Brief Summary
This video explores Reddit's journey from a popular, community-driven platform to a publicly traded company struggling to balance profitability with its unique culture. It examines Reddit's design, its challenges in monetization due to its anonymous nature and user skepticism towards advertising, and the controversial decisions made to increase revenue, such as API pricing changes that alienated users and moderators. The video highlights the tension between Reddit's users and shareholders, and the platform's shift towards prioritizing profit over community satisfaction.
- Reddit is the 5th most visited website in the US and 9th worldwide, yet struggles to be profitable.
- Reddit's unique community-driven design and user base make monetization challenging.
- Controversial decisions, like API pricing changes, have led to user backlash and moderator protests.
- Reddit is now profitable but faces the challenge of balancing user satisfaction with shareholder expectations.
The State Of Reddit
Reddit is a highly popular website, ranking fifth in the US and ninth globally. Despite its large user base, the platform has struggled to achieve profitability for years. Reddit's stock has significantly decreased, and the company has faced challenges in monetizing its user base of half a billion users. However, recent changes suggest that Reddit may finally be making money, but at a potential cost to its community and values.
The Design Of Reddit
Reddit distinguishes itself from other social media platforms through its use of communities called "subreddits," which cover a wide range of topics. Unlike platforms that rely on complex algorithms, Reddit's ranking system is primarily driven by user upvotes and the recency of posts. The platform's open-source nature allows users to see how the ranking system works. Subreddits are managed by volunteer moderators, fostering specific communities and making it a go-to resource for troubleshooting and finding niche information. This community-driven approach has contributed to Reddit's popularity and user loyalty. In 2024, Reddit had 97 million daily active users and over half a billion monthly active users.
A Flawed Business Model
Reddit launched its IPO in March 2024, pricing shares at $34 and experiencing a 70% surge to $57.8 on the first day, raising $750 million and reaching a market cap of $9.5 billion. Despite this success, Reddit faces challenges in monetization. Its revenue streams include Reddit Premium, rewards, and advertising. However, Reddit's average visit duration and pages per visit are lower compared to other social media platforms, and it didn't even make the top 12 in "Average time per month spent". In 2022 and 2023, Reddit experienced significant financial losses. Reddit users don't generate much revenue compared to other platforms. In 2022, the average revenue per user was $43 for Facebook, $35 for Instagram, $10 for Twitter, and only $1.19 for Reddit. Reddit's design and culture make advertising challenging due to user anonymity and skepticism towards marketing. A significant portion of subreddits contain "not safe for work" (NSFW) content, which advertisers avoid.
Doubling Down
Reddit partnered with Google to provide training data for Google AI, generating $60 million annually and gaining access to Vertex AI. A similar deal was made with OpenAI, increasing the share price by 11%. To facilitate these deals, Reddit implemented API pricing, charging $0.24 per 1000 API calls, which negatively impacted third-party platforms like Apollo. Apollo's developer announced the platform had to shut down. In protest, moderators initiated a blackout, with over 7000 subreddits going private or NSFW, causing a drop in traffic and ad revenue. Reddit forced out protesting moderators and prevented mods from changing subreddits to private or NSFW. Despite the backlash, Reddit began to record profits, reporting $29.9 million in income in Q3 2024 and $71 million the following quarter. In Q1 2025, they made $26.2 million. Advertising revenue increased by 61% from 2024 to 2025. However, Reddit's share price fell due to lower-than-expected daily active user growth. Reddit is caught between its users and shareholders, and its efforts to monetize have alienated its community.
