Deep within the 1000+ comments on the accompanying reddit thread is a really interesting fact: Reddit is not (currently) profitable. [1]
I was already a reddit gold subscriber, but the fact that at the moment they're literally running into the red to provide cool stuff like the Obama AMA makes me want to subscribe again. Anyone looking for a reddit gold account?
Reddit is a fantastic product— and its huge, growing popularity is a sure sign of that. But it never was built with a clear business model in mind. Their two sources of revenues are (i) ads and (ii) reddit gold.
I don't think anyone ever expected (i) to be more than just a little extra cash; and (ii), as they say, was never heavily promoted at all. So it seems like (part of) their solution today is to try to push (ii) as far as it will go. I don't believe it's going to get them very far in its current state, but it's a valid first step.
I think this highlights, once again, the need to actually build a viable business in addition to a quality product- one does not make the other, and it's hard to retrofit a business model 5 years later.
Sadly, everyone expects everything digital to be free (software, social networks, services, magazines, games, etc.), so it's an uphill battle. I think Reddit has some interesting cards in its hand though: AMAs are a growing trend, so that's something I'd try to monetize if I were them.
Regardless, I'm curious to see where Reddit will go.
Reddit probably has the same issue Groupon brought to local business. It's userbase expects a high quality product for dirt cheap, and is very vocal when something goes awry. When Woody Harrelson showed up to do an AMA, that turned out to be more of an "Ask Me About My New Movie", there was backlash. A lot of people just went around repeating a comment about Woody taking some poor girls virginity from a local high school prom and then never calling her back(not sure if this was true). So the idea of leveraging pseudo-AMAs for marketing purposes seems like swinging a broom at a hornets nest.
So the idea of leveraging pseudo-AMAs for marketing
purposes seems like swinging a broom at a hornets nest.
There are many AMAs that exist solely as the internet equivalent of a talk show where a celebrity makes an appearance to promote their latest book or tv series. The problem with the Woody Harrelson AMA was expectations, it was billed as "Ask Woody Harrelson Anything" and then when it came down to it the reality was it was actually "Ask Woody Harrelson anything about Rampart!"
If you set expectations accurately and provide real value then there will be no outrage, there was an AMA a few weeks ago from an ex death row inmate who did the AMA to promote his book, did anyone complain? No, because he was open about it and spent time answering all the questions regardless of their value to his promotional intentions.
Just like if a celebrity went on to Conan O'brien and answered every question with "Okay! So about my new film! It's really great, everyone should go and watch it!" people would be pissed.
Here's a couple of AMAs that I just picked in <1 minute that are promotional but had no complaints:
Cult TV show actress, indie video game developers and cult comic and adventure show host who are memes on Reddit. Reddit fancies these people, and the fact that they didn't pay to post makes it seem more legit. While they may be marketing something, the fact that it's not in your face makes it seem more innocent. Having something on there that specifically states "this is a sponsored AMA, someone is doing this to sell you something" immediately creates a negative reaction. Hiding the sponsorship would just cause paranoia.
Would sponsored AMAs be front paged immediately? Could they be downvoted to hell? Would comments that the sponsor found offensive be removed? Would a company want someone linking to r/SpaceDicks in their AMA? It's kind of a Pandora's box promoting on Reddit.
Does anyone know what Reddit's AWS monthly bill is these days? I suspect they would be closer to profitability if they ran their own hardware, but I haven't seen any numbers recently.
Don't forget that if they were to run their own hardware, they'd probably need a couple of sysadmins to manage it. The question is if running their own hardware would be cheaper by more than the salary of a couple employees.
In previous talks they have never revealed the numbers, but have said that their bills have been fairly constant over time - Amazon's price decreases have balanced growth in AWS usage.
I really, really hope Reddit and 4Chan succeed in this. It would be great for other new services to be able to point to services like Reddit and say, "Customers will pay for something that is valuable to them, even if it's just a web site."
I don't use Reddit enough to justify paying for it, but I would certainly pay to support HN.
It's worth mentioning that moot has managed to keep 4chan running since 2005 without accepting any donations, while paying for what I imagine is a ridiculous amount of bandwidth and being shunned by most advertisers. Up until the addition of 4chan passes, he was paying a fairly large portion of the monthly server bills out of his own pocket. Moot hasn't said how many people have purchased passes, but I'm guessing it's an amount closer to "allows me to break even without dipping into my own pocket" and not "I can support 4chan entirely through user contributions!"
I think Reddit would have a much easier time supporting itself entirely through non-intrusive advertisement, which makes me much less sympathetic towards their desire to have users directly support the site.
> See, the problem is that if your site is funded primarily with advertising, then you are beholden to your advertisers.
There is a lot of precedent for handling this, as newspapers have been doing for decades. Newspapers have the content producers and the business people in the same building employed by the same company.
You separate your business and editorial and put a wall between them in the company. Nobody from business has access to the admin panel and nobody from editorial has access to the business contacts.
I really couldn't imagine an advertiser asking reddit to remove a post for them. To advertise on reddit means that you have some understanding of how it works, and how it works doesn't involve admins censoring content.
There are more than enough advertisers in the world who both understand reddit and would pay good money to get their ads infront of that audience. The only problem is that the ad product is not sold or promoted well.
I don't really understand why they're so against doing proper advertising, so much so that they're willing to operate at a loss. Digg didn't fail because of advertising and if reddit can approach advertising in a "mature" way -- not just going after every penny -- it could work out well.
you come under editorial pressure from advertisers to
remove or modify it…This eventually results in a
watering down of the true, authentic content on the site
If you're in a situation where you have no advertising and you're losing money, why not be in a situation where you have some advertising and if an advertiser gets annoyed you tell them to leave and not work with you again? If reddit has value to advertisers a few annoyed advertisers aren't going to break the site, especially when it can exist as a money losing business.
Their current advertising is just... pointless, I rarely see adverts on reddit, almost every page load has the advertisement block filled with an internal reddit notice (eg: "check out the FAQ!", "Thanks for not using adblock", "check out reddit gifts") or an advert that someone has paid for via self serve for their subreddit.
Maybe I'm missing something but surely even just throwing up a simple adsense block in the advertising space would generate enough revenue to be worth whatever supposed good will these cutesy cat picture adverts exist to score. Adsense certainly wouldn't "destroy" the trust people have placed in the site... As someone that puts time into reddit I'd be more annoyed if they let the site become so unprofitable they have to shut it down vs. have a few adverts that I can opt out of with a tiny monthly fee.
Would anyone here (that uses reddit) leave if they had proper advertising (that could be opted out of with reddit gold and was not audio / video advertisements, just "standard" web adverts)? I've never met someone willing to leave a website over adverts, if the adverts are reasonable.
Also during the time I wrote this comment I was constantly refreshing reddit.com, so far I have not seen a single non-reddit related advert and I'm at 30 page loads.
(maybe raldi or jedberg or whoever that left reddit and lurks here can explain why this isn't being done, because it's confusing, is there an internal belief that reddit users are so touchy that they'll leave if reddit tries proper advertising?)
edit: oh and for the perfect example, imgur has advertising, what about 75% of popular reddit content uses, and I don't see people boycotting imgur? (of the 100 links in r/all right now 75 are to imgur, 25 of those are to imgur.com which has advertising, so that means 25% of the front page links go straight to imgur with adverts)
edit edit: in an attempt to explain my opinion succinctly, I think the real problem reddit has is the toxic idea that any attempt to make money will alienate the community, when in reality the majority of reddit users don't care and the vocal minority would not leave the site as long as the advertisements were reasonable. People want a stable website that they can be a part of, advertisements don't destroy that. Look at how many people love imgur, 9gag and funnyjunk. Having so little faith in reddit users ability to deal with adverts is to me more "insulting" than the adverts themselves.
I agree that Reddit is taking a naive view on Advertising. There is a huge amount of value to be added here, both to Reddit and the Community by an effective Advertising platform. I'll speak with examples:
r/gaming, a post about Borderlands2 with a sponsored ad that links to one-click checkout on Steam.
r/politics
A post about Romney's many lies featuring a donate to Obama link, or vice versa.
r/fitness
Featuring a sponsored Ad to a local crossfit gym that is having a free trial.
To pull this off they need much better Advertiser control, sentiment analysis of posts, and inclusion into a larger Ad Exchange (or offer Reddit inventory via an exchange model).
If I were an advertiser, I'd much rather pay someone to astroturf Reddit than buy advertising space on Reddit itself. It seems like a much better investment.
I spent a huge amount of ad money on reddit for literally no conversions and a handful of clicks. These were ads that were hugely effective on lots of other sites.
Spending your money to advertise on reddit is less effective than simply flushing it down the toilet.
Probably as simple as they've watched past businesses that monetized via advertising, didn't like what they saw, but are still struggling to come up with alternatives.
Once they figure out how to monetize effectively, they'll really have something hot on their hands, so I'd bet it seems like a good idea to tread carefully and tolerate some loses for now.
>I asked all of the candidates I interviewed the question: "Why did digg fail?" Yishan knows. And I'll do everything in my capacity as a board member of reddit, inc. to make sure he doesn't fuck it up.
Digg stagnated because it listened to a vocal minority
of its community
but rather they are locked into an unchanging mediocrity
by the inherent conservatism of their existing userbase
isn't this EXACTLY what he is doing here? He's letting the minority decide that reddit shouldn't have adverts and shouldn't try and be profitable and should cling to the idea that reddit is one big happy family that is sitting around telling each other stories by the camp fire as they all help fuel that campfire.
Most people I know that use reddit don't have an account, let alone are willing to pay money towards reddit. Shouldn't reddit move forward; accept that yeah some of the vocal minority might hate adverts but with proper advertising they could transform the sites financial situation and hire enough people to make the site able to grow and adapt alongside the demand for the site? Lots of the comments on the blog post seem to have the same sentiment: the reddit admins are never around and the site barely seems to be updated, if people feel that way wouldn't they be happy to take an extra ad or 2 to see that change?
I would love to see an extra 2 adverts on every reddit page if it meant the site could grow and adapt and offer all the features it should have but are left up to the community to build (see: reddit enhancement suite). There's so much reddit could be...
It's really just one of many revenue streams I imagine they will try to tap. People feel like it's a community as well, and if they're willing to give back, which reenforces the individual's sense of connection, then it can work.
I'm sure they've gone over the numbers and determined the only way to generate enough ad revenue would be to seriously annoy the users, all of whom are familiar with Adblock anyway. And why go down that road if they don't have to, there's nothing wrong with asking for contributions in order to put out a product they're proud of. Advertising in print has always been a supplemental thing, the real money came from subscriptions.
And why go down that road if they don't have to, there's
nothing wrong with asking for contributions in order to
put out a product they're proud of
They've explained it as they're losing money and they will continue losing money unless a substantial number of people sign up to reddit gold. Asking for contributions is an absolutely wonderful idea (they've been doing it for over 2 years and I signed up the first day it was available -- the company I work for also has a similar system to reddit gold for our websites) however I do not agree with sacrificing actual user experience in the name of "freedom".
As I said in my comment I would love to see a comment from someone involved with reddit previously or presently on whether or not the fear of user outrage is a driving force behind this refusal to invest in proper advertising, because it seems to be that way.
From the way the blog post reads I don't think the issue is that they can't make money with adverts, it states:
we can start running a bunch more ads
That seems to imply that adverts are a way for them to make the money they need, it's just one they want to avoid. Maybe they're sugar coating it because saying "if you don't pay up the site is dead" may come with PR problems, but that seems unlikely. My experience with internet advertising is not extensive, it's possible you're right but I think figures would be needed to understand that.
I think that if they want to really commit to the idea that reddit gold can support the site they need to have targets (A counter of the # of people that need to sign up this month), something that people can understand and associate with. If there's 50,000 people needed every month to be paying and it's at 40,000 people will be compelled to sign up to feel like they're contributing.
Looking at what reddit does, I seriously doubt this. They're not a "publication". They don't have to pay writers/journalists to create content, the content comes free. There are many ad-based sites that don't have that luxury. Event moderators come from the community, they're only significant costs is infrastructure and payroll. I use to work for a company that has a fraction of the uniques reddit gets (still in the millions a month though) and that 1) does a lot more then reddit as a product and 2) has significant other costs outside of salary and infrastructure and was still not in the red. Also, this wasn't shitty advertising, the ads were well monitored and we broke ties with networks/advertisers that we found continuously had crappy ads.
There's also no control over the content. As an advertiser, I would be worried with where my ads may end up. With a traditional publication, I generally know the type of content that will come out and their policies.
For your publication, the writers will keep writing as their job, but if you upset the content generators at reddit, you'll lose your content source.
In general, monetization of a publication is a more proven model than monetization of user generated content.
Redditors are a shit audience that commands shit rates from advertisers, because the only businesses willing to buy space on reddit are those with nothing to lose by association with that virulently misogynist, racist filth (well documented by Gawker, CNN, ShitRedditSays, among others).
There’s a good reason Advance has done everything it can to distance reddit from the premium brands of Condé Nast, short of dumping reddit altogether.
If what you are saying were true President Obama wouldn't have campaigned on reddit two months before the election. Presidential campaigns don't take risks like that. You are vastly overstating the damage to reddit's reputation that small underground subreddits and a handful of users have caused due to a couple days worth of tabloid coverage.
If Advance were worried about reddit tarnishing their brands as you say they'd just have the admins ban anything offensive.
I don't doubt that there is a lot of racism, misogyny, etc, prevalent on Reddit. That doesn't mean that Reddit doesn't have any good qualities. It's like judging America based on the worst qualities of the country and saying, "This is America, why would anyone want to live there."
On one end is their free and ad-supported access. The few ads that I see are very easy on the eyes, easy to ignore, and I don't feel compelled by the ads to buy a gold account. In return you get user generated content.
On the other end is the gold account, where you don't see ads, and you get the same user generated content.
In addition to any of that, they might decide to generate content themselves. Be the paid New York Times of the Internet (whatever that means, to them); the Site of Record. They've almost got the credibility, and certainly have the name recognition; their drama gets covered by the mainstream media.
Of course they'd have to hire another body or two.
Why not buy the most popular mobile apps for the site and monetize them? Users seem to be much happier spending money on mobile apps than on web sites.
Not sure if Jason (the developer of Alien Blue... far and away the best mobile reddit client) would want to sell his app. It seems like a labour of love.
--- I typed this up just before getting a call, so apologies for the first-draftiness. I refreshed the page to see if anyone was saying anything similar but I didn't see anything, so I might as well post it. ---
I really think they should just skip over the whole maj/minority struggle and work on a more suitable approach. What makes Reddit so special? Each subreddit and its dedicated and often unique community. When reddit was relatively new I avoided it, because on the surface all I saw were fellow tech-hungry teenagers looking for the next big place to gather. Only a few years ago did I stumble on some of the smaller, more interesting subreddits and realize that I could spend my entire time among just a few without ever caring about the rest of 'Reddit' because within those little communities, there was something really cool and fun. Expat living in Japan? There's an r/ for that. Love cartography? There's an r/ for that. Linguist/mathematician/physicist? Plenty of r/s for you, of varying quality and concentration but interesting nonetheless.
Sometimes when I'm motivated to learn more about a subject, one of the first things I'll do is check if there is a decent subreddit that's relevant. Lo and behold, r/spicy and r/bonsai now come to my frontpage to shower me with pruning advice, sauce exchanges, and more. Of course, anyone can create a new subreddit if the existing ones aren't interesting enough, moderated poorly, or the subject just doesn't have a home yet. My list of micro-wikis and webpages to set up now has marks for items that would work just as well being a subreddit. But we're talking about revenue here, so let me get to the point.
Don't just think about Reddit as one big thing, but rather as a world full of lively other things– some some tiny, others huge. They can make money without looking heavy-handed or causing too much controversy, as long as they see the users (all of them) as collaborators in that effort. Subreddits already enjoy a certain amount of freedom (of moderation, styling), why not gamify it somehow? For example, most people wouldn't mind if r/pics had real ads, and r/pics is probably one of the most trafficked subreddits around. Those who still don't want the ads can get Reddit Gold. However say r/crypto thought the ads were silly, and wanted them removed. Then they could, for example, buy their way out directly (garnering a few extra features for the local mods) or encourage their own subscribers to get gold, with some percentage reducing the number/location of ads until reaching zero.
What? A post get promoted 'My experience with AT&T sucks, they're terrible and here's why'. AT&T's marketing department makes a call, and says 'we'll pull our advertising spend if you don't pull that item'. Suddenly reddit has to make a call between having the cash they require to stay afloat, and staying true to their users.
That being said, I think there's a better compromise for the ad block than what they're doing at the moment. I don't care whether the ad space shows a kitten or an ad for Maccas, so it may as well generate them money (and if a company pulls advertising, well, that sucks, but that's how it goes. Better than having no advertising at all.)
Suddenly reddit has to make a call between having the
cash they require to stay afloat, and staying true to
their users.
but if reddit doesn't have that money now what difference does it make? if reddit has reddit gold and has advertising, don't they end up in a position where they're able to choose and turn away advertisers if they need to? unless turning away advertisers causes some sort of industry problem where companies are unwilling to work with reddit?
The "big corps vs. the little guy consumers" notion is cute but I think the problem is more along the lines of very few advertisers wanting to be on a site with areas like /r/jailbait and /r/creepshots (or whatever took their place this week).
Oh, I think that's also a problem. I can't believe that, as a company, they put up with that for so long - I would have banned Jailbait from the start, especially once it started showing up on Google's front page results.
That being said, I'm sure there's a compromise. If Obama is prepared to associate himself with the website (and I would have said that was a fairly poor decision on the campaign's part, but it didn't end up being a problem), then I'm sure there are advertisers. A bigger problem I suspect, is that it draws an audience who simply do not click on ads.
I was already a reddit gold subscriber, but the fact that at the moment they're literally running into the red to provide cool stuff like the Obama AMA makes me want to subscribe again. Anyone looking for a reddit gold account?
[1] http://www.reddit.com/r/blog/comments/12v8y3/now_is_the_time...