Diversify Your Revenue Sources!

September 01, 2011 · by Dale Traxler

Earlier this year, Google did major algorithm changes that had many eCommerce sites scrambling to rework their Search Engine Optimization (SEO). We were fortunate not to be adversely affected by that change, but we've felt the pain of losing 30% or more of your traffic almost overnight (more details in the closing)

Facebook just changed the algorithm for how they prioritize news feeds. We've seen a dramatic decrease in the page views and the social interaction from our posts since they made that change. That's led to much lower referral traffic from Facebook. BAD THING FOR US.

Google is always messing with AdWords. New ways to show ads, new types of ads etc. My latest experience was with "keyword creep", where broad based keywords you don't want in campaigns suddenly appear and eat up your campaign funds for carefully selected, targeted keywords and phrases. I could write a whole posting blasting Google on this topic alone, but suffice it to say that I don't expect to pay for the keyword "beads", when I am targeting a "jewelry clasp". BAD THING FOR US that I will now watch closely across all my campaigns.

Comparative shopping engines used to be a pretty good place for us to do product feeds. Now, Amazon and Overstock seem to completely dominate all the categories with no room for a little guy. Fortunately, many of the Amazon products being promoted are from our Amazon Marketplace store. GOOD THING FOR US. Not the same from Overstock, as we did not get into them before they closed our product category. BAD THING FOR US.

The reason I mention all these things is that if you are too highly dependent on any form of traffic for your revenue, you can be severely impacted when changes are made that you don't get to vote on!

I recently did a very thorough analysis of our traffic and revenue sources across all of our 4 online stores. We were very please to learn that our traffic and revenue is the most diversified its ever been. Hence, finding issues in our AdWords Campaign and lower Facebook referrals are not as disruptive as they would be if those were the lions share of our revenue.

Revenue Sources

There are many different sources for traffic and revenue. Obviously, they are intertwined. Traffic sources turn into revenue sources when someone actually buys something. Its important to use use analytics to focus in on the actual revenue sources. I separate them out because your revenue sources may look very different from your traffic sources because of conversion rates and such. Let's take a closer look at potential revenue sources that apply to most eCommerce sites.

• Direct Traffic - visitors who come directly to your site through bookmarks or typing in your URL.
• Organic Search Referrals - search engine referrals you don't have to pay for from Google, Bing, Yahoo, Search.com, Aol.com etc.
• Pay-Per-Click Referrals - ads that you pay for that may appear within search engines, blogs, or other content focused sites
• Banner Ads - ads that you pay for on targeted websites usually fed through an ad serving network
• Referrals - links from other websites or blogs that refer users to your website
• Affiliate Programs - paid referrals - usually some type of revenue sharing relationship managed by affiliate networks. I should note that we do not participate in any affiliate programs
• Social Media - referrals from Facebook, Google1, Twitter, your own blogs, and other social media outlets
• Email promotions and newsletters - an old standby for us that just keeps on ticking
• Comparison Shopping Engines (CSEs) - Shopzilla.com, Become.com, Bing Shopping, TheFind.com, SortPrice.com, Shopping.com, etc. Provide comparative shopping environments on a product by product basis. Some charge, some are still free.
• Marketplaces - Ebay.com, Amazon.com, Buy.com, Sears.com and more to come. All support the sale of your products within their eCommerce websites. You provide a feed or maintain your own store within their environment. They get the order, you ship the product (or they do) and you get "most" of the revenue

There are undoubtedly more revenue sources that I am missing here, but suffice it to say you have many potential sources of traffic and revenue. If you don't already know where your revenue is coming from, you should figure that out. Use your analytics to determine who is really driving your sales, and if possible your profits. Don't ever forget that you pay dearly for Pay-per-click ads, and you may pay very little for email or conversions from organic search. On the other hand, you may be spending your whole budget optimizing your SEO, only to have Google flip your world like they did earlier this year.

We've worked very hard to diversify our revenue sources since 2008. At that time, we switched over our online stores to be hosted within our new eCommerce platform, Netsuite. Even though we followed all the "best practices" for switching hosts and platforms, we lost 30% of our traffic overnight when Google put us in the penalty box as a "new" or at least "undefined" site, even though we had top page rankings and SEO rankings at the time. We also saw our revenue go down roughly 30% overnight also because of our high dependence at that time on Google organic search. We scrambled to redo our SEO, beef up our ad campaigns, etc. But, we simply were not diversified enough to make up the 30% loss in traffic without a great deal of pain. About 4-6 months later, we had recovered our search rankings and traffic, but it was a lesson we learned well.

Diversify your traffic, diversify your revenue. It's the best way to step around things you can't control without potentially being hammered by changes you don't expect in the marketplace and on the web. If you have not evaluated some of the revenue sources listed, do it! There are pros and cons to each and every one. We are very happy to see a little bit of revenue from as many sources as we possible can!

Category: Evolving eBiz | Tags: social media, Search Engine Optimization, Revenue Sources, Pay-per-click Advertising