[thunderbird120]

People are starting to come to terms with the new reality where tech companies actually need to have a viable business model which takes in more money than it expends. The return of nonzero interest rates means that the runway is no longer infinite, you can't just raise more money to cover costs forever, eventually you have to either take off or crash. This is revealing just how much of a nonsensical anomaly most of the 2010s were for many internet companies. COVID provided a brief return to this period but it couldn't last. The idea that large companies can be run at an operating loss indefinitely is going to be dying a slow painful death over the next few years along with any companies which can't make the transition to actually earning money, and that is the way it should be.

[vineyardmike]

> …and that is the way it should be.

I don’t know, it’s looking like most people prefer businesses that eschew profits.

Yea my business-101 textbook says businesses should run a profit, but my sociology-101 textbook says we should do things that are good for people.

Maybe Reddit (et al) should be recreated as non profits dedicated to community building… before Facebook becomes the sole source of internet social interaction.

[goatlover]

How will non-profit Reddit pay its costs? What makes you think doing things for the good of people is excluded by for profit businesses? They create all sorts of products and services that people want and need. Yes, there are abuses. Same with non profits. Because humans are in charge.

The problem with doing things for the good of people in a general sense is that you still need to have a functioning economy where scare resources are allocated somehow.

[vineyardmike]

> What makes you think doing things for the good of people is excluded by for profit businesses?

This entire thread is proof. The entire thread is platforms that people liked started to suck as soon as they decided to make a profit.

Sure theoretically profitable businesses can be good for people, but I’m not holding my breath for an example.

> The problem with doing things for the good of people in a general sense is that you still need to have a functioning economy where scare resources are allocated somehow.

Scarce resources is a cute textbook term but very few things in society, especially on the internet, are scarce. Profits must come from somewhere, and that somewhere is your customers. So it’s almost tautological that profits are bad for customers.

Reddit was built on free content from unpaid users being moderated by unpaid mods for the benefit of the community. Reddit is discovering that they can’t charge for a scarce resource they don’t own. The scarcity wasn’t internet bandwidth or servers or engineering efforts. The scarce resources were community contributions by users and mods.

[nearbuy]

Continuing to operate at a loss isn't a good option either though. Eventually they'd shut down and the community would lose all of Reddit.

[dbbk]

But they do have to make a profit or they will cease to exist. Money is not some fictional number.

[soundsgoodtome]

I mean… contextually, it kinda has been for the past decade if you’ve been in tech.

It’s only starting to matter now because those fictional numbers are starting to become very real, very fast, given the current state of interest rates.

[roastedoolong]

> How will non-profit Reddit pay its costs?

hmm... if only there were... I don't know... some way to offer users to pay for a quality experience and subsidize that income with advertisements and reasonable API usage fees?

no, that couldn't possibly work! I mean, look at Wikipedia...

oh. right.

[dbbk]

That's literally what Reddit does now and it's not enough

[bsmith]

not enough to cover the costs of running reddit, or not enough to pay back the VC funding?

[lmeyerov]

Yep!

Tech companies over hired for ~10 years wrt efficiency & sustainability, and few want to do layoffs necessary to get 'good' efficiency numbers, instead just close enough that they can maybe reach non-buzzy norms in a few years, and hope things change in the meanwhile to go back to setting money on fire.

It's natural: market funded inefficient growth for years, and tech people want to feel like they are succeeding, which headcount is a power-tripping and physical metric for, even if wildly inaccurate. Cutting isn't easy either. Losing headcount makes folks want to quit, slows growth, and if as deep as needed for efficiency (which the 'standard' 10-20% cut isn't enough for), loses revenue... Which can cause a death spiral.

We have been growing purely on revenue for awhile now, and we have to remind many of our customers that we need to get paid bc we aren't (currently) doing the VC thing. Many have been trained at this point to not think that way, it's bizarre.

[mrtksn]

Amen, I really hate that era because it has turned into a land grab by those who had access to that infinite money. It eroded the web and mobile by consolidating everything into a few platforms.

I'm hopeful that if companies start making money, we will start seeing competition again.

The web is barren, the web 3.0 went nowhere and social media is an outrage machine. I'm sure it could be better.

[ls612]

The other major issue is that the ability to start a major reddit competitor has been regulated out of existence. Same with any other large platform. The EU especially (although the US has also done this to a lesser extent) has created regulations and laws which are near-impossible technically to fulfill, so anyone operating a new website is in violation of them if you look hard enough. And believe me for a new social media app with linking news/politics/etc stories as a major feature everyone in power will be incentivized to look as hard as possible.

[jdiez17]

> The EU especially (although the US has also done this to a lesser extent) has created regulations and laws which are near-impossible technically to fulfill

Which regulations specifically are you talking about and what makes it “near impossible technically to fulfill” them?

[yamazakiwi]

Twitch revenue was 2.8 Billion last year. In what way does prioritizing more revenue mean they will achieve a viable business model when they're already generating billions.

Business types want you to think they're tidying up, but most are using this zeitgeist as an opportunity for greed and the chance to shift more power away from workers.

[thunderbird120]

To state the obvious, total revenue does not tell you if a company is actually making money. If operating costs exceed revenue you lose money. It doesn't matter how much revenue you're making. Given the costs required to run twitch, they are likely still losing money, not making it. Losing money is not a viable business strategy.

[yamazakiwi]

I am aware that revenue is not profit, we are on HN after all.

While it is possible to run a company at a loss with extremely high revenue, contextually, you're making excuses for a company that could easily keep running with 2.8 Billion dollars yearly.

It's likely that after they extract more money from creators they will increase their spend more to maintain operating at a loss. At what point does it end?

[viknesh]

If your claim is "2.8 billion in revenue is enough to run twitch profitably", I'd love to see the numbers backing that up. What's the cost of serving videos, acquiring advertisers, etc.

Otherwise it's just wild speculation.

[yamazakiwi]

If you were looking at the product and that number reasonably, you would realize that it doesn't take wild speculation.

[DangerousPie]

Revenue != profit

[yamazakiwi]

If you're making 2.8 billion in Revenue with no profit on a Twitch-like product, that's a you problem, not the creators problem. They already extract a ton of money from creators and generate revenue with ads. Twitch is spamming ads like it's TV in the 90's.

[hn666]

Without knowing the operating costs your sentence really makes no sense, this single number doesn't matter, what matters is its relation to the operating costs.

[yamazakiwi]

It's not as simple as costs vs revenue and you are wrong, it is trivial to speculate in this case.