How Over-Reliance On A Social Media Platform Can Cause Start-Ups To Fail

We often hear this proverb, “don’t put all your eggs in one basket” which implies that you shouldn’t concentrate all your prospects or resources on one thing or place, or you could lose everything. It is quite surprising that a lot of people still do not heed to this advice, as they often fall victim to certain consequences, merely by concentrating all their resources on a single thing. This article talks about the need for start-ups to desist from depending their business on social media platforms.

While going through my Twitter feeds, I stumbled upon a thread that spurred me to write extensively on this. According to a young man who composed the thread, he is a start-up founder who owned a media company. He talked about how his over-reliance on Facebook cost him his start-up business. In 2018, his female feel-good entertainment company was pushing at $75m+ a year in revenue, having 110 amazing creative employees and a fledgling OTT streaming channel. According to him, he built the business on the backs of Facebook, drinking from their firehose of eyeballs. The business growth became so outstanding and the traffic and video views skyrocketed beyond Buzzfeed, ABC, CNN, and Fox news.

His media company became masters at harnessing Facebook’s newsfeed with feel-good articles, videos, and stories. At their peak, they had 20MM social media followers, 40MM Comscore monthly uniques, 15MM live programming views per month, and 90M video views per month. Their live shows included 4+ hours a day of original unique programming. These remarkable achievements earned the start-up company the admiration of Facebook where they were constantly hosted at its headquarters with Facebook profiling little things about them at their conferences on how to build a media company.

With the uncertainty of life, the unusual happened. In his words, “In February 2018 the algorithm had a major shift. Now, we have been through tons of algorithm changes before, so this didn’t worry us at first, but something was different. Our high-level contacts at Facebook said Zuckerberg didn’t like the fluffy content we were producing and he wanted to be taken more seriously. He wanted the country to respect Facebook and get their actual news there ( previously it was family/friends update, feel-good viral content)”. 

This move by Facebook spelled doom for this start-up company as they watched helplessly as 90% of their organic traffic from Facebook dried up. Tragic! Totally displeased with the recent hiccup, the company reached out to Facebook and the feedback they got was that Facebook’s new focus wanted hard-hitting news and opinion pieces, meaning if they wanted more traffic, they would have to pay for it through sponsored ads. This is a start-up that was already spending close to $4m a month on Ads, so Facebook assumed they would spend more to achieve their desired results considering the algorithm change. The start-up began to accrue more losses than profit which eventually led to it folding up.

One costly mistake this start-up made which the owner disclosed was their failure to diversify on other alternative platforms big enough to balance out the insanely large amount of views they had on Facebook. They got so addicted to Facebook’s volume of traffic and had no other platform that could move the needle. This story above-mentioned should be a cautionary tale to every start-up to diversify their options. Knowing fully well that they are not the owners of various platforms they use, they should have it at the back of their minds that a simple algorithm can debilitate their years of hard work. It’s more like building on rented land because it can be taken at any time by the owners without minding whose ox is gored.

The ideal thing for start-ups to do is to scale one channel then diversify. This doesn’t mean that a start-up can not build on existing infrastructure, rather they should not give room for over-reliance and have a good exit/diversification strategy without dilly-dallying. This implies that they could create their websites to redirect traffic to their sites. We have often heard of cases where Facebook and Instagram accounts had to be either taken down or restricted forcing most start-ups to start afresh. The painful truth is that these platforms are actually in control of the audience and activities that go on there.

Unforeseen changes to API bans can ruin a start-up business overnight. Outside of just diversifying, companies need to develop their communities such as websites, discord, email list, etc. We can remember vividly when IG, Whatsapp, and Facebook experienced a total blackout for some hours which happened a year ago. That was indeed a wake-up call to all those solely relying on using these social media platforms to run their business, that by a push of a button, their business can be jeopardized. Start-ups need to know that when these platforms seem unfavorable, they should blame not the platform but themselves for failing to understand the risk involved.