There was a large prosperous bar located in the uptown area of my city. It had an affluent clientele and very classy atmosphere and located in prime real estate. They seemed to do everything right and they always seemed to be busy. A group of friends wanted to go out, so we ventured into the heart of the city to this bar only to find a closed sign on it and the doors locked.
It wasn't some the taxman that locked the doors and seized the assets, or even the economy...it was the landlord. They closed because the lease was up and it was rumoured the landlord increased the rent 10 fold, essentially forcing them to close immediately.
Literally overnight, their business model quit working. Costs were increased far beyond revenues. A decision made by another party, one they had no influence or control over. A great business erased instantly.
This is what you risk every day you make your business completely dependent on another organization. It might be Facebook, LinkedIn, Blogger, it might be Google.
It's called digital sharecropping, and it essentially is defined as building your business on someone else's land. There are of course pro's as well as con's. It's usually easier and less expensive to use another companies resources and of course the features that are built in to help "grow your crop". You can easily add content on sites like Facebook, but remember the content belongs to Facebook. It's a clever business model, the more content you add the more valuable Facebook becomes. We do all the work and they reap the rewards. Think of it like leasing a condo. You want to have a nice condo so you add hardwood floors, marble tile etc. The problem is when the lease is up and the landlord decides not to renew you have to leave behind the assets and sweat equity you put into the condo. It's a lose win, in other words you lose what you invested in the condo and the landlord win's by having a condo worth substantially more than when he initially leased it to you.
The landlord has all the control, he can get rid of you, you lose everything. If he raises the fees, you starve.
Landlords can be erratic
A majority of small businesses are migrating and focusing all their marketing on sites like Facebook. It's free; it can be local and can be a very efficient marketing tool.
What happens when you unknowingly violate Facebook’s terms of service. Facebook can delete your account or restrict how you communicate with your customers. I've witnessed this happen to more than one local business. If your business is strictly Facebook based...it's game over if this happens. What happens if the Landlord decides to renovate your condo while you’re still living in it? This happening with Facebook all the time i.e. Timeline changes, Fan page changes.
Remember the landlord may or may not be here next year. Sharecroppers have put millions of hours into sites like Digg or MySpace. Although they exist, they are no longer bringing nearly the traffic they once did. Sharecropped land tends to become less fertile as time goes on.
Maybe the landlord's goal the entire time was to build up a business and sell to another landlord who has a different agenda, an agenda that doesn't align with yours. Large mergers are becoming more and more frequent.
Are Facebook and Google bad for business?
OF COURSE NOT! These are excellent tools to add to a marketing MIX. The moral of the story is to spend most of your time and creative energy building assets that you control.
All businesses should have a well designed website with a hosting account. This is like buying your building instead of leasing itt.
Of course outside influences can have a negative effect on this as well. The building can burn down...in other words your site can be hacked, email accounts can be closed and reputation can be smeared. The lesson here is that you have the control to fix these challenges.
You can fix the hacked code, create new email accounts and respond effectively to manage your reputation. You can take it a step further and proactively protect your assets by taking website security seriously, using more secure hosting and avoiding spammy or questionable email practices.
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