You might have noticed that building an audience on social media doesn’t seem as easy as it was promised to be.
The truth is that things have changed. And that business influencer who is promoting their top tips for growing your follower count on Instagram? Well, they’re selling you a very old playbook.
To explain (and offer some guidance on how to address this in your own business), let me start with a pricey Uber ride.
When I was in Seattle in June, I was shocked to discover that a 3-mile Uber ride from my hotel to the studio would cost more than $20. As I walked back to the hotel from the studio that afternoon, I listened to Atlantic contributor Derek Thompson talk about his recent analysis of the “end of the Millennial lifestyle subsidy” on Today, Explained. Thompson described the same phenomenon I’d just experienced that morning—logging into Uber or Lyft to catch a quick ride and discovering that the prices had doubled or tripled.
One might blame the higher prices on inflation.
And, that wouldn’t necessarily be wrong. But it wouldn’t be the whole story, either. “These start-ups weren’t nonprofits, charities, or state-run socialist enterprises. Eventually, they had to do a capitalism and turn a profit. But for years, it made a strange kind of sense for them to not be profitable,” Thompson writes.
The reason that the price of an Uber ride, a Peloton bike, or the app you subscribe to has gone up so dramatically is that these services have been subsidized by venture capital for years. Venture capitalists believed that if companies kept prices low—even taking a loss—then they could attract the user base needed to dominate a market. Once these companies dominated their market, then they could adjust their financial models to become profitable.
This investment strategy brought us artificially low prices on all manner of conveniences that urban Millennials—and, increasingly, city dwellers and suburbanites broadly—came to rely on. These lower prices also allowed disabled people and chronically ill people to experience a new level of access to their neighborhoods and cities: transportation to healthcare providers, food delivery for no-spoons days, and video conferencing to engage with groups in their communities. And so when prices started to skyrocket, they were back to square one, which was not a good place to be.
At the same time, the fast fashion industry convinced a vast segment of consumers that clothes were supposed to be cheap and replaced often with newer styles. Other consumer goods brands took the lesson from fast fashion and applied it to their own production processes. New direct-to-consumer brands promised that by cutting out the middle man, they could increase quality (which had gotten worse and worse) while maintaining low prices.
Now, with interest rates rising and investors becoming a little more cautious, businesses that have subsidized prices in the name of growth are feeling pressure to put the focus back on profit. They’re looking at their pricing models and asking themselves how to make the equations work. It turns out that this is not an easy thing to do! In the case of Uber and other on-demand gig economy services, they’re learning that labor is expensive. The fast fashion industry is learning that transportation costs are unwieldy. Direct-to-consumer brands are learning that conversion marketing is expensive. In short, the companies that led growth in the consumer market over the last decade are learning that everything about their businesses is more expensive than they’d like.
“That means higher prices, higher margins, fewer discounts, and longer wait times for a microgeneration of yuppies used to low prices and instant deliveries. The golden age of bougie on-demand urban-tech discounting has come to a close,” explains Thompson.
So is it inflation? Yes. A dollar today won’t go as far as it did in 2019. But another way to look at it is that the 2010s were defined by a form of deflation. Wages didn’t rise, but workers could buy more and more because companies exploited every resource they had to make goods cheaper and cheaper. We got more for our money—but at what cost? As things rebalance and we begin to pay the actual costs of a product, it hurts.
Something similar has happened in the realm of small businesses online.
Between 2009 and about 2015, the legacy social media companies were incentivized to grow at any cost by the same venture capitalists underwriting consumer goods and services start-ups. Facebook wanted to wow users with its ability to connect them to a whole host of potential customers. Instagram needed to help users grow their audiences to compete with Facebook. Twitter, LinkedIn, and later TikTok would all follow similar playbooks. Each platform subsidized users’ success to ensure the growth of its user base.
Back in 2017, I had a sizable Facebook page—about 15,000 followers. That summer, I was invited to join Facebook’s nascent creator program. They offered to pay me $1000 for every 3-minute or longer video I uploaded to my page. They would also support the growth of my page with ads. Since I was still an active Facebook user at the time, it seemed like I could really benefit from this arrangement without doing any extra work. By the end of the partnership period, my page had grown to more than 36,000 followers. Facebook literally subsidized the growth of my page. That, of course, looks great on paper. But I can’t really reach any of those people because today, Facebook wants me to pay for the privilege.
I don’t begrudge Facebook for that move. (I do begrudge them for a host of other reasons.) I’m not going to rant and rave about creating posts that no one sees. I’ve just stopped doing that labor. However, there are plenty of others–maybe you–who sink hours into the tasks that used to work every day.
Eight or ten years ago, these tasks allowed early online businesses to build massive audiences and then create products that scaled to serve those audiences. The mass online course model was so successful precisely because venture capitalists, via their social media company investments, subsidized audience growth. There are, of course, exceptions. But they are few and far between.
The old guard of internet creators (e.g., Chris Guillebeau, Amy Porterfield, Pat Flynn, etc.) entered the market at a great time to build an audience. With successful online courses, affiliate marketing schemes, and self-publishing, these creators built a financial foundation that allowed them to continue growth through paid advertising or partnerships as “organic” growth stalled out. Plus, unlike Uber or Peloton, there weren’t any shareholders exerting undue pressure to keep pace with previous growth. They could enjoy the audiences they’d built in the heyday and maintain an eye on future profitability.
This particular type of success cannot be replicated today. The market conditions are completely different—and they have been for years. Again, there are exceptions, but no one should build a business strategy around being the lucky exception.
Building an online business or working independently via the internet is just as viable as ever, though.
It just requires a different financial model. Instead of counting on growing a massive audience and a product that scales, a safer, more sustainable play is to build a model that’s profitable from the start with a minimum viable audience. In some models, that might only require reaching 10-20 high-quality leads. In other models, it might be 50-100. But none of these models rely on an audience growth subsidy that is no longer available. None of them rely on “audience growth” as a core strategy or activity at all.
With less time spent on audience-building, business owners can spend more time on craft, client experience, team management, and administration. They’ll run tighter, more sustainable businesses that are less likely to quake under the strain of market forces. These businesses will (and do) focus more on value creation rather than value extraction. And business owners will do far less exploitative affective labor to make themselves attractive to audiences.
The end of the audience growth subsidy is good for businesses and for consumers. As business owners adjust to new expectations and new models, the rebalancing might hurt—but it will be worth it in short order.