[Iulioh]

Another point i would like to discuss, if someone has more knowledge than me:

How the fuck was reddit not profitable?

The founder said it but i still don't belive it.

Was all the money spent in bullshit features no one still uses or it was before that?

[sschueller]

It's not profitable enough. Investors all expect double digit continuous growth. No one seems happy anymore to "just" make a profit.

This results in companies rapidly growing until no more profit can be made in the short term at which point they start cutting costs to continue show profit. The cuts result in destroying the long term value (firing valuable know how etc.) for a short term profit. At the end the company dies or becomes a sad zombie.

Rinse and repeat.

[lotsofpulp]

Reddit has not yet earned a profit.

https://companiesmarketcap.com/reddit/earnings/

[creesch]

Because for the past few years they have never been interested in actually being profitable in a sustainable way. They only worked towards “potential” profitability based on their huge user base as a signal towards potential investors.

Before all this, before an IPO was considered an option, they actually did try to make the platform sustainable for a while. I can't remember the details, but buying gold (and getting some perks) you supported reddit. They actively promoted this and even had a counter that showcased how much you contributed to server costs and all that. This is also the only time I remember that reddit reported numbers in the black.

They could easily have built further on this and increased income sustainably and slowly growing over time. But clearly at some point it was decided that this approach was not enough and that they needed more rapid growth and work towards an IPO. Which is the point where they massively scaled up their staff, started attracting investments and started working on the redesigned reddit. Which truly marked the beginning of the end.

Not to say that things were perfect before that, far from it, the platform had enough issues back then as well. But there was a very distinct and clear point where things still could have turned around and reddit would be a radically different platform from what it is today.

[silisili]

Reddit has way less users than it claims. I don't know what percentage are bots, but I'd guess it in the 30 to 40 percent range. It's not uncommon at all to find identical comments, or to reverse search any upvoted post and realize it's a repost, with many identical comments from the last time.

The real users probably aren't worth much, advertising wise. The key young demographic doesn't use it, and only a small portion of the next most valuable does.

[Iulioh]

Whatever number of users are or were bots it was and is still one of the most visited sites in the world and it was text based (before the image and video hosting) with the added bonus of the user autotargetting themselves and their interests...how can it NOT be profitable?

[silisili]

Personally, the only people in my circle of friends I know that use it heavily are single, older liberal Millennials. Plenty of others use it for niche topics at times, but not to the same extent. To young people, it might as well be a more boring Facebook.

The key demo of 18 to 34 is mostly uninterested. Of the next demo, you only have one slice of the pie who interacts much at all. Compared to most other social media, it's not worth much.

This, however, is an anecdote of one data point of course.

Edit - Also, why pay to advertise when you can just make a shill account for free?

[Iulioh]

--- Also, why pay to advertise when you can just make a shill account for free? ---

Because it does not guarantee visibility.

"Why pay for advertising on Facebook when you can have a Facebook page?"

[silisili]

Because the advertising model is very weak on Reddit, it's just a sponsored post with no differentiation most people skip past. No video or image to catch interest.

Plus, the users are self segregated, what a dream.

Imagine you wanted to sell drop shipped backpacks. All you'd need to do is create and prime, or buy, a dozen or so accounts, and start recommending your own brand subtly in every recommendation thread in r/backpacks or whatever the most popular sub for it is.

People trust Reddit because they assume they're other real users. Many advertisers already know and take advantage of this. It's nearly impossible at this point to know who or what is authentic.

[TeMPOraL]

> People trust Reddit because they assume they're other real users. Many advertisers already know and take advantage of this. It's nearly impossible at this point to know who or what is authentic.

That's what advertisers would like their customers to believe.

The truth is closer to: advertisers are lazy, Reddit users aren't complete idiots, subreddits are moderated, and spammers are (rightfully) despised. Effective shilling takes more effort in actively moderated environment so I wouldn't be surprise if sponsored posts had a better ROI than the much more dishonest plays.

[TeMPOraL]

> The key demo of 18 to 34 is mostly uninterested. Of the next demo, you only have one slice of the pie who interacts much at all. Compared to most other social media, it's not worth much.

This view may very much be the answer. Like, if the 18-34 "key demo" (which, incidentally the Millenials you mention are a part of) is "mostly uninterested", it's dumb to chase after them. Reddit had - and surprisingly, still has - its own, large core demographics, which they somehow failed to monetize. Hell, for a good while that demographics was upstream from Facebook, providing content for Facebook users to repost.

I guess the VC rules are that you either shoot for the Moon or get written off, even if you have a perfectly good submarine.

[roenxi]

They don't seem to advertise very much. And I'd expect most of the advertising revenue would be going to people cutting out the middle man by posting to Reddit directly. If they aren't making $ per page view, it is not crazy to think that being the most visited site in the world is unprofitable.

If anything, just by the logic of commodity economics, they should in theory be - at best - borderline profitable. They don't provide any obviously useful or difficult service apart from an easily recognisable domain name and they face global competition. No obvious moat, no obvious profits.

[meowface]

If it had the number of real users it says it has, would that really increase the chance of it being profitable?

[SanjayMehta]

All dictionary words are reddit usernames with little activity.

One of the founders admitted that they had created thousands of fake accounts to give the appearance of traction.

[raverbashing]

> The real users probably aren't worth much, advertising wise.

Well they have alienated the power users and made the site focused on the 9gag audience then wonder why the value per user goes down

[Ekaros]

Probably combination of not actually being good at generating revenue. And also over hiring and wasting money on things beyond core-platform. You know all of the short lived "events" and features.

Developers are cost centre and very expensive one when they spend time on things that do not generate any meaningful new revenue. On site like reddit as long as core product is decent users would stay due to network effects.

[nabla9]

That's deliberate. They chose to grow their user base instead and it worked.

  2019 350 million users 
  2024 504 million users

Investors invest into future free cash flow.

[diggan]

> They chose to grow their user base instead and it worked

"It worked" but for what? Usually the idea is to focus on user growth first, and then eventually turn a profit, but what difference does it make if you succeed with the first step if you haven't even thought about the second step, much less be able to succeed with it?

[nabla9]

Reddit can turn profitable at any point.

The spend to grow. Sales and marketing $71 million, R&D $142 million. They could easily switch into 25% profit margin business if they stop investing into growth.

[diggan]

Sure, maybe for some months at max, until people notice they're being squeezed and leave en-masse. I'll believe the common "X can turn profitable at any point" once it's been demonstrated.

[kmac_]

Every 16th living human is a Reddit user? I wonder how they count that.

[Macha]

It's pretty clear why it's not profitable now, they've ballooned the company to a huge size and not got any clear revenue or user growth improvements in line with the company size.

What I'm more surprised is that it wasn't profitable in the yishan/ellen pao era. They had reddit premium unlike the founders first run at the site, and they were still run by a handful of people in Conde Nast's back closet.

[ororroro]

They are deliberately unprofitable. The upside is in tax savings, (potential) growth, and any shady side deals the top level can get away with making.