Nobody cleans a house as quickly and as thoroughly as a gentleman who has a ladyfriend coming over. Or something like that, goes the saying. As the man cleans the house, he is acknowledging that the state it was in was not acceptable and yet he was okay with it.
Often we find that startups act like bachelors. They live in filth and will only clean house (pun intended) when a suitor is knocking on the door.
Deezer, the Spotify competitor, is dead to me and many people. They lured us in with their free tiers and high-definition audio quality. We loved it but it was not sustainable and we knew it. I mean, even the mighty Spotify is still losing money every year despite hundreds of millions of premium subscribers.
So, when someone rang the Deezer guys app and said they were thinking of buying the business, Deezer knew they had to pimp their app up. They had to shave its legs and buy it some new fishnet stockings and so the free tier plan had to go.
I think even those among us that don’t use Reddit regularly have come across Reddit. At the very least, we all have seen stuff like ‘r/’ in the search results when we were googling stuff.
Reddit is a social news aggregation, content rating, and discussion website but that description doesn’t do it justice. It is really popular, garnering close to 500 million monthly users, and many people say it has become more useful than Google search on some topics.
Reddit sits on mountains upon mountains of data. It would be hopeless trying to sort through all that data but there are many forums (subreddits) dedicated to specific topics and that’s how the data is sorted.
You can find a forum for any weird little niche interest of yours like the r/gggggg subreddit that’s focused on the letter G. Yep, that’s it. All that’s shared on that subreddit is the letter G on clothes, cars, cartoons etc.
These subreddits are run by community moderators who are not Reddit employees. They clean the subreddits of offensive and illegal stuff.
The moderators are volunteers and do not make money directly from Reddit, but many opportunities exist to make money indirectly. You can probably think of ways you would make money if you had a popular subreddit visited by millions of people every month.
Reddit going public
Reddit is preparing to list on a stock exchange later this year and knows it needs to wear its Sunday best. So, they decided to change the pricing on access to their data.
So, Reddit will be charging third parties for its API. From 1 July, Reddit will charge developers that require higher usage limits $0.24 for every 1,000 API calls or less than $1 per user every month.
Alternate Reddit apps will be hit the hardest. See, the official Reddit app is not well-loved and there are a number of alternates, with their own interfaces that utilise Reddit data through the API. Reddit will be charging these alternate apps.
Apollo, one of the popular alternates said under the new pricing, they would have to pay over $20 million a year. They can’t afford this and have announced that they are shutting down. A number of other alternates said they would be shutting down for good too.
Subredditors are furious. So, a boycott was planned and many popular subreddits went dark for 48 hours to pressure Reddit into rethinking their pricing amongst other things.
The boycott ended on the 14th of June but some subreddits with tens of millions of members each stayed dark.
It had to be done
Reddit’s CEO says they will not be moved by the boycott and will introduce the new pricing structure as planned. He says Reddit needs to become a self-sustaining business and can no longer subsidise high data usage by commercial third-party apps.
He is adamant because he is eying the IPO later this year and needs the company’s books to look as divine as possible. On the impact of the boycott, he says, “We have not seen any significant revenue impact so far and we will continue to monitor.”
Reddit has not turned evil. They have only confirmed that their business model was not sustainable. I mean, the company still posts losses to this day despite revenue growing pretty much every year since the platform was launched.
Reddit was like the neighbourhood drug dealer who gives away free samples to get people hooked and then starts charging them once they are addicted. A strategy that many companies in the USA are using.
Twitter made a move similar to Reddit’s early this year and they too were crucified in the public sphere. It was worse for Twitter because Elon Musk is hated.
They have to take the criticism because they lured us in with free stuff. They should have just charged for their stuff from the get-go. No, ndaakufarisa, they should not have done that.
Reddit has also realised that the likes of OpenAI and their other generative AI friends could benefit from Reddit’s data without paying for it through their still-free API. They figured, here’s their chance to monetise their structured data.
Anyway, what do you think about companies sacrificing profits and subsidising costs for users and using venture capitalists’ money to pay their bills? – only to scrap those free tiers when it comes time to cash out on their platforms.