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Reddit is the solution to many of life’s simple problems. Need fan theories about the finale True Detective: Night Country? Go on Reddit. Recently moved to a new city and want to join a running club? Reddit is waiting. The so-called front page of the Internet is a huge multiverse of message boards, with more than 100,000 distinct communities. As some of its 73.1 million active users say, there’s a subreddit for almost everything. (Literally, actually.) So, maybe the solution to the problem of Reddit needing to make more money lies somewhere in one of those subreddits.
As the massive online forum launches its initial public offering, with an expected valuation of about $6.5 billion, the moment has been somewhat overshadowed by reminders that the company has never turned a profit in its nearly 20 years of operation. Even with revenue growth of 21% in 2023, for example, its net loss narrowed to $90.8 million. Reddit recently tried to drum up excitement about an IPO among its broad user base, offering its most active participants the chance to buy in early, but many of them vehemently rejected it. Do they know something that outsiders don’t? Since no one can engage with Reddit quite like its users, Fast company He crowdsourced several Redditors’ ideas on how the company could become profitable, and asked business analyst Jeremy Goldman which ones he thought might actually work.
Goldman is senior director of marketing, trading and technical briefings at subscription-based market research shop Emarketer, and is a show host Future proof Podcast. Equally important, for the purposes of this analysis, he has spent time in the trenches of Reddit himself. As the company’s senior emarketer, Goldman created several under-the-radar accounts, tracking the ways Reddit identifies and targets its users. As such, he has been watching with keen interest the occasion of Reddit’s long-awaited IPO, as a potential turning point.
Here are monetization suggestions from Redditor sources:
More targeted advertising
“They know who we are on Reddit anyway so they can target ads within our Reddit,” Splashbodge said He says In r/tech.
Scrolling through the average subreddit, users might find a promoted message from a brand somewhere in roughly every 10 posts. However, these ads currently do not appear well to their (mostly anonymous) users. As for advertisers, they still seem to view Reddit as a weird, niche platform, and not a big part of their social investment strategy.
Goldman agrees that this is a good idea but may be difficult to implement. “If these are good native ads that feel organic to the platform and not intermittent, especially for new users, then it makes sense that it’s something that can drive revenue,” Goldman says. “With Reddit, though, many users have been there for a while, which makes change more difficult. It’s also difficult to explain to brands that these ads really work simply because Reddit has a lot of information about what its users care about.” .
“They’re sitting on so many different gold mines (data, profitable demographics to advertise to, partnerships with big brands, etc.) but they’re too dumb to do anything smart with them right now,” experienced @nowhack He says In r/stock.
Some of the most popular subreddits, like Am I The Asshole and the massive Ask Me Anything forum for public figures, appear to be ready for partnerships with major brands.
“This is actually a really interesting possibility,” Goldman says. “I think if you have partnerships with big brands that can get bigger acquisitions, like YouTube acquisition slots, that makes a lot of sense given the size of Reddit. You can see them doing a lot of brand deals where these brands are doing one-off sponsorships.” For specific subsites or for the entire site.
Expand the premium model or offer custom features
“Take and expand the existing premium ad-free experience,” He says c4ptnh00k at r/IntellectualDarkWeb. “Offering a premium API offer versus the free one. Restricting free API keys to throttle bots. You would then have two different revenue streams. This would allow for premium subscription features in the UI.
Although Reddit already has a premium tier, offering an ad-free experience and access to the exclusive r/Lounge community for a $72 annual fee, many of the site’s heavy users want access to more customized features.
Goldman sees some hope in this. “Most platforms haven’t done a good job of breaking down their premiums. “Snapchat Plus is the only app that’s really been a hit,” Goldman says. “And part of the reason we think Snapchat Plus is successful, anecdotally, is that it has a lot of younger paying users.” Their parents are the price. So, I think with Reddit, it definitely might encourage more people to move towards the premium version if they start offering more custom features. But part of the challenge is that Reddit really needs these cool features for its standard user base. If you hold these for some time, when they could be said to be lagging behind on the innovation front, that could be a problem.
Lower pay for CEO Steve Hoffman
“No profit but the CEO gets paid hundreds of millions? Perfect. Great investment. No,” He says Price Ninja at r/technology.
Similar remarks crop up frequently in Reddit threads discussing the site’s potential profitability, mainly because Hoffman’s $193 million compensation package was a recurring point of discussion in the run-up to IPO day. Would it raise Reddit’s bottom line if he was paid less?
Goldman doesn’t see Hoffman’s pay cut as the main solution to Reddit’s profitability problems. “If your CEO pay is the reason you’re not profitable, then something has really gone wrong. Because it means your company is much smaller than you want it to be. So, this is definitely not a Reddit issue in the long run. However If Hoffman’s compensation was closer to Mark Zuckerberg’s $27.1 million or Snapchat CEO Evan Spiegel’s $3.3 million, the company might now be profitable.
Hire highly qualified supervisors and make them paid employees
“Maybe they can use the cash to hire some good mods,” He says notaliberal2021 on r/Stocks, “Because the majority of people we have now are so biased and power-hungry.”
The fact that moderators work for free has long proven Reddit’s magnetic appeal. However, the fallibility of these non-employees has led to some hate speech issues over the years, along with some banned subreddits. Perhaps hiring specialists in more of these roles would make things run more smoothly overall and pave the way for brands to feel more secure. At the same time, such a move could lead to one problem being replaced by another, as safer subreddits alienate a portion of the user base that likes to post and engage with more provocative content.
“I think they can work on that to support “Edits better — motivates people about brand integrity and gives them a stake in building stronger communities,” says Goldman. “But that only gets you part of the way there. You can’t give up too much to the people running these communities if the primary goal is profitability.”
Sell Reddit to Meta or Google
“Reddit should be acquired by a company that already makes most of its money doing something else, (perhaps an ISP) which would then be willing to run it as a loss leader.” He says Slay the dragon at r/IntellectualDarkWeb.
In the run-up to its IPO, Reddit announced that it would sell nearly 20 years of unique user data for AI training purposes. Since Google is already licensing Reddit content to train its AI models, it might be thinking about showing up around the world.
Goldman doesn’t think such a deal would pass regulatory muster, but notes that if Google eventually buys Reddit, Redditors may not be happy about it in the long term. “The last thing Google is going to do is suddenly make itself like Google; instead, they’re probably going to play against the grain and prove to people that nothing is going to change,” he says. “And then, when people almost forgot that Google bought Reddit and nothing changed, I I’m talking years later, then That’s when you’ll start to see things change, and Google will turn on the advertising spigot.
Ultimately, Reddit has yet to prove its ability to generate the level of revenue that a platform of its size and length of existence should. Becoming shareholders will only increase the pressure on the company to find a path to profitability, with no clear path to doing so without putting pressure on the user base. It’s a complex dilemma that makes Goldman glad he’s not the company’s CEO.
“Imagine you are playing chess and you have several different moves, but each one leads to checkmate,” he says. “That’s the challenge I think Reddit faces.”
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