#20 - Strategic Control Compromised

Originally published in The Times of India.

Walmart or DMart operate on razor-thin margins, yet they thrive because they control the fundamentals: their supply and demand functions. They invest heavily in reducing costs and ensuring efficiency. They don’t leave their success up to chance—or to someone else’s algorithm.

Now look at media companies. Many have outsourced two of their most critical functions: distribution and advertising. Instead of owning the relationship with their audience, they rely on platforms to do the heavy lifting. And while this can lead to massive growth, it also means handing over control. If the algorithm changes, so does their visibility, revenue, and ultimately, their future.

Here’s what can go wrong:

Black Swan Disruptions

Imagine building your dream business. Everything clicks. You’re growing fast, racking up millions of users, and revenue is rolling in. Then one day, everything changes—not because of what you did, but because an algorithm decides to rewrite the rules.

That’s what happened to LittleThings, a lifestyle website that grew massive thanks to Facebook’s algorithm. By 2014, they had 20 million followers and were pulling in nearly a billion views a month. But in 2018, Facebook shifted its algorithm to prioritize posts from friends and family. Overnight, LittleThings lost 90% of its traffic. They couldn’t recover. A once-thriving business was forced to shut down.

This isn’t a one-off story. In 2019, Vice Media faced similar challenges. YouTube’s algorithm mistakenly flagged many of their videos, cutting off ad revenue. They had to fight for manual reviews to restore what they’d lost.?

And it’s not just social media. In 2021, Apple introduced the “Ask App Not To Track” feature. It was great for privacy, but devastating for mobile gaming apps that relied on targeted advertising. Companies watched as their main revenue streams vanished almost overnight.

What’s striking is how little control these businesses had. They weren’t failing because they made bad decisions. They were playing by the rules of the platforms that hosted them—until those rules changed.

Joe Speiser, the founder of LittleThings, now advocates for diversification. Don’t rely too much on any one platform, he says. It’s tempting, especially when an algorithm is working in your favor. But the same systems that build your business can take it all away without warning.

Long-Term Erosion of Assets

Long ago, Easter Island was a paradise forest. The Rapa Nui people thrived, using the trees to build canoes, homes, and the sledges to transport their famous moai statues. But as their society grew, so did their appetite for resources. Tree after tree fell, each one fueling progress but leaving the island just a bit more barren. No one thought the forests could disappear; after all, there had always been trees. Then, one day, the last mature palm was cut, its mighty trunk crashing to the ground. They cut faster than nature could replenish. And then, one day, the last fruit-bearing tree fell. No ceremony. No pause. Just gone. All that remained were saplings too young to bear fruit anytime soon.

In his book Collapse, Jared Diamond uses Easter Island as a haunting metaphor for self-destruction. What if I told you that a similar pattern is unfolding in digital media today?

Drop in value of journalism: Think of the algorithmic marketplaces like a relentless lumberjack. They prioritize clicks, views, and engagement over quality. A hard-hitting investigative report that took months to produce is treated no differently than a cat video. Over time, this commoditization chips away at the value of premium journalism. Why invest in slow, high-quality reporting when quick, viral content delivers the same returns?

Loss of direct traffic: Platforms like Facebook and YouTube have become the main gateways to information. Fewer people visit publishers' websites directly. The once-strong bond between media outlets and their audiences is now mediated by tech giants. That relationship—the direct line between a publisher and its readers—is fading.

Ad attribution challenges: When users engage with an ad on a news site, platforms might be able to claim ad-click or conversion attribution due to initiatives like Google One Tap Login. This reduces the needs for brands to directly buy advertisements from publishers.?

Commoditization of high value content: While ChatGPT offers convenience to users by summarizing and synthesizing original reporting, it drops the publisher’s exclusivity. It’s like eating a gourmet meal but in a regular takeaway box by the street: quick, filling, but not much of an experience. Over time, even the best reporting risks becoming just another commodity, reducing the incentive for publishers to create it.

Trust in news: Trust in news is at an all-time low. Surveys from the Reuters Institute show year after year that people feel disillusioned with journalism. When algorithms reward outrage and entertainment over depth and nuance, it’s no wonder trust erodes. It’s a vicious cycle: distrust leads to lower engagement with credible outlets, which leads to less revenue, which leads to fewer resources for quality journalism.

Remember what happened on Easter Island. The collapse wasn’t sudden. It was a series of small, seemingly insignificant choices, compounding over time.

The long-term shift of advertising revenue from publishers to algorithmic platforms, such as Google, between 2003 and 2013, serves as a stark warning of how the digital landscape can reshape entire industries.

That’s the lesson for digital media. The slow, steady erosion of content value, audience relationships, and trust may not feel urgent now. But if we keep chopping down trees without planting new ones, what kind of ecosystem will we be left with?

Conclusion

The lesson here is simple but hard to execute: control what matters most. Just like Walmart secures its value chain, media companies need to secure their value chain. That means diversifying distribution, owning audience relationships, and investing in direct channels that platforms can’t take away.

So, here’s the challenge: In a world dominated by algorithmic marketplaces, how do you build a business that grows without giving up control? Are you playing by someone else’s rules—or making your own?

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