Platform Dependency Threatens Value
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Shaan Puri and Sam Parr discuss the inherent risks of building businesses dependent on third-party platforms, highlighting how platform changes can dramatically impact business value and sustainability.
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Platform Dependency Risks:
- Changes in platform direction can instantly destroy business value
- Algorithm changes can drop rankings from top to bottom
- Platforms known to compete hostilely with successful apps
- Single platform dependency creates significant vulnerability
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Risk Mitigation Strategy:
- Focus on quick payback periods
- 9-month payback feels safe
- 3-year payback too risky given platform uncertainty
- Diversification across platforms recommended
- Focus on quick payback periods
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Examples of Platform Risks:
- Gaming platforms
- Fortnite/Call of Duty can change direction
- Game popularity is temporary
- Amazon FBA
- Complete dependency on Amazon's platform
- Subject to algorithm changes
- Amazon known to compete with successful products
- Gaming platforms
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Business Opportunity Despite Risks:
- Many platforms offer acquisition opportunities
- Shopify plugins
- Salesforce apps
- Zoho integrations
- Gaming platform mods
- Can build $10-20M revenue businesses through strategic acquisitions
- Assets often undervalued, especially in gaming
- Some selling for less than 1x revenue
- Created by inexperienced developers
- Many platforms offer acquisition opportunities
The key insight is that while platform-dependent businesses can be highly profitable, the inherent risk requires careful consideration of payback periods and potential platform changes when making investment decisions.
Sam Parr
Host of MFM and fitness influencer
Sam Parr is a serial entrepreneur and business media pioneer.
In 2016, he founded The Hustle, a business news media company that started in his kitchen with just $12 and grew to eight figures in revenue.
Sam led the charge in making newsletters popular when few believed in their potential.
After four successful years, he sold The Hustle to HubSpot, a publicly traded company. Now operating as HubSpot Media, The Hustle reaches 3 million readers daily, employs a team of nearly 100, and has been the launchpad for dozens of its staff to found their own media companies and newsletters.
Sam remains the host of the popular business podcast, My First Million, and continues to start and sell companies. He also co-founded Hampton, a highly vetted community for entrepreneurs, founders, and CEOs, and teaches people to write better through his platform, Copy That.