There’s no question that social media platforms can be powerful tools for businesses of all sizes. But what happens when your business is built on a platform that’s not your own?
Founder of startup LittleThings, Joe Speiser, found out the answer to this the hard way, losing $100 million in the process.
Speiser claims in 2018 Facebook implemented algorithm tweaks that had a drastic and devastating impact on LittleThings. Consequently, his business collapsed and he is now warning others of the dangers when relying on algorithm-heavy platforms such as Instagram, TikTok and Facebook to scale a business.
LittleThings was a digital media site with a female-focused target audience and it launched in 2014 with great success. The site was centred around sharing “soft-news” and uplifting content such as feel-good stories, cute animal pictures, crafts and cooking. With a social media following of around 20 million, it was heralded as a social media success story by Facebook executives themselves.
But all that changed in 2018 when Speiser noticed a significant decrease in referral traffic from Facebook. It turned out that the site’s content was being edged out of users’ News Feeds by posts from friends and family. In the face of this algorithm change, Speiser and his team attempted to adapt by creating more video content – but it was too little, too late. LittleThings eventually folded with losses of more than 100 jobs and $100 million.
Speiser’s story is a cautionary one for businesses that rely too heavily on social media platforms to drive traffic and engagement. While it’s important to use social media as part of your marketing mix, don’t put all your eggs in one basket. Build your business on a platform that you own and control.
A discussion about Facebook’s role and responsibility in news production has centered on this algorithmic change. Publishers have been forced to reorder their business models in order to attract the platform’s readers, who proved more likely to click on and engage with sensationalistic and divisive stories over other sorts of content. As a result, so-called clickbait material has become increasingly common.
The change has been hinted at in the so-called Facebook Papers leak last year. Internal papers revealed that even Facebook’s own employees were concerned that the algorithm would promote offensive and potentially misleading material.
The documents suggest that Facebook’s parent company, now known as Meta, has pushed back against the reporting, claiming that they do not provide a full picture of the company’s various efforts to combat harmful activities on its platforms.
This experience is something that Speiser has taken to heart and is warning other startups about the dangers of building businesses on apps and other e-commerce platforms. As he has said, while it allows for great traffic and quick growth, “can you ever truly sleep well at night knowing at any time it can all be taken away with just a simple algorithm change?”
Let this be a cautionary tale for businesses relying on social media
While there’s no question that social media can be a powerful tool for businesses of all sizes, it’s important to remember that when your business is built on a platform that’s not your own, you’re at the mercy of that platform’s algorithms. So if you’re looking to scale your business, it might be wise to consider building it on your own platform.