There’s a great bookshop where I live.
The kind you picture in your mind’s eye when you think of those great bookshops you see in the movies.
Perfect for browsing, with loads of comfy chairs to relax in. Some books displayed enticingly, others piled high. There’s even a little coffee shop, so you can relax with a friend and a latte.
And they get authors to come in for readings, so there’s always a sense of event and excitement. In fact they do everything right, and they’ve always had plenty of customers.
Quite a surprise when they closed their doors last month.
The Most Dangerous Threat to Your Online Marketing Efforts
No, it wasn’t for any of the reasons you might think.
It wasn’t Amazon who killed them, or the proliferation of free content on the web, or the crappy economy.
They closed the shop because they were leasing their big, comfortable building, and when that lease ran out, their landlord tripled the rent. Just because he could.
Literally, overnight, their business model didn’t work any more. Revenues simply wouldn’t support the costs. A decision made by a third party ~ one they had no control over ~ took a wonderful business and just trashed it.
And that’s precisely what you risk every day you make your business completely dependent on another company.
It might be Facebook. It might be eBay. It might be Google.
It might be that site you’re spending much of your time leaving comments and building your traffic strategy upon.
It’s called digital sharecropping, and it means you’re building your business on someone else’s land.
And it’s a recipe for heartbreak and failure.
What is digital sharecropping, anyway?
Digital sharecropping is a term coined byto describe a peculiar phenomenon of Web 2.0. As far back as 2006 he identified the trend and explained why sharecropping is such a powerful business model for social networks and other online businesses:
One of the fundamental economic characteristics of Web 2.0 is the distribution of production into the hands of the many and the concentration of the economic rewards into the hands of the few.
With a reported 900 million active members, Facebook is, by far, the largest digital-sharecropping operation that the Internet has yet produced. About one out of every eight people on the planet sharecrops for Facebook today – and their collective labor is expected to put a billion dollars of cash into CEO Mark Zuckerberg’s pocket when the company goes public in a few weeks.
In other words, anyone can create content on sites like Facebook, but then that content effectively belongs to Facebook. The more content we create at our cost, the more valuable Facebook becomes. We do the work; they reap the profit.
The term sharecropping refers to the farming practices common in the U.S. after the Civil War, but it’s essentially the same thing as feudalism here in the UK. A major landholder allows individual farmers to work his land, and takes most of the profits generated from the crops.
The landlord has all the control. If he decides to get rid of you, you lose your livelihood. If he decides to raise his rent, you go a little hungrier. You do all the work and the landlord gets most of the profit, leaving you a pittance to eke out a living.
OK, so we’re not subsistence farmers, and our work doesn’t involve 12-hour days in gruelling conditions. So why is digital sharecropping dangerous?
It’s dangerous for a couple of reasons …
Landlords are fickle
More and more small businesses are moving all of their marketing to sites like Facebook. It’s popular, it’s free (or at least cheap), and it makes them feel like they’re doing something really ‘cutting-edge’.
But what happens when Facebook thinks you’ve done something which violates their terms of service, and deletes your account? Or maybe changes the way you’re allowed to communicate with your customers?
Facebook is a particularly fast-changing platform, but it’s not the only one. An entire industry has sprung up based on trying to figure out what Google’s going to do tomorrow, both as a search engine and as an advertising platform.
If you’re relying on Facebook or Google to bring in all of your new customers, you’re sharecropping. You’re hoping the landlord will continue to like you and support your business, but the fact is, the landlord has no idea who you are, and even if he does, doesn’t actually care.
Landlords up sticks and move
The other problem with sharecropping is that the landlord may or may not be here next year.
Sharecroppers have put millions of hours into sites like Bebo, Digg or MySpace. And those sites still exist, but they’re no longer bringing the traffic they once did.
Sharecropped land, in other words, has a tendency to become less and less fertile over time.
Maybe Facebook, LinkedIn or Google+ will buck the trend. Maybe they’ll continue to stay healthy and vibrant for decades, rather than just a year or two.
Maybe you won’t end up as one of the 600,000 Facebook sites hacked every day!
Who knows. The best we can do is guess. And if we guess wrong, our business goes into a slow and steady decline.
Or even a meltdown, like our local bookshop.
So are Facebook and Google bad for business?
No of course not. Facebook, Google, LinkedIn, Twitter, and many more sites are all superb tools to add to your marketing mix. And blog commenting can be a useful tool to prime traffic flow.
And if you optimise for Google, it should serve you well for Bing, Yahoo and most of the search engines, so from that point of view, its not a bad strategy.
But never forget. While your current optimisation may well have resulted in your website being listed right at the top of Google’s search results, your site might well be penalised in the future by one of Google’s regular algorithm changes.
Or when Google decides to put the rent up.
The secret is to spend most of your time and creative energy building assets YOU control.
There are three and only three assets you should be building today ~ and you should continue to focus on for the lifetime of your enterprise:
- A well designed website with your own web hosting account
- An opt-in email list, ideally with a high-quality auto-responder
- A reputation for providing impeccable value
These things are the equivalent of buying your building instead of renting it. How many of them do you have?
Sure, any of these can fall prey to outside influences. The bookshop’s building can still burn down. And your site can be hacked. Your email account closed down. Your reputation smeared.
But repairing your assets is in your control. You can fix the hacked code, export your email list to another provider, and respond effectively to manage your reputation.
There’s no one to stop you. No third party you need to ask permission.
More important, you can proactively protect those assets by taking website security seriously, avoiding any spammy or dodgy practices with your email, and cultivating a loyal audience who will vouch for you as being one of the good guys.
You’ve put a lot of time and effort into your business ~ don’t put it all at risk by building on rented land.
How about you ~ do you feel confident that you’re developing your own online assets?
How’s the balance between assets you control and third-party sites like Facebook, Twitter and LinkedIn or traffic from Google?
Let me know about it in the comments below.