A pie made of slices from different pies

Credit: Midjourney/Prompt: Anita Zielina

Why a diversified revenue portfolio is the best sustainability insurance for media organizations

And 3 great examples of what this can look like for smaller newsrooms

Anita Zielina is an RJI Columnist whose column analyzes the changing landscape of media business models and showcases practical approaches to drive sustainability through revenue innovation.

The media industry has a terrible tendency to believe in silver bullets — the belief that new revenue streams might emerge that are going to, single-handedly, save us. Maybe it’s just human nature that we, after more than 20 years of struggling to reinvent our disintegrating business models, have the unreasonable hope that there is one simple, straightforward solution to our problems. 

Every year or so, a new hype cycle starts and someone declares that “XYZ is going to save the media industry.” Usually, the “XYZ” in question is a cool, new, bright and shiny thing — what media executive P. Kim Bui coined the term “Shiny Things Syndrome”

Case in point: The iPad, video, Facebook Instant Articles, digital subscriptions or, very recently, foundation dollars and AI.

 While all of these can be elements of a successful revenue strategy, history shows that placing all your bets on one horse is rarely a good idea. Plus, all money comes with potential strings attached – advertisers can be iffy, funders intrusive and users demanding. The hype around shiny new revenue streams is usually noisy, fast and hard to ignore, and the fall when the illusion evaporates is usually rough. 

A solution: The diversified revenue portfolio

So if there is no silver bullet, how might media organizations go about deliberately designing a sustainable business model? I explain an approach with the idea that actually derives from the world of Investment Banking and Finance. If you get an MBA, you’ll be taught the core concept of the “Diversified Revenue Portfolio,” or “Fully Diversified Portfolio”.

In the world of finance, portfolio diversification is the practice of spreading your investments so that your exposure to any one type of asset (and therefore risk) is limited. You build an investment pie that looks very much like a pie you’d serve at a large family gathering — several almost equally sized slices, not one gigantic slice for yourself and crumbs for everyone else.

Reducing market risk and volatility

This practice is designed to help reduce the volatility of your portfolio over time: If one of the slices (as in: one of the revenue streams) falters or disappears, your business, of course, is still going to suffer. But chances are you’ll survive, because there is a high probability that aside from unexpected force majeure (hint: our very first pandemic!) market movements are rarely equally damaging to all kinds of revenue streams. 

Ideally, you’ll be resilient enough to cross-subsidize the crumbling piece of pie through the still intact slices, at least for the time it takes the market to stabilize again, and your business to grow new revenue streams.

Diversified revenue portfolios aren’t just for venture capitalists or large legacy newsrooms. I asked three thriving, entrepreneurial, community-oriented media businesses how they think about, and deliberately plan for, revenue diversification — and which part of their diversified revenue pie they aim to grow:

Anita Li, Founder, The Green Line, Canada

Anita Li
Anita Li

“Diversified revenue streams are essential for The Green Line especially since we’re a startup that’s just over 1-year-old. You never want to put all your eggs in one basket because that puts you at greater risk; if the stream that’s generating the most revenue falters, you’d be in trouble. One great example of that is ad revenue, which as most people know, has provided a lower and lower return for news outlets after they largely became digital. After the recent passing of Bill C-18 in Canada, which forces Meta and Google to compensate Canadian publishers for news content published on their platforms, social and search traffic has plummeted for news outlets here, compromising ad revenues even more. 

On the flip side, diversified revenue streams also mean you can take more risks when experimenting with a new, untested stream because you have others to fall back on in case it doesn’t work out. So, for example, if you have robust sponsorship and membership streams, you’d feel more confident experimenting with merch as a new revenue stream. 

This is particularly critical for young publications that haven’t yet reached financial sustainability because even one unlucky circumstance, like C-18, can cause your ship to go down if you haven’t worked on diversifying your revenue streams.

I’m keen on growing The Green Line’s events revenue. We have a unique community-based approach to events that fills in a market gap here in Toronto, which is where the publication is based. Toronto tends to either have large-scale but generic corporate events or community-led but amateur grassroots events, so there’s an opportunity for us to deliver events that are highly produced but still have that intimate, word-of-mouth feel. We’ve also tested our events, both virtual and in-person of various sizes, so I’m confident in knowing what’s worked and what hasn’t for The Green Line’s target audiences. Additionally, because C-18 is reducing our social and search traffic, events are a great way to build an audience both at the top and middle of the funnel.” 

Styli Charalambous, CEO and Co-Founder, Daily Maverick, South Africa

Styli Charalambous
Styli Charalambous

“Revenue diversification is critical to the sustainability of any medium to large news publisher. Now that we, like most industries, are so prone to disruption, it’s essential to have meaningful revenue streams from different sources.  

Diversification helps shield an organization from some of the impact of unexpected shocks like COVID-19, where advertising took a hit amongst all the uncertainty and canceled campaigns. But it’s not easy to achieve; the move from B2B to B2C reader revenue, for example, is ideal but needs many changes in organizational design and new product and technology skills. Diversification options are also heavily influenced by how you are funded, the political and competitive environment and the skills you have at your disposal. 

It often requires bringing in new skills or developing them from scratch, which is fraught with challenges and exploring unknown territories. Another big potential pitfall is being drawn into revenue opportunities that don’t align with the vision of the organization. Chasing profits that are not aligned or supportive of an editorial vision can impact the culture of the organization and lead to other fallouts. 

At Daily Maverick, we look at our revenue diversification efforts in three buckets: Philanthropy, commercial revenue and reader revenue. When we started our membership in 2018, we’d hoped to get an even split of 1/3rd for each bucket and to have two types of revenue within each bucket. This “3-2-6” approach consists of three buckets, each with two subtypes of revenue offering six individual revenue streams. For example, recurring memberships and once-off contributions were the two types of reader revenue and events and advertising would fall under commercial revenue. 

Growing our membership base is at the heart of all our expansion plans, and we’ll focus our efforts on this and commercial revenue opportunities in the future, relying less and less on philanthropic support which can be volatile.” 

Sara Lomax-Reese, Co-Founder and President, URL Media, United States

Sara Lomax-Reese
Sara Lomax-Reese

“Diversified revenue is essential. Any media organization that is focused on long-term sustainability and institution building must be invested in exploring multiple revenue streams today. It requires creativity, tenacity and a deep understanding of your audience; their current media consumption trends and how these habits are evolving. Media has morphed from “radio, TV, print” to an audience-centric approach to meeting people where they are with information that matters in their everyday lives. This broader definition also broadens your revenue options.

But revenue generation has also gotten much more difficult with ad dollars being siphoned away from media organizations and dumped into the social platforms while consumer interest in news continues to wane. Because URL Media is a network of BIPOC owned and led media organizations, our model is a bit different.

We are in service to high performing Black and Brown media companies that have trusted relationships with their audiences but need more visibility and revenues to help grow to create more long-term sustainability. Additionally, we have URL Direct which is a series of URL-curated newsletters and other products that feature the excellent work of our partners as a way to amplify their content and make it more discoverable and relevant to broader audiences.

We also have a thriving recruitment arm that sources BIPOC talent to help diversify newsrooms and other businesses struggling to meet DEI goals. The recruitment business developed organically due to the decades-long problem of creating more diverse newsrooms especially in the aftermath of the killing of George Floyd and the ensuing protests. This was a classic case of seeing a need and filling it.

The third bucket of our current revenue mix is philanthropy. We have had success in securing several grants to help us launch and grow our network from an inaugural group of 8 media organizations to now 21. This has been absolutely critical to our success, providing us with sufficient runway to test and learn over the past 2 years so that we could figure out our business model and how we can best support our partners.

We are looking to grow our URL Direct product lines as an important part of our overall revenue diversification. Intellectual property, video and events are also part of our growth strategy over the next 12-24 months.“

How to get started with revenue diversification

1. Stay focused

Smart revenue diversification doesn’t mean throwing many spaghetti at the wall to see what sticks – make sure that you pick one or two additional revenue streams you aim to start or grow rather than experimenting with many streams at the same time. You otherwise risk spreading your resources too thin and losing focus.

2. Apply the Onion Principle

As you explore where to start, apply the “Onion Principle:” Your current main revenue streams are the inner core of the onion. As you venture out of that core exploring new business opportunities, pick something that is still close to it. You want to make sure you utilize existing strengths, skills, teams, your brand and your operational capabilities and build on them, rather than starting with a business opportunity that is super far off from your current operating model.

3. Keep marginal costs low

Err on the side of lower risk and work on keeping marginal costs low: If you build this new business opportunity, how much will it cost you (in time, money and sales time) to make it happen and to keep it going? To start, decide on opportunities that are adjacent to your current business, so you can utilize your existing infrastructure and the added marginal cost (and therefore risk) to “produce” the new service and product is manageable.

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