Living and Dying by the Algorithm

 

The genesis for this post comes from a tweet by Eric Pacifici:

To summarize:

1. a client of his acquired a home services business
2. most of the business came from organic [“free”] search traffic from Google
3. the organic traffic fell off a cliff
4. Revenue has plummeted [Ari’s commentary: the organic traffic was probably more profitable and valuable too]
5. Life sucks for this client.

[PSA: Don’t take Personally Guaranteed Loans for things with Algorithmic risk

Eric didn’t say, but I really hope his client didn’t take an SBA loan to buy this business. I wonder if people who buy non digital, “main-street”, businesses, even do Digital Due Diligence, or understand the risk? ]

 

We’re all dependent on an algorithm

The Algorithms, and the Platforms, control everything. Even those of you in Real Estate Multifamily, who are smirking at this email, depend on algorithms.

If your business depends on B2C online platforms like Amazon, Google, Apple, Facebook, TikTok, Instagram, AirBNB YouTube and more,  you are exposed to platform and algorithm risk. This includes both organic and paid content.

I’m just going to list some risks, just so you have an idea of what I mean:

• Organic traffic declines and algorithm updates
• Youtube traffic drop offs
• Facebook or Google Ad account bans
• Amazon FBA account closures
• Twitter account closures
• Bad review spam on a Google Local business account

The list is endless.

Recognizing and acknowledging the existence of platform/algorithm risk is the first step in managing it.

I know it sounds like the beginning of an AA meeting.

The next question is, how do you cope with it?

 

The Devil You Know vs the Devil You Don’t

 

While some people may suggest diversifying across different platforms, this may not always be the best approach, especially if you have already mastered one platform. Instead, consider diversifying within the platform to mitigate risks.

For example:

• For ad accounts, maintain multiple active ad accounts.
• For YouTube channels, create and manage multiple channels.
• Run Multiple websites (this is a separate post about portfolio theory and it will come soon)
•  Work with a broad range of influencers to diversify your traffic sources. Sean over @ Ridge Wallet recently mentioned how they work with over 1000 influencers to promote their brand. I thought this was an interesting way of approaching it, as each influencer has their own platform risk, but in the aggregate it’s not a problem if a few get whacked away by an algorithm.

 

Experience has shown me, however, that platforms engage in large scale purges every once in a while, and all of those 1000 influencers can go belly up at once.

 

By owning multiple properties and running backup creative or channels, you can better weather potential losses from platform risk or account bans. This approach also expands your presence in your niche market by competing against yourself before facing off against other competitors.

Don’t make the platform look stupid

Shoemoney  said this best a very long time ago:

 Diversifying Traffic Platforms for a Multi-Legged Business

 

Once you’ve managed platform risk for your primary platform successfully, it’s time to consider branching out and giving your business multiple legs. This involves delving into other traffic platforms to expand your reach and open up new opportunities. Carefully select which platforms align best with your business goals and grow your presence on them step-by-step.

 

In doing so, you can better prepare your business for any future risks or setbacks that may come from platform updates, algorithm changes, or other unforeseen factors.