Platform Risk

What is platform risk?

Platform risk arises when you build your business or side hustle on top of an existing platform in order to leverage on its existing services and users. The risk arises from two sources: Platform moderation and Platform existence. The risk emerges whenever there is a change in the way a platform moderates its activity or from a change in a platform’s existence. We go further into examples of platform moderation and platform existence risks below.

What is platform moderation risk?

Think of Facebook’s algorithm updates an its effect on Facebook games from companies like Zynga (e.g. Farmville, Mafia Wars, etc.) and publishers, where it began to show less posts from Pages on users’ feeds or perhaps of Instagram’s move to an algorithmic feed from its previously chronological feed.

This shows how even small changes to a platform’s algorithm can have huge changes to the amount of organic traffic you are likely to receive if they decide to do so.

Individuals then have to either pay to reach the followers which they previously acquired or have to find ways to work with the new algorithm, changing their content strategy or quantity.

Finally, the last and most dangerous form of platform moderation risk is when the platform bans an entire account. This essentially “de-platforms” an individual or business and they lose access to the megaphone that the platform provided. As you'd expect, this can devestate their business overnight.

What is platform existence risk?

A caveat: If you are using a platform which has withstood the test of time, this is less likely to happen.

However, if you have decided to build your audience or business on a new platform, there is a possibility that the platform might fade into obscurity or close down.

This occurs more than you would think - Niche celebrities came out of Vine but it was eventually shut down, Google+ was shut down, and, of course, the closing of MySpace.

A more recent example was the possibility of TikTok being banned in the US in 2020. During that period, the successful creators all attempted to find a way to retain their audience by directing them to other platforms like Youtube or Instagram.

To a lesser extent, an example of this can also be found when building an app for a platform which does not end up being a market leader, i.e. building the first customer review app for Shopify vs doing the same for other eCommerce providers. The platform risk is found when you bet on the eventual success on the platform you are currently building upon.

What is at risk?

When you are faced with platform risk, the largest risk you face is losing access to your audience and losing any proven growth or sales channels.

Losing your audience

The risk of losing your access to your audience is the largest risk of building on top of a platform. This mostly occurs when a social media platform either changes its algorithm or bans your account.

In such cases, the content you have created no longer has the same reach to the audience who has already expressed interest in hearing more from you. You would either have to rebuild this group of interested people on another platform or would have to rely on other methods of communication like advertising or public relations.

Losing your growth / sales channel

Another large risk of being deplatformed is losing a sales or growth channel. In those cases, you would no longer have an avenue to sell your application, product, or service.

An example would be if the Google Play store or Apple app store no longer lists your app, or if your Shopify integration is no longer allowed to be on Shopify Marketplace. This could devastate your business overnight.

Usually, this occurs mainly from an infringement of their terms of service, which you should not be doing. However, the risk of it occurring still exists if you are simply unlucky or have infringed on some term unknowingly. In some cases, accounts and apps have been reinstated - but not all platforms are as forgiving or responsive.

How do you manage platform risk?

Now that we know the potential downsides of platform risk, we need to acknowledge that it is impossible to have absolutely no platform risk - the pandemic has shown us this as even the most reliable platform, physical stores, have been disrupted.

What we should seek to do to manage the risk is by diversification and channel ownership.

Diversification

You can diversify your platform risk by being on many platforms. This can be seen in various forms - Youtubers might have large followings on Twitter or Instagram, physical stores also ensure they have an eCommerce store, etc.

By diversifying your channels and audience, you ensure that should any one platform fail, your entire business/ side hustle is not put at risk.

Ownership

You should also aim to own at least a single channel. The easiest and most reliable form of this is owning an email list. This means that as a brand, you ensure you retain the ability to contact the group of people most interested in your service, no matter what happens to individual social media platforms.

Another example of this would be having a website or blog on top of releasing content solely on Medium, Spotify, Twitter, or Facebook Pages (if this is you, may the algorithm gods bless you). This allows you to potentially have search engine traffic be a growth and acquisition channel down the road.

A last example would be if you are in eCommerce, you should try to ensure you have your own eCommerce website on top of selling on platforms. Selling on platforms like Amazon will give you access to its customer base, but it is also rumored to use its aggregated data to compete with third-party suppliers on its own platform.

Conclusion

While platform risk cannot be eliminated, we should look to mitigate the potential downsides of platform risks where possible. While diversifying into many platforms might be beyond the amount of time and energy you are able to devote (creating content for multiple platforms can be a massive time sink), ensuring you retain ownership is a lower hanging fruit I would recommend you do.

In the case of Startup Illustrated, it has ownership of two channels - our website and email subscribers (thank YOU for subscribing!), I have decided to focus my efforts on Twitter based on the amount of time and energy it would take to be on multiple platforms.

In the future,I will also be looking to diversify the platforms it is using. Possibly Youtube, a podcast, or TikTok. Drop me an email or DM on Twitter and let me know what you think!

That's all for this week's issue of Startup Illustrated. I hope this helped you in some way or form. If you'd like to have the next issue of Startup Illustrated delivered to your inbox, do subscribe to our newsletter. You can also follow the Startup Illustrated Twitter account @StartupIllustr. If you'd just like to say hi, just drop me a DM on Twitter @foundbryan.Until next week, I wish you all the best!