Technology / Space

How an Algorithm (and my stupid mistakes) Made Me Unemployed

This is embarrassing to write. It is confessional, and probably overly personal. In a time when there’s always someone ready to call you an idiot when you fail, I’m gonna beat them to the punch. I’m an idiot. And now I’m unemployed and my company is nearly bankrupt. Hopefully, someone reading this will avoid making the same mistakes I made.

To understand what happened to my company, I need you to understand how it became a company.

In 2003, a co-worker and I started a website about ghost towns and abandoned places (Ghosts of North Dakota) with the idea that we wanted to photograph the vanishing places left over from North Dakota’s railroad settlement era, before there was nothing left to photograph — a kind of virtual preservation.

The website succeeded far beyond our expectations, and it became a labor of love. We went out every spring, summer, and fall, photographed as many places as we could and shared them on our website, but we didn’t get paid anything for it, and we were OK with that, because we never thought it was a money-making proposition.

In 2009, we changed from a website to a blog format. People started commenting, with histories and memories of the places we photographed, and the whole project went to another level, but we still weren’t making any money.

A coffee table book with photos of the places we’d visited was something we’d always wanted to do, and in 2012, I saw our chance when I found out about crowdfunding. I read an article about Kickstarter and realized that Ghosts of North Dakota would be a perfect candidate for a crowdfunding campaign. We had an established social media following (I think we had between 50 and 75-thousand Facebook followers at that time), and many had already asked, “When are you going to do a book?” I researched what it would cost to print a hardcover book, and came to the conclusion that we could print it and ship reward copies to our supporters, for $12,000, as long as I could figure out how to design the book myself. So, we launched a Kickstarter campaign and had 30 days to reach our goal.

It was a slog, and there were a few times when we questioned whether we would make it. With a couple days to go in our campaign, we were down about $1,100  from our fundraising goal when one of our fans came through with an $1,100 pledge and put us over the top. It was the biggest pledge we received by more than double.

The forklift brings our first book out of the warehouse.

That was the beginning of a two-year rocket ride that we could not have anticipated. The pressure was on to produce a book and get it shipped in a timely fashion. I didn’t even own book design software, so I had a friend “hook me up with some software” if you catch my drift, and I taught myself how to use it (in the most rudimentary, amateur kind of way). I designed our first book, and was quite proud of it at the time, even though I think it’s pretty rough when I look back on it now.

This is where the real surprise happened.

We paid just under ten thousand dollars for a thousand copies of that first book, and thought they might last us six months or a year. When the book arrived, we spent the remaining $2,000 to buy a few necessary items — like a new printer for shipping purposes, and packing envelopes and cartons — and after shipping all the reward copies to our supporters, we got down to about $300 in our bank account, and we had about 900 copies of the book left.

Preparing to ship copies for our Kickstarter supporters.

It sold out in 30 days.

We were slack-jawed at the interest in our book. In hindsight, it seems our state was under-served. There are a lot of people in North Dakota who love it despite its reputation as a boring backwater, and take pride in being from here. Our book filled a niche which nobody else was interested in filling, and our social media presence was putting North Dakota in front of people in a way that nobody else had done before. Book stores and gift shops began to call, and then the Vice President of Distribution at Barnes & Noble, New York. We were selling our books on our website, but people were calling book stores and asking if they carried our book. Soon those book stores were calling us, wanting to know how they could get it.

Our first book.

Do the math on the success of that first book and you start to understand how we felt overwhelmed with gratitude and pride. We made enough money on the first one that we decided we should do another one. However, with the kind of success we were having came new challenges. Expensive challenges.

It became clear that we needed to incorporate as a business, so we did. We had to find a distributor, too, because Barnes & Noble doesn’t deal with indie publishers directly. Distributors take a cut of your revenue, and they also demand a steep wholesale discount. Barnes & Noble made money on our book, the distributor made money on our book, and we still got to make a little money on our book.

A couple Christmases came and went, and the orders came fast and furious. We had to reorder the first book a couple times, at ten thousand dollars a pop. We had to order up the second book, another ten thousand dollars. We started ordering larger quantities so we could get a better price on the books, but then we were spending 12 or 15-thousand each time we re-ordered. I know, right? Nice problem to have.

This was the single biggest mistake I made. I assumed it would continue.

So this is how it went. First year, total revenue, $12,000. Second year, total revenue, $60,000. Third year, total revenue, $120,000.

In Stephen King’s “On Writing“, he describes the moment when his agent told him he had sold the paperback rights for Carrie for $400,000.

“Are you sitting down?” Bill asked.

“No,” I said.  Our phone hung on the kitchen wall, and I was standing in the doorway between the kitchen and the living room. “Do I need to?”

“You might,” he said. “The paperback rights to Carrie went to Signet Books for four hundred thousand dollars.”

On that Mother’s Day in May of 1973 I was completely speechless. I stood there in the doorway, casting the same shadow as always, but I couldn’t talk. Bill asked if I was still there, kind of laughing as he said it. He knew I was.

I hadn’t heard him right. Couldn’t have. The idea allowed me to find my voice again, at least. “Did you say it went for forty thousand dollars?”

“Four hundred thousand dollars,” he said. “Under the rules of the road”–meaning the contract I’d signed–“two hundred K of it’s yours. Congratulations, Steve.”

I was still standing in the doorway, looking across the living room toward our bedroom and the crib where Joe slept. Our place on Sanford Street rented for ninety dollars a month and this man I’d only met once face-to-face was telling me I’d just won the lottery.  The strength ran out of my legs. I didn’t fall, exactly, but I kind of whooshed down to a sitting position there in the doorway.

By the third year, I kind of felt like Stephen King sitting in that doorway. I was fond of telling people that I wish I could say I was a genius who had this planned all along, but the reality was we had stumbled into a business.

We did a third book, then a fourth. By the time we reached year three, we spent 80-thousand-plus of our 120-thousand in revenue on book printing, packing materials, shipping, and building an inventory for future sales. There was internet access, webhosting and bandwidth, mailing software, legit photo and book editing software, computers, camera lenses, and the list goes on. It all costs money.

A huge part of our success was due to our Facebook following. We could post one piece of content and with 100,000 followers, it would get anywhere between 300 and 600 shares, and get seen by as many as 500 or 600-thousand people. We had more Facebook  fans on our page than any TV station in the state. More than any radio station. More than any newspaper. More than 90 percent of our traffic came from Facebook.

This was the single biggest mistake I made. I assumed it would continue.

I should have known (but I was either blind or in denial) that it wouldn’t be this easy. I do remember telling my wife and my partner Terry on several occasions that I had nightmares that someone came along and took it all away. That was a funny little anecdote, until it actually happened.

I never would have imagined that Facebook would voluntarily decrease the effectiveness of their own pages, so they could collect money from the owners of those pages. In 2014, Facebook implemented their new algorithm. In short, it made it harder to reach your followers “organically”. If you wanted them to see something you posted, you would have to pay.

In the past when I’ve written about this part of our business, there’s always a cynic who chimes in with “Facebook has a right to make money, too,” or “Hey, it’s their platform, you can’t expect to use it for free, idiot.”

Yes. I agree. I am an idiot.

It should be noted, though, that Facebook was making billions by this time, largely on the dollars of big corporations who were spending money on the Facebook ads that show up next to your newsfeed. And I wasn’t using their platform for free, because I was spending money on Facebook ads myself (thousands), and they were working like gangbusters. I would spend $300 on a Facebook ad and get $1200 in sales of our books. My wife is a radio sales rep, and I told her “Facebook ads work like nothing I’ve ever experienced. I’ve never used another kind of advertising that works like this.” She said, “As a radio salesperson, I really hate to hear you say that,” but it was true.

Back to the point, 2014, the new algorithm came down the pipe, and suddenly, nothing worked anymore. Not only was organic reach on Facebook cut to 1% of following (or less), even paid ads stopped working. Suddenly, running a paid ad was much more complicated. You could no longer just plunk down $300 or $500 bucks and count on the fact that your ad would be seen by the people who loved your project or followed your page. Now, you had to be a web developer to get results. You had to know about re-targeting, and demographics, and pixel tracking, and you had to spend $300 or $500 dollars to run an ad, and if the strategy you employed didn’t work, you had to try again, and spend the money again. Paid Facebook ads didn’t even work as well as a free post I made six months earlier.

I believe that was by design. Facebook complicated “reach,” both organic and paid, because they didn’t want a big chunk of the money available for advertising, they wanted all of the money available for advertising. From big companies and small ones.

In short, my little company started losing money fast. We had invested in it under the assumption that the success was going to continue, the upward revenue arc was going to continue, and the expansion of our follower base was going to continue. Those assumptions were wrong, and led to mistakes.

When I lost my regular, full-time job in the radio business, I started paying myself a salary to run my business. It was meager, $25,000/year, but even at that rate, it was a mistake.

Expenses had ballooned. Suddenly there were accounting expenses, tax liabilities, and unemployment premiums, in addition to the expenses that go with running a business where we traveled a lot and had considerable fuel, lodging, and equipment costs. It was a mistake to not anticipate all of it.

Traffic to our website dropped by more than 50-percent. We relied too heavily on Facebook and did not diversify our social media following early enough (In fairness, Twitter wouldn’t have done much good anyway since their click-through rate is atrocious). It was a mistake to believe that Facebook would simply allow us to keep making money. By far, it was the single biggest mistake I made.

I made so many little mistakes that it became death by a thousand cuts. I made a mistake in how I presented our books. I should have been more careful about the tone of our pitch. I look back now and see that we beat many of our fans over the head with an unspoken message. We’re making money now.

I did business with friends, and sometimes when you do business with friends, they start to resent you for making money. They stop seeing you as a friend, and they start seeing you as a client. It was a mistake.

We launched additional projects, to cover abandoned places in other areas, and while the vast majority of our followers supported us, there were some who saw it as a betrayal. A few people who were fanatical about our first project were surprisingly jaded about our second and third. They wanted us in our box. When we would post an abandoned place over the border, in Minnesota or South Dakota, there were plenty of people who reported it to Facebook as spam, or hid the post, because it’s not North Dakota and I don’t want to see it. Facebook keeps track of all of that. The negative voices are the loudest voices, and pretty soon the algorithm started to believe, people don’t want to see Ghosts of North Dakota’s stuff.

It was a mistake to believe that people would support us when we ventured outside the box that they wanted us in.

I made a lot of mistakes, and we encountered unforeseen challenges, too. Our distributor went out of business, and we had to find a new one, which cut off our revenue from most retailers for about 8 months. I could go on boring you to tears with all of this, but I really need to bring it to a close and tell you where we are today.

Year four, our revenue dropped to $60,000, cut in half by Facebook’s algorithm and my stupid mistakes. Year five revenue will be even less. I have collected my last paycheck from my company, and as of today, I am effectively unemployed and looking for a full-time job, again. I’m hoping not collecting a paycheck will keep my company from going under.

I’m not mad about it. I accept my mistakes and take ownership of the things I did. I hope there’s someone reading this who can avoid some of the same trouble. Diversify. Build your business slowly. Don’t ever count on a social media outlet to deliver your traffic.

And if you ever get to work for yourself, enjoy every minute of it, because you never know how long it will last.

By Troy Larson

Publisher, photographer, producer, husband and father. Cat person. Dog lover.

One reply on “How an Algorithm (and my stupid mistakes) Made Me Unemployed”

Hey Troy. This is a great story (not, you know what I mean). I’m sad to see your business going under. Hopefully you can get back on your feet soon. I also have a small business and have mostly ran it word of mouth. It hasn’t made me a fortune, but it makes me enough and I love doing it. I love talking to people and helping them find exactly what they need at a great price. I’ve started slow, but was considering going whole hog this summer with a retail store. Now after reading this I think I’ll wait and continue on a slower pace. Build up my customer base before I get the retail location. Thanks Troy for your words.

P.S. I would never call you an idiot.


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