ok to put a lot of time and money into an offer that's working really well at the moment, but…
2) You have to think about how much time you're spending on the campaign to make that extra money.
Example: You launch a dating campaign that's netting you $200/day. This is more than any campaign you've done before, so you devote all your energy to this campaign. What happens a lot though, is people spend 5 more hours per day on this campaign to only squeeze $25/day more out of it. Is $25 more per day worth 5 hours per day? That's like earning $5/hour. In that situation, I can guarantee you could find more lucrative projects to spend 5 hours per day on.
As I wrote the above example, I realized I committed a common mistake affiliates makes (including me, yes!) – thinking in terms of all or nothing. This is a huge problem for affiliates, and they don't usually realize they're doing it just like I didn't when writing the example above.
If I had a campaign making $200/day and I wanted to spend more time scaling it, I don't have to spend all my available time scaling it. If I had 5 extra hours to work, I'm not really sure it would be productive to spend the whole 5 hours on this campaign no matter how much I was making from it. Even if I did 3 hours on this campaign, that leaves me another 2 to work on other projects and streams of income.
Think about this when you work on campaigns. You should think of your time as a portfolio too! What % of your time are you going to devote to each campaign or project?
Going back to the above example, if all my income is generated from the be2 offer, it could all be wiped out if something happened to that offer. So, you can diversify into other offers like this:
Now, if be2 stops converting, I only lose 25% of my income. There is still an issue with the above though in that my income is all coming from one niche. This isn't always bad, but it's not as diversified as I like to be.
Something like this would be a little more balanced:
The above isn't a recommendation, just an example of how you could diversify into different niches. Just keep this concept in mind when running campaigns. I don't like to run in just one niche because things change fast in this industry. It's not just that a niche might get saturated, or stop converting…it's that I'm not spending time learning anything else. I might get really good at that niche, but I'm not developing skills in any other area.
You can also think about this in terms of traffic sources. Are you running just on POF? Just on FB? What happens when/if you can't do that anymore? Do you have to start at square 1 learning a new traffic source? It happens to affiliates all the time.
Does this look very diversified?
If Facebook is your main income source, I'm not saying to drop the time you spend on it in half. Even if you just devote 10% of your time to something else it will pay off.
10% isn't much to ask, but it will go a long way to diversifying your business.
What should you diversify into?
Glad you asked! I would like to know the answer too. I'm only half kidding, but this question doesn't have a right answer. Let's list the things you could diversify into:
CPA offers (dating, weight loss, etc.)
PPS offers (Shareasale, CJ, etc.)
PPC (getting paid when someone clicks on an ad)
Building a tool
Building an app
Creating your own product or course
Creating your own offer
Running a startup
Starting a traffic source
Those are really just scratching the surface, and for each item listed there are multiple sub items. PPV could mean running on Lead Impact, Traffic Vance, etc.
An ideal affiliate portfolio would involve these elements:
– Running CPA offers & PPS offers on different traffic sources
– Long term sites – niche sites, authority sites, etc.
– Smaller, stable projects that can be outsourced (example – video marketing)
– Researching and testing of new methods, traffic sources, projects, etc.
– Learning subjects like HTML, basic programming, etc.
– Analyzing and keeping up with the industry
For the longest time, I thought my curse was ‘jack of all trades, master of none'. I was really good at learning something and putting it into practice, but I never took it as far as some people. It wasn't until fairly recently that I started looking at this as a good thing. It's made me more diversified for one. It's also given me the opportunity to learn different skills I can apply to many different projects. So instead of being upset that so and so is earning 30% more than me on some offer or traffic source, I'm happy earning 70% of what they do becasue it leaves me more time to develop other areas of my business and actually earn more because I have more projects going on. Plus, I have more stability in my business becasue I'm diversified in different areas.
To start working on these ideas, this is what I would recommend
1. Write down every task you do right now and how long you spend on it:
Check stats, launch campaigns, read forums, build sites, etc. Just write down what you do and how much time you spend on it. Don't guess on this, just observe and write down how long you spend on each task. Do this for 1 week, so you get a baseline on where your efforts are going. Be honest with yourself too – if you spend 1 hour looking at Facebook, write that down.
Once you've done that for about a week, make a list with the time spend on tasks as a percent. Take the total time you worked, then figure out what % of that you spent on each task.
2. Now that you know what you are doing, write out a portfolio of what you should be doing.
Analyze what you're spending time on, and decide if you need to be spending that much time doing it. Are you checking your stats for an hour per day? Is that really necessary? Can you do the same amount of work in 30 min instead? Is all your time going to one traffic source? Are you learning anything new or growing your business in any other areas?
Write out a business plan based on what you've been working on and what areas you want to expand into.
30% Dating on Facebook
25% Loans on PPV
20% Building authority sites
15% Creating a digital product
5% Kindle publishing
5% Researching new areas to expand into
This is just an example, but gives you an idea how you can diversify your business. Affiliates, historically are very short sighted. They'll choose to put 100% of their time and energy into an offer or traffic source that's ‘hot' at that time. It's not wrong to put a lot of time into something that's working great at the moment, but there usually isn't a need to put 100% of your time into it. Again, even if you scale back to 80% of your time, that means 20% of your business is still growing in other areas. When that offer or traffic source dies (and it will), you'll still have the other campaigns or projects you were spending 20% of your time on. More importantly, you'll have knowledge in another area and be more adaptable.
If you're like me, it helps to visualize things. I find this makes it click more (pun intended) in my head. A super easy way to do this is in Excel.
Open a new sheet, and write out whatever data you want to look at. Do this after your initial assessment of where your time is going.
Highlight the data and click insert, then ‘pie' (I chose 2-d in these examples). Click on the chart, and it will bring up the chart tools tab on top. I change the chart layout so I can see everything as a %
Nothing too fancy, but this really helps me analyze where my business is going. Sometimes I don't realize I'm spending so much, or so little time on something until I look at it this way.
I strongly encourage everyone to analyze their business in this, or a similar manner. It will help you grow as an affiliate and business owner. Think about the results of putting just a small % of your time into other projects. It's not something that pays off overnight, but if you come back to this thread a year later and have spend 10% of your time building niche sites or something, I guarantee it will pay off and you'll have something impressive to show for it.
Remember that to approach affiliate marketing as a smart business owner, you need to put an end to the ‘all or nothing' thinking. Businesses grow, change, and adapt. Your business will be more stable, and you'll make more money than the affiliates who put all their eggs into one basket. I totally understand the temptation to chase the latest hot thing, and I'm not saying you shouldn't. Just don't put everything into it, and save a small % of your work time for other projects.
It's important to think of this portfolio as constantly evolving. It's not going to stay the same month to month. Take some time on a regular basis to do a quick analysis and see if you're on the right track, or if your time could be better spent elsewhere. One month you might spend more time building campaigns on Lead Impact, the next you might spend a little more time building out a blog network. Again, there isn't a right or wrong here. This business changes all the time, so your business portfolio will change as your skill grows and you branch out into other areas.