R: Hey guys, we’re back. We’re gonna talk about another gangster mentality, “Diversification.”
This is a mentality that a lot of real life gangsters seem to miss out on, because they’re busy hustling all the time, trying to scrape by. Whereas, we are building long term profits, like real gangsters, that are gonna retire when we are, like, fucking 27.
Sounds pretty ridiculous.
So, diversification is basically the whole idea that you want to split up your risk as much as possible. You don’t want all your risk to be placed in one basket because, then, one catastrophic event can wipe out your entire business. That leaves you scrambling to make money, and now you have lost months worth of work or whatever, and you’re screwed.
Better strategy, diversify your shit, have multiple businesses, and multiple websites.
K: That’s right. To give you one example, a good friend of ours was running a ton of advertising on just one particular site. Well, that particular site’s price skyrocketed one day, and priced him out of the market where he was no longer profitable. That sucked. What he should have done was been running ads on a hundred sites from day 1. That way, when that one site had a weird event, you just drop it out of your thinking.
Similarly, with your SEO. You do not want to be going for one keyword. You want to be going for hundreds of keywords, or really, thousands, or tens of thousands of keywords. That way, if a new competitor comes along and pushes you out of the spot, whatever, it’s like .1% of your business. You’re not even gonna care.
R: Similarly, with your link building. You want to diversify the sources of your links.
You know, we’ve all got these different strategies for where we get all of our links, so that we can rank for these different keywords. Well, if Google one day decides that they no longer like directory links, and that’s your big thing, that you get a quarter or a half of your links are all coming from directories, and then one day you get hit really hard because Google will start to devalue links from directories, well, you’re screwed. However, if you do the kitchen sink approach of SEO, that we prefer, where you can just diversify and get as many as different sources of backlinks as possible, then hopefully directories or whatever else will only be maybe 10% of your total link portfolio. So that way, you’re not really in that much of a risk, not much more risk, than anybody else. And in fact, you’ll probably prosper when Google makes changes because other people who are doing gimmicky shit will get knocked out and you’ll probably float above them.
K: Furthermore, I would say, you should diversify your traffic to beyond even just SEO. You should really be getting some traffic from SEO, from some ads, banner ads, you should have some referrals in there, maybe have your own affiliates, have some kind of a customer referral program. I mean, hell, run billboards outside on the street. You know? Run an ad on local television or do direct mail. Just because you have a business on the internet, does not mean that your traffic has to come from SEO.
We talk about SEO a lot because we consider ourselves to be SEO professionals. We do tons of paid advertising. We’re starting to get into physical direct mail. And we’re gonna be doing a lot more of this sort of promotion, just in the name of diversification.
R: Exactly. Name of the game, “diversify your risk as much as possible.” I mean, you want to diversify and then at the same time, you also want to set yourself up for big scores at the same time.
So, it all depends on how much effort and resources you have to put in to something. You want to try to find things that, potentially, have a big reward for a small amount of risk. So, if you can launch a new product within a couple days, or for a very small amount of money, and it seems like just a good opportunity, then do it. Because for one thing, it’s a great way to diversify. And two, the risk reward there is great because for a couple days, you could potentially make, who knows? Thousands, tens of thousands, hundreds of millions of dollars, potentially, on what the idea is.
So always be looking not only at diversification, but also at your risk reward and how much energy you’re putting into a product, versus, the potential reward that you could gain for it.
K: Aboslutely. Let’s also say that you’ve got $10,000 that you’re trying to invest in a number of projects. Is it better to throw $10,000 into one project? Or to create 10 $1,000 projects? Well, I like the latter approach because you never know what kind of snags each one’s gonna hit. And you never know which one’s gonna hit it big. When you’re only working on one idea, you’re taking a real gamble that you picked the right idea. But if you’re working solidly on, like, 10 ideas, it’s a much greater chance that one of those is going to kick in.
R: Absolutely. Now, there’s another opposite approach as well. I mean, once you’ve got a winner, and you’ve seen it’s really starting to take off, Warren Buffet would say that you wanna pool all of your energy into that one idea.
We take that approach somewhat. I mean, we definitely pile on pretty hard once we find a winning business. But at the same time, we also get bored, to be honest, working on the same business all the time. And it’s kind of nice to have a couple different businesses going on, so that you can juggle between them, and do different kinds of work, and different kinds of projects. And also, you learn a lot of different things by being diversified. I mean, by doing paid ads, or by doing SEO, or by doing direct mail, or any of those different things, you’re learning all different sides of the marketing coin.
I mean, you’re just...by reading different books...and, really, one of the best benefits of being diversified as far as your business is, is that you can read these books by geniuses like Dan Kennedy, and you can apply the principles that they talk about in so many different ways because you’ve now got five different business that you can apply those ideas to, rather than just one.
You know, all of these principles apply in a different way to each business that you have, so it’s great to be able to handle a number of them. You get much more intelligent, and your overall business acumen just really picks up.
K: Yeah, and it also lets you split test ideas in a more meta way across businesses. Like, if you want to try creating your own affiliate program for one of your businesses, but try going through link share for another business. You might want to try offering a commission-based model to your sales team for business A, or a flat fee to business B. It lets you do these kind of metasplit tests that you would not be able to do necessarily within a business.
R: Yeah, you can split test between writing your own articles, and hiring someone out to write articles for the next business or for the next five businesses or whatever. It’s all good stuff. Try it out. Diversification. Extremely important principle.