Facebook’s Mantra “Join us or we will copy you” – Platforms, Marketplaces and Playing with Fire

Summary: <br> <br> <br> <br> The internet has changed.<br> The world of the walled garden is here.<br> This creates interesting dynamics, problems and opportunities for startups. It is exciting, and terrifying. Let me explain.<br> My background is ecommerce and Amazon. In 2015 I invested ~$8k in product and managed to scale my “startup” to a 7 figure exit at the end of year one.<br> If you are scratching your heads, you should be. Building and flipping a business in a year is dumb. But my goal was just to make some quick cash selling products online, primarily via Amazon.<br> It worked. And through the process I built a top 3 Amazon podcast, met hundreds of FBAers (Amazon sellers), and helped 1000s build businesses on Amazon.<br> As I grew, I started to wisen up. What started as a personal challenge suddenly become scary. Let me explain.<br> Platforms are like distribution on steroids<br> <br> Platforms and marketplaces like Amazon, Android and the App Store are unparalleled acquisition engines. Never before in the history of mankind could companies, let alone startups access this scale and breadth of consumer.<br> The world is literally there for taking.<br> Starting a hardware startup? Kickstarter can help.<br> Building an ecommerce app? Shopify’s add-on store speeds its up.<br> Not a developer but got a great idea? There are even UI and chatbot based platforms for creating apps.<br> The power and resources at founders’ fingertips are unprecedented.<br> And so is the speed at which startups scale. Zynga.org was a rocketship, riding on Facebook’s coattails. The social network grew and viralized distribution, allowing Marc Pincus gaming company to ~10x in under two years. 260M+ MAUs (monthly active users). That is unheard of in gaming, at least it was.<br> <br> <br> In the world of platforms, this is starting to become normalized. But there is a huge problem.<br> Platforms are great, until they aren’t<br> Zynga, more than any other company, took advantage and built an incredible gaming business directly through the Facebook Graph API. Over time, Facebook began making changes to how developers could interact with specific data and just as quickly as Zynga grew, they fell — and fell far. There are many companies, big and small, that have suffered a similar demise. — Ben Schippers: TechCrunch<br> <br> <br> And I knew of sellers who shutdown overnight, with no warning. Amazon’s a double-edged sword. All platforms and marketplaces are. When it is good, it is great. But playing on some else’s playground often ends in tears.<br> There are two ways this happens:<br> <br> rules/algorithm changes<br> copy/paste competitors<br> <br> Both kill startups.<br> The age of the algorithm<br> The first and most obvious example would be Google. Google indexed the world’s information and built the leading search browser, with 77–80% of worldwide searches. That makes Google powerful. SEO and organic search make and break businesses. And throughout their history, Google has done just that.<br> The infamous Panda updates broke the backs of many businesses. Imagine adding a wall around a local mall. The number of visitors drops drastically. Businesses collapse and the mall defaults on the mortgage.<br> Those are the metaphorical examples of a small algorithm change.<br> And they happen, even with the best of intentions. Google wanted to clean up search. They saw marketers manipulating results, creating backlinks and gaming the system to get more visitors.<br> So Google fights back, adding penalties for overly specific and frequent backlinks. These hurt many sites, not just the grey and black hat players. And entrepreneurs (and mom and pop sites) had NO warning and NO recourse.<br> Even Ebay lost 80% of it is organic search thanks to Google’s Panda 4.0 updates. This was 2014. This can happen to anyone.<br> But blacklisting is even worse<br>