We have a great bookstore in my town — the kind of place you picture in your mind when you think of a great independent bookshop.
It’s perfect for browsing, with lots of comfy chairs to relax in. The books are displayed enticingly. There’s a little coffee shop so you can relax with an espresso. They get your favorite writers to come in for readings, so there’s always a sense of event and excitement.
They do everything right, and they’ve always had plenty of customers.
But they still closed their doors last year.
No, not for the reasons you might think. It wasn’t Amazon that killed them, or the proliferation of free content on the web, or the crappy economy.
They closed the store because they were leasing their big, comfortable building … and when that lease ran out, their landlord tripled the rent.
Literally overnight, their business model quit working. Revenues simply wouldn’t exceed costs. A decision made by another party, one they had no control over, took a wonderful business and destroyed 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’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’s digital sharecropping, anyway?
Digital sharecropping is a term coined by Nicholas Carr to describe a peculiar phenomenon of Web 2.0.
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.
In other words, anyone can create content on sites like Facebook, but that content effectively belongs to Facebook. The more content we create for free, the more valuable Facebook becomes. We do the work, they reap the profit.
The term sharecropping refers to the farming practices common after the U.S. Civil War, but it’s essentially the same thing as feudalism. A big landholder allows individual farmers to work their 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 fees, 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 on.
Well, we’re not subsistence farmers any more, and our work doesn’t involve 12-hour days in grueling conditions. So is sharecropping still dangerous?
It is, 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 local, it’s free (or at least cheap), and it makes businesses feel like they’re doing something cutting-edge.
But what happens when Facebook thinks you’ve done something that violates their terms of service and deletes your account? Or changes the way you’re allowed to talk 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 doesn’t actually care.
Landlords go away
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 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.
The best we can do is guess. And if we guess wrong, our business goes into a slow and steady decline.
So are Facebook and Google bad for business?
Of course not. Facebook, Google, LinkedIn, Twitter, and many more sites are all superb tools to add to our marketing mix.
The secret is to spend most of your time and creative energy building assets that you control.
There are three assets you should be building today, and should continue to focus on for the lifetime of your business:
- A well-designed website with your own hosting account
- An opt-in email list, ideally with a high-quality autoresponder
- A reputation for providing impeccable value
These things are the equivalent of buying your building instead of renting it.
Now any of these can fall prey to outside influences. The bookstore’s building can 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.
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 or Twitter?
Let us know about it in the comments.