Thread by @jspeiser

How my Dependence on Facebook cost me my startup, $100M, and 110 jobs

It's the first time I've publicly spoke about this in 4 years.

A 🧵...

In early 2018 LittleThings, a female focused feel good entertainment company was pushing $75m+ a year in revenue, had 110 amazingly creative employees, and a fledgling OTT streaming channel.

We built the business on the backs of Facebook, drinking from their firehose of eyeballs. Our growth was outstanding, and our traffic and video views skyrocketed beyond Buzzfeed, ABC, CNN, HuffPo, and Fox.

We became masters at harnessing Facebook’s newsfeed with feel-good articles, videos, and stories.

At our peek we hit:

20MM social media followers
40MM Comscore monthly uniques
15M live programming views per month
900M/video views per month

Our live shows included 4+ hours a day of original unique programming.

Facebook constantly hosted us at their HQ, even profiled LittleThings at their F8 conference on how to build a media company. Things couldn’t have been going any better.

Then, in Feb of 2018 the algorithm had a major shift. Now, we had been through tons of algo changes before, so this didn’t worry us at first, but something was different. Very different.

Our high-level contacts at FB said Zuck didn’t like the fluffy content we were producing and he wanted to be taken more seriously.

He wanted the country to respect Facebook and get their actual news there (previously it was family/friends updates, feel-good viral content).

I watched helplessly as 90% of our organic traffic from Facebook dried up.

Their only feedback to us was that this is the new focus FB wants, hard hitting news, and opinion pieces, and if we wanted more traffic we would have to pay for it through sponsored ads.

We were already spending close to $4m a month on ads, so they just assumed we would spend more to feed our team, unfortunately the margin on paid vs organic was dramatic.

Paid yielded a 10-20% margin, while organic 90%. Without the flow of those eyeballs we couldn’t afford our 100+ staff, NYC lease, or live video studios. It was a death sentence.

Insult to injury was the timing.

LittleThings was under a $100m LOI with a large European acquirer and about 2 weeks away from closing.

This material change in the business was enough to spook them (rightfully so), and force us to settle for a significantly lower offer.

Why we didn’t diversify the business sooner?

It seems so obvious, don’t put all your eggs in one basket.

Unfortunately at the time, there weren’t any real alternatives.

We tried for years to diversify by pushing hard into OTT, email, Pinterest, and Youtube.

Snapchat was still too young for our demo, and TikTok didn’t even exist yet.

We were never able to grow the alternative channels big enough to balance out the insanely large amount of views FB was sending.

We were addicted to the FB volume of traffic and no other source could move the needle.

Years later, as an angel-investor I watch countless startups build their businesses on Shopify apps, Amazon, Instagram, TikTok, Google apps, etc.

Sends chills down my spine.

It’s a very sharp double edged sword.

You get the benefit of instant access to millions, and fast growth.

But can you ever truly sleep well at night knowing at any time it can all be taken away with just a simple algorithm change?

Let this be a cautionary tale to every startup founder out there.

Choose your platforms wisely, and always remember if they can give it, they can take it…

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