Reddit made $500M in revenue last year, yet is unprofitable. The reason isn't its AWS bill, but the "must 5x every year no matter what" mentality of their VCs who are looking for their exit. This pushes companies to overhire, add useless features and waste money on user acquisition just to chase that growth chart and have a successful IPO roadshow.
Reddit is a lemon.
"Some invitees say they’re worried about the company’s financial situation. Reddit recorded a net loss of $90.8 million last year, an improvement from 2022, when its deficit came it at $158.6 million. The company said in its prospectus that it’s racked up a cumulative loss of $716.6 million."
Reddit's CEO and COO made $193M and $93M in 2023 but their CFO "only" made $6.6M
So if you eliminate the CEO and COO, they have a profitable business. Given those two have tried to kill the community over and again, why keep them?
Reddit is a lemon.
"Some invitees say they’re worried about the company’s financial situation. Reddit recorded a net loss of $90.8 million last year, an improvement from 2022, when its deficit came it at $158.6 million. The company said in its prospectus that it’s racked up a cumulative loss of $716.6 million."
Reddit's CEO and COO made $193M and $93M in 2023 but their CFO "only" made $6.6M
So if you eliminate the CEO and COO, they have a profitable business. Given those two have tried to kill the community over and again, why keep them?
Reddit is a lemon.
"Some invitees say they’re worried about the company’s financial situation. Reddit recorded a net loss of $90.8 million last year, an improvement from 2022, when its deficit came it at $158.6 million. The company said in its prospectus that it’s racked up a cumulative loss of $716.6 million."
Reddit's CEO and COO made $193M and $93M in 2023 but their CFO "only" made $6.6M
So if you eliminate the CEO and COO, they have a profitable business. Given those two have tried to kill the community over and again, why keep them?
Reddit faces the problem of competing in a marketplace dominated by businesses losing money that are being supported by VC money (well really the limited partner’s money). It is very hard to build a business in an industry where all your competitors don’t care about profit and are only interested in growth.
Without vc, cheap and ad supported is reasonable. Vc pumping in millions and expecting returns that requires building a company is the problem
Does reddit really need, hr, middle managers, sales, marketing, design teams. It wouldn't if it had a focused goal. Now it has all sorts of crap and extra features to try be profitable.
"Some invitees say they’re worried about the company’s financial situation. Reddit recorded a net loss of $90.8 million last year, an improvement from 2022, when its deficit came it at $158.6 million. The company said in its prospectus that it’s racked up a cumulative loss of $716.6 million."
Reddit's CEO and COO made $193M and $93M in 2023 but their CFO "only" made $6.6M
So if you eliminate the CEO and COO, they have a profitable business. Given those two have tried to kill the community over and again, why keep them?
Congratulations, you have discovered why Reddit (and any B2C social network in general) took venture capital as it did and why it's struggling to contain its expenses on scaling to that many users.
Reddit went from 700 employees to 2000 employees because they took VC money and have to grow grow grow. I'm sure one could make a sustainable business out of Reddit but nobody wants just a sustainable business.
The cycle will repeat for sure -- it's been repeating for over 20 years now.
They could have funded 150 startups for 10 years and created 1500 highly motivating startup jobs with that money but instead it will just maintain the status quo, pay Reddit engineers to be corporate cattle and allow reddit to be as innefficient as ever.
It’s a stage in the bubble process: these companies were funded well beyond their real revenue prospects and those unsustainable business models are also seeing ad rates which have been declining for many years. The investors expect returns which the market can’t deliver and that’s going to lead to more abuses until the users switch to a company earlier in the cycle.
Reddit has had something like $550M in funding, with the last round in December 2019. It’s been around for 15 years so it’s unlikely to become profitable at the desired levels but everyone involved has a strong incentive not to recognize that.
Reddit is going public this year and needs to pump revenue numbers up while they are preparing the filing so that the equity holders get a good multiple from the underwriter.
After that, the activist investors which will certainly look for more margins will demand reddit reduce services and increase revenue irrespective of what that does to the services, so long as the relative cost/benefit is beneficial to quarterly returns.
I've actually wondered this for years - why reddit let imgur take that lead and run with it, but to some of the other replies I guess it does come down to cost. Reddit doesn't have a big budget and until last year I think it was just 3 or 4 of them (now I still think it is < 10) -- the moment they get a huge influx of money though, the moment they take over media hosting, cripple third party mobile apps and start punching babies - it seems to be the way of the startup world.
For what little (nothing?) it is worth, it upsets me that this pattern is repeated over and over and over... for once I'd like to see a startup grow organically over time, never forgetting their roots, not being worth $4 billion after a year of being in business and just acting like a good, solid, mature company that grows into something valuable over a decade.
These overnight-billion-dollar dice rolls are getting exhausting and while really addictive and interesting, they just suck the air out of the room.
Reddit is a corporation with a large amount of VC investment. Profit is a primary goal, and engagement that shows more time and thus more revenue is exactly what they want.
The problem is that throwing money rarely leads to the outcome desired.
I would know how to run a high-quality reddit on $5M/year, and perhaps as much as $20M. I would not know how to run a high-quality reddit on $100M/year.
The term is 'overcapitalized.'
At some scale, people focus on climbing corporate ladders over the core business, on pet projects, and communications becomes a bottleneck (and the number of potential links grows as a square law with the number of people).
The right scale depends on the complexity of the product. A car requires an army to engineer and produce.
Reddit? That benefits from a small team, where people can holistically understand the whole system, and everyone involved. That's at most 20 SWEs.
By YC startup standards again, Reddit isn't a very successful company. The amount of early investment that went into it has certainly paid off, but monetization is a seriously hard problem for them.
Reddit at its core is a utility. A "dumb pipe" operator whose main role is to keep the servers running and pay the bandwidth bills. Yet like so many (internet-based) utilities, they have delusions of grandeur, born out of a sense of entitlement to the incredible value produced by their users.
Why did they hire 2000 people? Nothing they have done in the last decade has provided new value to users. If they had simply accepted their role as a utility instead of chasing the mega-growth tech fantasy then they would be a (modestly) profitable company with 200 employees at most.
I don't think Reddit's issue is the cost of operating the site but the pressure to generate bigger revenue for the IPO (or maybe more, a plausible story by which they could generate big revenue).
Of course costs play a part in how much revenue you need, but even in the realm of costs it's probably employees rather than servers that's dominant.
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