Channel Diversification Index
One great channel feels like a strength until its algorithm changes. Enter your revenue or traffic by channel and find out how dangerously dependent on a single source you really are.
This index borrows the Herfindahl-Hirschman Index (HHI) from economics: square each channel's share of your total and add them up, scaled to 0–10,000. A low score means demand is spread across many channels; a high score means one source dominates. The flip side, effective number of channels (1 ÷ HHI), tells you how many channels you really have — concentration is the single biggest, most overlooked risk in growth.
Channel Diversification Index inputs and result
How to use this calculator
- List your channelsName the channels that bring you revenue or traffic — paid search, organic, email, paid social, referral, direct, and so on. Up to six are supported.
- Enter values in one consistent unitUse either revenue or sessions for every channel, not a mix. The index works on shares, so the unit only needs to be consistent.
- Leave unused channels at zeroOnly have three or four channels? Leave the rest at zero — they are excluded from the calculation.
- Read the index and effective channelsA lower index and a higher effective-channel count mean healthier diversification. The lead channel's share tells you where your dependence sits.
- Act on concentration riskIf one channel dominates, treat building a second strong channel as a growth priority. Export the table to make the risk case to leadership.
RGM Expert Says
Concentration risk is the quiet killer in growth, and almost no one puts a number on it until it bites. A business doing brilliantly on one paid channel looks like a success story right up to the morning the account is suspended, the algorithm shifts, or the auction price doubles. We borrowed the Herfindahl index from antitrust economics precisely because it gives that fragile-looking dominance a hard score you can track and defend in a board meeting.
The effective-number-of-channels reading is the part that lands with founders. Telling someone their HHI is 0.46 means little; telling them ‘you effectively have about two channels, and one of them is most of your revenue’ makes the exposure visceral. We use it to reframe diversification from a vague best practice into a concrete target: get from two effective channels to three or four before you scale spend, not after a shock forces your hand.
The nuance we always add is that diversification is not free, and concentration is not always wrong. Early on, going deep on one channel that is working can be exactly right; the index is there to tell you when that bet has become a liability rather than a strategy. We pair it with channel-economics and attribution work so the second channel a client builds is genuinely additive, not just a way to spread the same demand more thinly.
How it works
The index is the Herfindahl-Hirschman Index applied to your channel mix. Each channel's share of the total is squared and the squares are summed; squaring is what makes dominance hurt the score far more than balance does. We scale the 0–1 result to 0–10,000 (the convention in competition economics) and also report its reciprocal as the effective number of channels.
- Share — each channel's fraction of total revenue or traffic.
- HHI — sum of squared shares; higher means more concentrated.
- Effective channels — 1 ÷ HHI; how many channels you really have.
The Herfindahl-Hirschman Index is the standard concentration measure in competition economics (used by the US DOJ/FTC for market concentration). Here it is repurposed for marketing channel mix; the band thresholds are RGM analysis, not a regulatory standard.
Why single-channel dependence is the hidden risk
A channel mix that leans on one source is fragile in a way that growth metrics hide. Revenue can look healthy and rising while you sit one policy change, ad-account ban or ranking update away from losing the majority of your demand overnight. Concentration risk does not show up in CAC or ROAS — it shows up the day the channel breaks.
Squaring the shares is what makes the index punish dominance correctly. A 60/40 split scores far worse than 25/25/25/25, because one channel at 60% carries disproportionate risk. The effective-channels reading (1 ÷ HHI) translates that into plain language: four equal channels give you four effective channels, but a lopsided mix might leave you with the protection of barely two.
Diversification is insurance, not free lunch. A second channel often starts smaller and less efficient than your proven winner, which is exactly why teams put it off — and exactly why they get caught out. The index is there to tell you when the convenience of one great channel has quietly become a bet-the-company risk that needs deliberate investment to unwind.
Reading the diversification index
Bands adapted from competition-economics conventions for marketing channel mix. They are guidance, not regulation — context (stage, margin, channel control) matters.
| HHI (×10,000) | Effective channels | Read |
|---|---|---|
| Below 1,500 | ~7+ | Well diversified — low concentration risk |
| 1,500 – 2,500 | ~4–7 | Moderately diversified |
| 2,500 – 5,000 | ~2–4 | Concentrated — watch your lead channel |
| Above 5,000 | ~1–2 | Over-reliant — single point of failure |
What growth leaders say
Every channel that works eventually saturates or shifts under you; durable growth comes from a portfolio, not a single golden goose.
If one platform can switch off most of your revenue with a policy update, you don’t have a growth strategy — you have a dependency.