In the past decade, webcomics have evolved, for the most part, from a hobbyist activity to full-fledged businesses, some with complex revenue models, production schedules and even fulltime employees. It seems like dozens of articles each month emerge, studying and commenting on the "business" part of the industry, but for the most part they've been written by artists rather than, well, real businessmen. My real job is looking at what makes businesses work. Yes, there are differences from space to space, but bear with me; I know what I'm talking about.
There's no magic cure-all that fixes ailing businesses or makes startups successful, but there are a few concepts I'd point out to people if they weren't utilizing them. In this article, I want to cover the always-entertaining topic ofÃ¢â‚¬Â¦
You've heard the proverb, don't put all your eggs in one basket, right? It turns out there's something to that. I figured this would be a good topic to start with, since it covers a broad list of topics for which I'll go into more depth on each individually in this series of articles. In short, focusing on one revenue stream is not only risky, but it also impedes growth, confines your brand and in short, increases your chance for overall failure.
Diversification in the Real World
We're all familiar with Nintendo, right? It's a popular conception they "lost" the console wars with the Gamecube. Didn't they "lose" to the original Playstation too? Wait, why has their stock price doubled in the last three years then? In short, they didn't throw all their resources into their home consoles. They also happen to have these crazy-popular handheld systems called the Gameboy and Nintendo DS. In other words, they diversified so they wouldn't get burned on one revenue stream or the other (and let's not forget Pokemon).
That's a pretty simple example, with one successful business unit supporting a, well, less than successful business unit. I wouldn't, however, call that a particularly good application of diversification since A, both streams rely on the same industry to stay healthy and B, two to three revenue sources is still pretty risky. Things get a bit more complex (and effective) when you're dealing with multiple revenue streams across different verticals. For instance, look at General Electric. You may have a fridge or microwave with that logo slapped on the front, but they also have their own lines of consumer electronics, aircraft engines and even banks. What do these all have in common? Well, if you're diversifying to your fullest extent, just the GE brand. Plus, the more lines of business you're in, the more opportunities you can synergize one revenue stream with another. Looking at General Electric again, they can offer competitive financing options for their $1,200 washer-dryer combo usingÃ¢â‚¬Â¦ hey! It's that pesky brand again, poking in with their interest rates and easy payment plans. The idea is that if GE is going to sell you an appliance, why not milk some more dough out of you with some other tangentially related services?
How do we apply the lessons of these multibillion dollar corporations to webcomics? Let's look at what options we have out there. Advertising? Merchandising? Conventions? Do all of them and call it a day, right? Well, yes, but it gets a little more complicated than that.
Don't forget that even within each revenue stream there should exist a healthy mix of clients or products. Don't focus on just one thing or otherwise you put that whole wing of your operation at risk.
Merchandising? Order smaller quantities, but increase the mix. See what works and what doesn't. Don't limit yourself to one type of product — people buy more than just shirts.
Advertising? Have multiple clients and branch out to advertisers that aren't necessarily competing with each other (it's difficult, I know). Look at other ways to apply advertising strategies. Have one of your advertising clients sponsor your booth at a show.
Syndication? Yes, it represents a very tiny amount of revenue, but it's consistent and represents something else to fall back on.
In addition to spreading risk, diversification has a side benefit of exposing your brand to a larger audience. It's just like Marketing 101. The broader your reach the more people you're gonna hit.
What about those magical "synergies" we were talking about earlier? It's not just some irritating corporate buzzword. It's a very real thing and it's use in webcomics is pretty simple. Have extra stock in your merchandise inventory? Create goodwill by sending product to your advertising clients. Doing an autograph signing or sketches? Use that as a marketing channel and offer 10% coupons to your online store for those that swing on by.
Now let's take a look at how have some of existing webcomics have fared with diversification:
Look at Qwantz.com (aka Dinosaur Comics), run by Ryan North. North does an amazing job of creating different market-facing products and services, all which have amazing potential for growth. His comic has an increasing selection of merchandise to choose from, and his technical innovations, OhNoRobot and RSSpect are both growing in popularity. Although North hasn't grown his ad model to that of other comics, the opportunity is there and in the meantime he has the ability to leverage those impressions to drive traffic to his other revenue streams.
I had a chance to speak with Scott Kurtz from PVP about the topic, and he has managed multiple sources of revenue to the point where it's a healthy mix of advertising (multiple clients), merchandise (through Thinkgeek.com), comic books (published via Image) and show appearances.
It wasn't always this way, however. Early on, Kurtz was focusing on one revenue stream at a time and was "constantly worried about it dropping out on you." The shift didn't come without its pains and aches he says. "At some point, you can't juggle any more plates Ã¢â‚¬Â¦ and it gets stressful. But not as stressful as getting a call and finding out your one revenue source is done and suddenly you're f*cked."
And Kurtz brings up a great point; can one over-diversify? Absolutely. Spreading your resources too thin potentially cannibalizes the growth in all parts of your business. The balance is different for each company and it's important to keep in mind. There are other ways besides improper resource management that diversification can have a negative impact. Again, from Kurtz, "If a game company asked me to write a strip to cater to their game, that would bring in revenue, but it would betray [and ultimately hurt] my readership. My readers know if I talk about a show, game or product, it comes from a genuine experience. Not because Sony paid me to push Everquest II on my fans."
So what are our takeaways for this?
- Diversifying is the safe bet and spreads risk across multiple disciplines.
- Diversifying creates internal synergies that translates to a greater chance of success than operating each revenue source independently. (and one day you'll be able to say that without feeling dirty)
- Diversifying ties your unified brand to each business unit- think of it as free marketing.
In closing, I'd also like to point out there's no shame in copying what works out there. Look at Qwantz, PVP, Penny Arcade, or DumbrellaÃ¢â‚¬Â¦ all of these guys know what they're doing. They're market leaders for a reason.