Do you reddit?

TL;DR – Einstein boiled an egg and reddit is not making money, but in the right way.*

r/underworkings

A glance at reddit’s front page (www.reddit.com) will show you an eclectic mishmash of content. At the time of writing this piece, the top rated article was about Einstein declaring his second greatest idea after the theory of relativity: adding as egg to boiling soup so as to cook a soft-boiled egg without an extra pot to wash.

That article had close to 6000 votes. When a member of the reddit community uploads content, others in the community can either up- or down-vote it. The content with the highest net up-votes moves up the ranks and ultimately rises to the “front page” which receives the most exposure. All content is organised into ‘subreddits’, which have a particular theme and are always prefaced with an ‘r/’. The Einstein anecdote was posted in ‘r/todayilearned’, a subreddit about interesting, yet little known, facts. Within each subreddit, the content is regulated by self-elected members of the community called moderators.

The front page of the internet
The front page of the internet

Perhaps most critical to reddit is its commenting functions. Members can comment on content, and respond to others’ comments. They can even up- and down-vote comments (top comments are usually as entertaining as the content itself). People engage by interacting in visceral debates and sharing ideas. “Communities” or subreddits are born where people have similar interests, and these communities can have their own traditions, cultures, even languages. For example, members celebrate membership anniversaries, called “cake days”. They also share personal and tragic losses, like being diagnosed with cancer. The responses can be astounding: thousands of supportive comments, advice and counselling, even raising money for medical bills.

r/secretsauce

We often think of platforms as connecting consumers (buyers) with providers (sellers). Reddit is a platform that connects readers with content, but also with each other. Like other online platforms, it has little in terms of traditional assets. Most servers are outsourced and it employs a quorum of engineers, stakeholder managers, and marketers. The website and ranking algorithm are all opened sourced and connected with an API, so anyone could recreate it or link the content to their application.

With such a simple and replicable operating model, it’s fair to ask how reddit has amassed such a following. In 2014 it had 36 million members, attracted 71 billion pageviews within over 10,000 active subreddits. In the same year US President Barack Obama hosted reddit’s Ask Me Anything (AMA) forum, and Bill Gates participated on reddit’s gift exchange, which has broken the world record for the largest Secret Santa, twice! Unlike Facebook, reddit does not on rely on networks to build stickiness (since everyone is anonymous) but relies on great content and a sense of community.

Bill Gates loving reddit
Bill Gates loving reddit

Undoubtedly reddit deserves credit for an operating model that has created immense value its people. I believe there are two particularly important values of the operating model that has guided its success:

  • Allowing for truly unbiased and unadulterated interactions: Reddit values transparent and diverse speech, and achieves it by respecting the anonymity of users.
  • Devolving power to the members: Content and comments are self-regulated by the members, the rare instances where management instituted controls were met with vehement protests.

r/makemomoney

Despite its operating success, reddit remains in the red, but not for the lack of trying. It faces a challenge in capturing value, since of aspects of the operating model inhibit monetisation. For example the anonymization of members limit reddit’s capacity to sell data like Facebook does.

It’s built some traditional avenues of monetisation, namely advertising and premium subscriptions. Both employ some social elements, for example redditgold subscriptions provide access to “secret” subreddits. Their latest idea has been a gift-exchange where members purchase from a reddit market, and reddit takes 15-20% of the transaction value from the sellers. Reddit is clearly wary of alienating members, and they should be. Digg and Quickmeme are examples, where economic motives slowly surpassed community values and the community left in droves.

Even though their performance has not translated to commercial success, I see great alignment between their operating model, and their approach to designing a business model, specifically:

  • Not obstructing existing behaviours: Their business models have allowed for average members to use the site without changing their behaviour. As familiarity rises, so does loyalty and stickiness.
  • Pacing implementation: Any changes have been slow, and have pulled members rather than pushed new products. This mitigates risk of community backlash.
  • Enriching the social experience: Their business models have created new ways for people to interact with each other, maintaining and building the community. For example, with advertising banners members are encouraged to purchase front page banners for $20, if they have an important announcement.

Clearly reddit hasn’t figured it out yet, but they are moving ahead without compromising their beliefs and that’s something to commend.

* TL;DR – a reddit acronym that stands for “Too Long; Didn’t Read”. It’s a synopsis for readers that don’t want to invest in reading the whole article.

 

(1) https://www.reddit.com/r/blog

(2) http://mashable.com/2012/06/06/reddit-for-beginners/#nkLiDYrXbiq4

(3) https://www.redditgifts.com/

(4) http://www.techradar.com/us/news/internet/web/whatever-happened-to-digg-1093422

(5) http://www.forbes.com/sites/insertcoin/2012/07/13/facebook-didnt-kill-digg-reddit-did/

(6) http://www.sickchirpse.com/how-does-reddit-make-money/

(7) http://www.businessinsider.com/reddit-is-trying-to-become-profitable-2013-12

(8) https://www.linkedin.com/pulse/parable-reddit-how-traditional-business-models-fail-rachel-happe

 

 

 

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6 thoughts on “Do you reddit?

  1. I have never used Reddit but am fascinated by it. I’m curious about its UI, which is very Web 1.0 in its aesthetic. I’d be curious to learn more about how the design of the site has evolved and how that can support the WIP business model.

    Thanks for your post!

  2. I have visited Reddit a couple of times, but I have not yet caught on. It is interesting that the company is still in the red since it is such a popular online platform (36 million accounts). Also after looking a little deeper the fact that it started right up the street in Medford, MA was interesting! I’m wondering if the push to get the company in the black will pressure the company to compromise its values for profit. We saw the sensitivity in online communities with Threadless and I’m wondering how close to the “edge” Reddit is. What’s your take?

  3. Love Reddit… cool company and great model.

  4. Big Reddit fan. It was interesting to me to learn they are in the red, although I was not really sure how they captured value. As more fans join I wonder if they will be able to support the community with the infrastructure that it requires–I assume yes.

    Thanks!

  5. Great post. I use Reddit almost daily. Real enjoyed your analysis of what makes their operating model effective, especially given the anonymity of its members. I wonder if they could leverage ideas from the community itself to come up with better ideas of how to monetize the site to ensure it can at least break even.

  6. I’m a little bit surprised reddit hasn’t managed to create a model that allows them to support the costs of running the company through targeted advertising on various subreddits? Do you know if this is something that has been tried, or whether it merely isn’t enough to cover the costs? The delicacy of the platform reminds me a bit of threadless as well… although maybe you could argue that if they make changes slowly enough, the site is so big and so diverse that it would be very unlikely to drive users away?

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