I Learned The Hard Way: Don’t Build Your House On Borrowed Land
Sep 24, 2023
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This podcast explores the risks of building a business on someone else's platform, with cautionary tales of businesses affected by platform risk. It discusses the impact of reaching milestones on social media platforms, the consequences of Apple's privacy policy update, and the importance of diversifying and understanding risks in business.
Building on borrowed land can lead to an existential threat if the platform makes changes or goes in a different direction, emphasizing the need to minimize risk by diversifying across platforms and creating contingencies in case of platform changes or shutdowns.
Relying solely on social media to reach your audience can be risky due to factors such as hacking, account deletion, or changes in algorithms that limit your reach, highlighting the importance of diverting your audience to platforms you own, such as email lists or websites.
Deep dives
Platform Risk and Building on Borrowed Land
Platform risk, also known as building your house on borrowed land, is a major concern when it comes to business. It refers to the danger of relying on an existing platform to leverage its services or users. Building on borrowed land can lead to an existential threat if the platform makes changes or goes in a different direction. For example, a coaching client experienced a significant decrease in revenue when a popular business platform redesigned their marketplace page, causing collateral damage. Another example involves Shopify, where a developer saw their app business shut down due to a major change in Shopify's checkout process. This highlights the risks faced when building on someone else's land, as larger companies might take notice and create their own versions, putting smaller businesses at a disadvantage. The podcast emphasizes the need to minimize risk by diversifying across platforms, owning your own audience through email lists or websites, and creating contingencies in case of platform changes or shutdowns.
The Risks of Social Media Platform Dependence
The podcast identifies social media platforms as a major source of platform risk. Relying solely on social media to reach your audience can be risky due to factors such as hacking, account deletion, or changes in algorithms that limit your reach. Loss of access to your social media audience can have a significant impact on your business. To mitigate this risk, the podcast suggests diverting your audience to platforms you own, such as email lists or websites. These owned platforms allow you to maintain communication with your audience even if you lose access to social media platforms.
The Dangers of Building on Third-Party eCommerce Platforms
The podcast highlights the risks associated with building a product or service on third-party eCommerce platforms, such as Shopify and Amazon. Relying solely on these platforms puts your business at risk if the platform makes changes or if the company decides to create its own version of your product. The podcast emphasizes the need to diversify your sales channels by having your own privately hosted eCommerce website in addition to selling on third-party platforms. Having ownership and control over your sales channel reduces the risk of losing your entire business if changes occur on third-party platforms.
Minimizing Platform Risk through Awareness and Contingency Planning
To minimize platform risk, the podcast suggests raising awareness about the potential risks and understanding the degree of risk associated with each platform. Awareness allows you to assess the impact on your business if a platform undergoes changes or shuts down. Additionally, the podcast emphasizes the importance of creating contingencies for various scenarios. This involves understanding what you would do if you lost access to a specific platform and having alternative plans in place. Diversification, ownership, and contingency planning are key strategies to mitigate platform risk in an increasingly online business landscape.
