5 ms·

I agree with your main point but your math is off by an order of magnitude: (14,300,000 x $0.05 x 0.5)/1000 = $357.50/day I still think Reddit could easily pa

I agree with your main point but your math is off by an order of magnitude: (14,300,000 x $0.05 x 0.5)/1000 = $357.50/day I still think Reddit could easily pay their costs by running ads, not sure why they are not doing so.

danielsoneg 16y ago
Their user base is outright hostile to the idea.
- cheald 16y ago
  Users are actively hostile to ads in general. Reddit's userbase, in particular, has been spoiled by the staff's similar attitude towards ads. The fact remains that computing power, bandwidth, and storage takes money, which is easy for your average hostile-to-ads user to forget. If they dropped in AdSense units, there would be an uproar for about a week, then people would adapt and life would go on with a significantly bolstered revenue stream. Worst that happens is that more users would still be adblocking, but given their page view volume compared to their expenses, I can't imagine that even that would be a net loss.
  - masklinn 16y ago
    > The fact remains that computing power, bandwidth, and storage takes money, which is easy for your average hostile-to-ads user to forget. Uh... therefore reddit gold. That's the point.
    - axod 16y ago
      Reddit gold will probably bring in 2% of what adsense would bring in (If the userbase was 'better')
      - jacquesm 16y ago
        I think you are completely wrong about that. Even at a very low conversion rate subscriptions pull in an awful lot of money. Typically my subscription income outweighs my ad income by about 5 to 1 in a given month. And my site is far smaller than reddit. The key to this is user retention, and if reddit users are loyal to reddit (which they seem to be, especially those willing to pull their credit cards) I wouldn't be surprised to see retentions on the order of 6 months or more. What do you base the 2% on ?
        axod 16y ago
        If you look at the internet as a whole, the number of $ revenue from 'subscriptions' vs number of $ from advertising, then the % is probably far lower. <1%. Also my personal experience has been that it's far far easier to make money from advertising. Especially for something like Reddit where there is little incentive for people to pay. For Reddit, yes you'll get a number of die-hard fans who want to subscribe. But I don't believe that there is a big enough value proposition for the userbase to do that en-masse. They may as well just set up their own reddit since the code is open source (And wouldn't be that hard to recreate if it wasn't). It might be different if: A). Reddit wasn't spending crazy money on servers B). Reddit wasn't owned by a multinational corporation C). Reddit hadn't pandered to, and cultivated a staunchly anti advertising userbase. Right now though, it's looking like they're going to try a subscription based news service. Which fails time and time again. People don't want to pay for online news. Also from their latest blog post, it looks like they're just spending the 'reddit gold' money on more hardware! Instead of fixing the underlying issues.
        jacquesm 16y ago
        I agree that their hardware strategies are bordering on the insane, I can host much (and really, like 10 times or so) cheaper by simply getting dedicated servers with fat pipes than I could ever do using EC2, that part makes no sense at all to me. Scaling issues aside, if they ran an efficient shop serverwise I think they could easily operate the whole thing from their subscription potential. Typically you can count on between 0.5 and 2% of your users signing up for a 'gold' service, provided you give them some extra goodies on top of the free product. The 'news' angle is a silly one, but they could definitely think up features that people would pay for that are not available right now in the free product. The real issue with reddit making money from advertising (aside from the ad blocking) is that the CPMs that are quoted here (between 2 and 9$) are not realistic for their number of pageviews. By the time all the unsold inventory is taken out you probably end with $0.05 ECPM or maybe 10 cts per click (and that would be pretty good). I'm really interested in how much they were paying before for their bandwidth and hosting if going to EC2 actually lowered their costs, they must have had the worst deal on the net for that to be true. Right now, $30K / month buys you 20 (very) fat servers and 20 Gbps flat rate, managed hosting. I'd really like to see someone make the case they can get that kind of performance out of EC2 for a similar cost.
- llimllib 16y ago
  They have conditioned their user base to be hostile to the idea.
  - krakensden 16y ago
    Maybe, but I'd guess a significant portion arrived that way. Advertising on the web is often extraordinarily obnoxious, and makes few friends.
- Hovertruck 16y ago
  I'm not entirely sure that's true. Most active redditors I know, including myself, have reddit whitelisted on AdBlock.
  - axod 16y ago
    Whitelisting solves nothing. It's still a 'bad' userbase. It's been cultivated to be anti consumerist anti advertising etc. Whitelisting on adblock will let through a tiny bit of CPM based revenue, but people won't click in the numbers that 'normal' people do.
    - DennisP 16y ago
      How do you cultivate a user base in a particular direction, when all the content is submitted by the users? The only way I can think of to cultivate an anti-ad userbase is to not have ads, but Reddit has had advertising for a long time. For a while it was even a bit obnoxious.
      - axod 16y ago
        Right. You need to set the tone for a community while it is growing.
- davidw 16y ago
  It'll be interesting to see whether they're more hostile to advertisements or not having a site.
pbhjpbhj 16y ago
Using _pi's figure of $8 CPM then we get 160 times this, $57,200 ? No on seems to be mentioning other revenue streams, user stats, customised reddits, merchandise sales, ...?
- blhack 16y ago
  Do you really think that they could pull $8 CPM? What's digg getting? A bit of googling shows that most people who get front-paged see ECPM of <$1... Why do you think that reddit would be so much higher? (I agree, they should be showing more ads)
  - _pi 16y ago
    It's really their rate, check the link under my comment thread.
- mrkurt 16y ago
  There's not a chance in the world that reddit could get $8 CPMs. They might be able to sell ads on one or two subreddits for that, but I doubt it.
  - bl4k 16y ago
    They could get more than $8 because there would only be a single ad on the page. Roadblock rates (ie. when a single advertiser buys out every ad slot on the site) are $65+ CPM on sites like Gawker and Techcrunch. If you assume a 50% fill rate on reddit, it would be very realistic for the site to achieve a $20+ECPM. The users now have an option to not see ads (ie. buy a gold subscription), so they can't really complain about having a single ad slot on the page for non-gold users. To go further, they could not show the ad slot at all if there isn't a campaign running on the site (ie. don't show 'backfill') which would further increase the value of the slot. $100k+ a month from that ad slot would be very very easy to achieve, and with minimal sales work (they could outsource it to Doubleclick or another network). Sites like Techcrunch and Gawker make millions from ad revenue with a fraction of the traffic - reddit could hit 6 figures a month with a single unit that isn't even displayed all the time. It would be a perfect balance of retaining the style of the site along with bringing in revenue TBH, when CN bought reddit, this is what I thought they would do
alnayyir 16y ago
$130k/year with your numbers. That'll cover the servers, easy, but what about salaries?
- cheald 16y ago
  That's with a 5-cent CPM and a 50% block rate. Those are laughably conservative numbers. The actual numbers they could pull would be massively larger.
  - alnayyir 16y ago
    Just wondering, thanks for letting me know. I have no idea what constitutes normal ad rates for a site because all the projects I've worked on have been pathological cases in either direction. What would some realistic numbers for something like Reddit be?
    - jamiequint 16y ago
      Maybe a $0.50 CPM * 4 ad units/page * (1 - 0.25 adblock rate) * 14.3M/1000 = $21,450/day or ~7.83M/yr
- masklinn 16y ago
  At 33k/mo in servers costs it doesn't even remotely cover the servers.
cheald 16y ago
I was thinking that my numbers seemed high, but mentally chalked that up to the fact that they do $overflow pageviews/month. Thanks. Still though, I agree. At something like a $2 CPM (which is NOT that hard to get for someone their size) they'd still be pulling in insane money for just one ad unit.

danielsoneg 16y ago

Their user base is outright hostile to the idea.

cheald 16y ago
Users are actively hostile to ads in general. Reddit's userbase, in particular, has been spoiled by the staff's similar attitude towards ads. The fact remains that computing power, bandwidth, and storage takes money, which is easy for your average hostile-to-ads user to forget. If they dropped in AdSense units, there would be an uproar for about a week, then people would adapt and life would go on with a significantly bolstered revenue stream. Worst that happens is that more users would still be adblocking, but given their page view volume compared to their expenses, I can't imagine that even that would be a net loss.
- masklinn 16y ago
  > The fact remains that computing power, bandwidth, and storage takes money, which is easy for your average hostile-to-ads user to forget. Uh... therefore reddit gold. That's the point.
  - axod 16y ago
    Reddit gold will probably bring in 2% of what adsense would bring in (If the userbase was 'better')
    - jacquesm 16y ago
      I think you are completely wrong about that. Even at a very low conversion rate subscriptions pull in an awful lot of money. Typically my subscription income outweighs my ad income by about 5 to 1 in a given month. And my site is far smaller than reddit. The key to this is user retention, and if reddit users are loyal to reddit (which they seem to be, especially those willing to pull their credit cards) I wouldn't be surprised to see retentions on the order of 6 months or more. What do you base the 2% on ?
      - axod 16y ago
        If you look at the internet as a whole, the number of $ revenue from 'subscriptions' vs number of $ from advertising, then the % is probably far lower. <1%. Also my personal experience has been that it's far far easier to make money from advertising. Especially for something like Reddit where there is little incentive for people to pay. For Reddit, yes you'll get a number of die-hard fans who want to subscribe. But I don't believe that there is a big enough value proposition for the userbase to do that en-masse. They may as well just set up their own reddit since the code is open source (And wouldn't be that hard to recreate if it wasn't). It might be different if: A). Reddit wasn't spending crazy money on servers B). Reddit wasn't owned by a multinational corporation C). Reddit hadn't pandered to, and cultivated a staunchly anti advertising userbase. Right now though, it's looking like they're going to try a subscription based news service. Which fails time and time again. People don't want to pay for online news. Also from their latest blog post, it looks like they're just spending the 'reddit gold' money on more hardware! Instead of fixing the underlying issues.
        jacquesm 16y ago
        I agree that their hardware strategies are bordering on the insane, I can host much (and really, like 10 times or so) cheaper by simply getting dedicated servers with fat pipes than I could ever do using EC2, that part makes no sense at all to me. Scaling issues aside, if they ran an efficient shop serverwise I think they could easily operate the whole thing from their subscription potential. Typically you can count on between 0.5 and 2% of your users signing up for a 'gold' service, provided you give them some extra goodies on top of the free product. The 'news' angle is a silly one, but they could definitely think up features that people would pay for that are not available right now in the free product. The real issue with reddit making money from advertising (aside from the ad blocking) is that the CPMs that are quoted here (between 2 and 9$) are not realistic for their number of pageviews. By the time all the unsold inventory is taken out you probably end with $0.05 ECPM or maybe 10 cts per click (and that would be pretty good). I'm really interested in how much they were paying before for their bandwidth and hosting if going to EC2 actually lowered their costs, they must have had the worst deal on the net for that to be true. Right now, $30K / month buys you 20 (very) fat servers and 20 Gbps flat rate, managed hosting. I'd really like to see someone make the case they can get that kind of performance out of EC2 for a similar cost.
llimllib 16y ago
They have conditioned their user base to be hostile to the idea.
- krakensden 16y ago
  Maybe, but I'd guess a significant portion arrived that way. Advertising on the web is often extraordinarily obnoxious, and makes few friends.
Hovertruck 16y ago
I'm not entirely sure that's true. Most active redditors I know, including myself, have reddit whitelisted on AdBlock.
- axod 16y ago
  Whitelisting solves nothing. It's still a 'bad' userbase. It's been cultivated to be anti consumerist anti advertising etc. Whitelisting on adblock will let through a tiny bit of CPM based revenue, but people won't click in the numbers that 'normal' people do.
  - DennisP 16y ago
    How do you cultivate a user base in a particular direction, when all the content is submitted by the users? The only way I can think of to cultivate an anti-ad userbase is to not have ads, but Reddit has had advertising for a long time. For a while it was even a bit obnoxious.
    - axod 16y ago
      Right. You need to set the tone for a community while it is growing.
davidw 16y ago
It'll be interesting to see whether they're more hostile to advertisements or not having a site.

pbhjpbhj 16y ago

Using _pi's figure of $8 CPM then we get 160 times this, $57,200 ? No on seems to be mentioning other revenue streams, user stats, customised reddits, merchandise sales, ...?

blhack 16y ago
Do you really think that they could pull $8 CPM? What's digg getting? A bit of googling shows that most people who get front-paged see ECPM of <$1... Why do you think that reddit would be so much higher? (I agree, they should be showing more ads)
- _pi 16y ago
  It's really their rate, check the link under my comment thread.
mrkurt 16y ago
There's not a chance in the world that reddit could get $8 CPMs. They might be able to sell ads on one or two subreddits for that, but I doubt it.
- bl4k 16y ago
  They could get more than $8 because there would only be a single ad on the page. Roadblock rates (ie. when a single advertiser buys out every ad slot on the site) are $65+ CPM on sites like Gawker and Techcrunch. If you assume a 50% fill rate on reddit, it would be very realistic for the site to achieve a $20+ECPM. The users now have an option to not see ads (ie. buy a gold subscription), so they can't really complain about having a single ad slot on the page for non-gold users. To go further, they could not show the ad slot at all if there isn't a campaign running on the site (ie. don't show 'backfill') which would further increase the value of the slot. $100k+ a month from that ad slot would be very very easy to achieve, and with minimal sales work (they could outsource it to Doubleclick or another network). Sites like Techcrunch and Gawker make millions from ad revenue with a fraction of the traffic - reddit could hit 6 figures a month with a single unit that isn't even displayed all the time. It would be a perfect balance of retaining the style of the site along with bringing in revenue TBH, when CN bought reddit, this is what I thought they would do

alnayyir 16y ago

$130k/year with your numbers. That'll cover the servers, easy, but what about salaries?

cheald 16y ago
That's with a 5-cent CPM and a 50% block rate. Those are laughably conservative numbers. The actual numbers they could pull would be massively larger.
- alnayyir 16y ago
  Just wondering, thanks for letting me know. I have no idea what constitutes normal ad rates for a site because all the projects I've worked on have been pathological cases in either direction. What would some realistic numbers for something like Reddit be?
  - jamiequint 16y ago
    Maybe a $0.50 CPM * 4 ad units/page * (1 - 0.25 adblock rate) * 14.3M/1000 = $21,450/day or ~7.83M/yr
masklinn 16y ago
At 33k/mo in servers costs it doesn't even remotely cover the servers.

cheald 16y ago

I was thinking that my numbers seemed high, but mentally chalked that up to the fact that they do $overflow pageviews/month. Thanks. Still though, I agree. At something like a $2 CPM (which is NOT that hard to get for someone their size) they'd still be pulling in insane money for just one ad unit.