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Meh, Twitter and Reddit monetize just fine with ads. The problem comes in with VC expectations where everything must 1000x or die. These are not bad businesses,

Meh, Twitter and Reddit monetize just fine with ads. The problem comes in with VC expectations where everything must 1000x or die. These are not bad businesses, they're just small compared to Facebook or Google. What's needed is mature leadership that recognizes the value comes from the community, and following the private equity playbook of strip-mining the value is short-sighted.

JumpCrisscross 3y ago
> problem comes in with VC expectations where everything must 1000x or die Is "VC" tech's catch-all for capitalism? Reddit is pining to go public and Twitter just LBO'd. Neither is having its chain yanked by venture capital.
- wpietri 3y ago
  Reddit took $1.3 billion in investor money. What makes you say they're not having their chain yanked? Going public solves an investor problem, but I don't see it solving anything for Reddit's community.
  - JumpCrisscross 3y ago
    > Reddit took $1.3 billion in investor money. What makes you say they're not having their chain yanked? Took. Past tense. Limited need to take more. Look at Reddit's Board: it's ten people, only one of whom (Mike Seibel) is a VC.
    - wpietri 3y ago
      Your implication is that if they don't need more money, they can just ignore all those investor-owned shares? That doesn't make a lot of sense to me. Reddit's an odd duck given their ownership history and their investors. But I don't think they're that odd. Nobody gives you that kind of money without expecting to be well paid and soon.
      - JumpCrisscross 3y ago
        > implication is that if they don't need more money, they can just ignore all those investor-owned shares No, they can ignore the venture capitalists' shares. Reddit's Series F was led by a mutual fund. Most of Reddit's shares are non-voting common stock, under a voting-rights agreement or held by non-VC investors. The difference is meaningful when tracing incentives. Venture capital, almost by definition, involves a high-loss high-reward portfolio. Most bets are expected to bust. That makes a middling bet that doesn't return the fund essentially worthless, which in turn encourages shooting for the moon. Late-stage private portfolios cannot sustain heavy losses. They are looking at preservation of capital in addition to returns, which makes them fundamentally different from VCs. Shorthanding all investors in tech companies to VCs denies you visibility into a rich spectrum of actors, incentives and alignments.
      - FormerBandmate 3y ago
        Reddit was literally bought by a magazine company in 2005. Their parent company still owns 70% of their stock or so
    - HWR_14 3y ago
      That's the current board. Do you know how much control the investors have to change the board composition if they are ignored?
      - JumpCrisscross 3y ago
        > Do you know how much control the investors have to change the board composition if they are ignored? Most of Reddit's shares were issued in the era of founder-friendly voting rights agreements. The fact that those investors don't have anyone on the Board means they don't have the right to elect one to it. Private-company Board rules are Byzantine. But they're not thoughtless.
        HWR_14 3y ago
        Isn't it also possible it's like Tesla with Musk. Even though the investors could oust him, they don't think it's worth losing his talent.
- dasil003 3y ago
  Twitter's problems started with VC investment where they were always compared against Facebook. I don't think Wall Street is much better, but by the time they went public, valuation and growth trajectories were already established by the VC narrative.
- djbusby 3y ago
  The chain is yanked whem you raise your first round. The yanking stops at Exit/IPO
  - wpietri 3y ago
    Yeah, I don't know how it is for everybody, but I'm reminded of the line, "A good horse runs even at the shadow of the whip." When I've been at places that have taken VC money, there's always a deep, pervasive awareness that the deal is "exit or bust", and that every investor call should include good news in up-and-to-the-right form. At least with us, they didn't have to do much explicit yanking of the chain. Probably for the same reason that Fat Tony doesn't often have to remind people that he expects to be paid on time.
  - nathants 3y ago
    the generation of companies that defeat these vc companies will bootstrap, and use things like remote and chatgpt to make it work.
  - compiler-guy 3y ago
    The yanking doesn’t even stop then; it just changes who is pulling. Various institutional investors are all over Google to do better than it is. Google makes billions of dollars a year. More. More. More.
    - bradleyjg 3y ago
      Google has founders shares. Everyone always like to blame Wall Street. Management listens to them not because they have board seats but because they want to keep the equity based comp party going.
- marcosdumay 3y ago
  > Is "VC" tech's catch-all for capitalism? No. It's a term specific for those investors working with: I don't expect you to survive, but if you don't get at least 10000% of return, you could as well be dead. Almost all of capitalism works differently.
Wowfunhappy 3y ago
> Meh, Twitter [...] monetize[s] just fine with ads. Well, not anymore. https://www.nytimes.com/2023/06/05/technology/twitter-ad-sales-musk.html https://www.nytimes.com/2023/06/05/technology/twitter-ad-sal...
- Prickle 3y ago
  https://edition.cnn.com/2019/02/07/tech/twitter-earnings-q4/index.html https://edition.cnn.com/2019/02/07/tech/twitter-earnings-q4/... Thing is, Twitter was profitable in 2019. Then the venture capitalists decided "Now is the time to increase your workforce by a factor of two. You need to start losing money again or you aren't trying hard enough!"
  - chimeracoder 3y ago
    You're getting downvoted, but you're correct. Twitter was profitable in 2018 and 2019. It then took a bath in 2020 (like almost all advertising-based businesses), and then was projected to recover to profitability in 2022 before Musk announced the takeover, which threw everything into a tailspin.
    - throwaway2990 3y ago
      It wasn’t projected to recover. It was struggling. They had wayyy too many people working there.
  - HWR_14 3y ago
    At the beginning of COVID there was a sense that WFH might be a permanent change and that companies might need to start competing on a lot of social distancing features. Look at Clubhouse exploding then, etc. Doubling the size of your workforce (and knowing you can shrink it if you are wrong) is a pretty reasonable bet. It has a known cost (measured in the hundreds of millions to few billions) if you try it and it is unnecessary (which it turned out to be), but a possible "death of the company" result if all the talent is gone just as you need XYZ to be competitive in a new landscape.
rjh29 3y ago
According to the spez AMA, Reddit is not profitable.
- wpietri 3y ago
  Profit is a balance between income and expenses. He's hired a ton of people in hopes that they could radically increase their revenues. So it's a little rich for him to complain that Reddit isn't profitable when he's the one who made the choices making that way. In contrast, they could have taken the path of Wikipedia or Craigslist or Whatsapp, keeping the costs very low as a way of achieving profitability.
  - rjh29 3y ago
    That was the path they took for the first 5-6 years, it didn't work. Tech savvy userbase with adblock and nobody bought Reddit Gold. Remember the monthly donation bar for their server costs? It never got close to filling. That was pre-new reddit. So they got investment and scaled up to everyday users. Terrible redesign but at least the site doesn't look nerdy anymore, right? There are now actual advertisers on board. People are paying for badges and hats. They are tracking the shit out of people and pushing the app. They're on the way to profitability, and the next step is to cut out the old guard - who they couldn't monetize anyway - by removing third party apps. Their costs are almost certainly ridiculous but their plan is either to become the next TikTok or crash and burn.
    - InitialLastName 3y ago
      > Remember the monthly donation bar for their server costs? It never got close to filling Cynically, nobody is going to donate to a full or nearly full "donations requested" bar, so nobody is going to specify a bar that gets full.
      - benj111 3y ago
        Really? I'd rather contribute to something that is actually going to be successful. If you say you need £1000000 to go to space, and ask for £10 sponsorship, if you tell me you've so far raised nothing, what chance is there of my money going to use as intended? If on the other hand you've raised £999000 I can be more confident you are actually going to reach your goal.
dm319 3y ago
I think we have to stop chasing growth like this. It's destructive to many things.
- behnamoh 3y ago
  Better still: change the definition of "growth" to encompass more nuanced, non-quantifiable things like user happiness, employee happiness, etc.
  - antupis 3y ago
    those can be faked always that's why I personally don't like those kinda metrics.
  - chii 3y ago
    why would the current shareholders want anything other than profit (which is by proxy measured by growth)? Shareholders care not for employee happiness, in so far as said employee is working and producing. Ditto with user happiness - if they're not happy they can leave. By not leaving, they must be happy to stay. I think these proposals to "change" the metrics is as flawed as the current system.
- hellweaver666 3y ago
  on of my favourite books is "Small Giants: Companies That Choose to Be Great Instead of Big" by Bo Burlingham. It's worth a read if this is something that interests you.
- simonh 3y ago
  I agree in general, but network effect companies are highly vulnerable to being out-grown. A bigger rival with a bigger network is inherently more attractive to users, and it's competitive advantage increases exponentially with size. The only way to avoid that I know is to address a specific target audience and scale up to dominate that. Tumblr has achieved this. A rival then can't dislodge you because you already own the relevant network. It's still risky though, because if a rival builds a product that covers the general audience and also servers that subset well, then the subset might decamp. Hence Tumblr trying to break out of it's niche. G+ addressed a lot of niches very well, but Google just wasn't interested in that kind of network.

JumpCrisscross 3y ago

> problem comes in with VC expectations where everything must 1000x or die Is "VC" tech's catch-all for capitalism? Reddit is pining to go public and Twitter just LBO'd. Neither is having its chain yanked by venture capital.

wpietri 3y ago
Reddit took $1.3 billion in investor money. What makes you say they're not having their chain yanked? Going public solves an investor problem, but I don't see it solving anything for Reddit's community.
- JumpCrisscross 3y ago
  > Reddit took $1.3 billion in investor money. What makes you say they're not having their chain yanked? Took. Past tense. Limited need to take more. Look at Reddit's Board: it's ten people, only one of whom (Mike Seibel) is a VC.
  - wpietri 3y ago
    Your implication is that if they don't need more money, they can just ignore all those investor-owned shares? That doesn't make a lot of sense to me. Reddit's an odd duck given their ownership history and their investors. But I don't think they're that odd. Nobody gives you that kind of money without expecting to be well paid and soon.
    - JumpCrisscross 3y ago
      > implication is that if they don't need more money, they can just ignore all those investor-owned shares No, they can ignore the venture capitalists' shares. Reddit's Series F was led by a mutual fund. Most of Reddit's shares are non-voting common stock, under a voting-rights agreement or held by non-VC investors. The difference is meaningful when tracing incentives. Venture capital, almost by definition, involves a high-loss high-reward portfolio. Most bets are expected to bust. That makes a middling bet that doesn't return the fund essentially worthless, which in turn encourages shooting for the moon. Late-stage private portfolios cannot sustain heavy losses. They are looking at preservation of capital in addition to returns, which makes them fundamentally different from VCs. Shorthanding all investors in tech companies to VCs denies you visibility into a rich spectrum of actors, incentives and alignments.
    - FormerBandmate 3y ago
      Reddit was literally bought by a magazine company in 2005. Their parent company still owns 70% of their stock or so
  - HWR_14 3y ago
    That's the current board. Do you know how much control the investors have to change the board composition if they are ignored?
    - JumpCrisscross 3y ago
      > Do you know how much control the investors have to change the board composition if they are ignored? Most of Reddit's shares were issued in the era of founder-friendly voting rights agreements. The fact that those investors don't have anyone on the Board means they don't have the right to elect one to it. Private-company Board rules are Byzantine. But they're not thoughtless.
      - HWR_14 3y ago
        Isn't it also possible it's like Tesla with Musk. Even though the investors could oust him, they don't think it's worth losing his talent.
dasil003 3y ago
Twitter's problems started with VC investment where they were always compared against Facebook. I don't think Wall Street is much better, but by the time they went public, valuation and growth trajectories were already established by the VC narrative.
djbusby 3y ago
The chain is yanked whem you raise your first round. The yanking stops at Exit/IPO
- wpietri 3y ago
  Yeah, I don't know how it is for everybody, but I'm reminded of the line, "A good horse runs even at the shadow of the whip." When I've been at places that have taken VC money, there's always a deep, pervasive awareness that the deal is "exit or bust", and that every investor call should include good news in up-and-to-the-right form. At least with us, they didn't have to do much explicit yanking of the chain. Probably for the same reason that Fat Tony doesn't often have to remind people that he expects to be paid on time.
- nathants 3y ago
  the generation of companies that defeat these vc companies will bootstrap, and use things like remote and chatgpt to make it work.
- compiler-guy 3y ago
  The yanking doesn’t even stop then; it just changes who is pulling. Various institutional investors are all over Google to do better than it is. Google makes billions of dollars a year. More. More. More.
  - bradleyjg 3y ago
    Google has founders shares. Everyone always like to blame Wall Street. Management listens to them not because they have board seats but because they want to keep the equity based comp party going.
marcosdumay 3y ago
> Is "VC" tech's catch-all for capitalism? No. It's a term specific for those investors working with: I don't expect you to survive, but if you don't get at least 10000% of return, you could as well be dead. Almost all of capitalism works differently.

Wowfunhappy 3y ago

> Meh, Twitter [...] monetize[s] just fine with ads. Well, not anymore. https://www.nytimes.com/2023/06/05/technology/twitter-ad-sales-musk.html https://www.nytimes.com/2023/06/05/technology/twitter-ad-sal...

Prickle 3y ago
https://edition.cnn.com/2019/02/07/tech/twitter-earnings-q4/index.html https://edition.cnn.com/2019/02/07/tech/twitter-earnings-q4/... Thing is, Twitter was profitable in 2019. Then the venture capitalists decided "Now is the time to increase your workforce by a factor of two. You need to start losing money again or you aren't trying hard enough!"
- chimeracoder 3y ago
  You're getting downvoted, but you're correct. Twitter was profitable in 2018 and 2019. It then took a bath in 2020 (like almost all advertising-based businesses), and then was projected to recover to profitability in 2022 before Musk announced the takeover, which threw everything into a tailspin.
  - throwaway2990 3y ago
    It wasn’t projected to recover. It was struggling. They had wayyy too many people working there.
- HWR_14 3y ago
  At the beginning of COVID there was a sense that WFH might be a permanent change and that companies might need to start competing on a lot of social distancing features. Look at Clubhouse exploding then, etc. Doubling the size of your workforce (and knowing you can shrink it if you are wrong) is a pretty reasonable bet. It has a known cost (measured in the hundreds of millions to few billions) if you try it and it is unnecessary (which it turned out to be), but a possible "death of the company" result if all the talent is gone just as you need XYZ to be competitive in a new landscape.

rjh29 3y ago

According to the spez AMA, Reddit is not profitable.

wpietri 3y ago
Profit is a balance between income and expenses. He's hired a ton of people in hopes that they could radically increase their revenues. So it's a little rich for him to complain that Reddit isn't profitable when he's the one who made the choices making that way. In contrast, they could have taken the path of Wikipedia or Craigslist or Whatsapp, keeping the costs very low as a way of achieving profitability.
- rjh29 3y ago
  That was the path they took for the first 5-6 years, it didn't work. Tech savvy userbase with adblock and nobody bought Reddit Gold. Remember the monthly donation bar for their server costs? It never got close to filling. That was pre-new reddit. So they got investment and scaled up to everyday users. Terrible redesign but at least the site doesn't look nerdy anymore, right? There are now actual advertisers on board. People are paying for badges and hats. They are tracking the shit out of people and pushing the app. They're on the way to profitability, and the next step is to cut out the old guard - who they couldn't monetize anyway - by removing third party apps. Their costs are almost certainly ridiculous but their plan is either to become the next TikTok or crash and burn.
  - InitialLastName 3y ago
    > Remember the monthly donation bar for their server costs? It never got close to filling Cynically, nobody is going to donate to a full or nearly full "donations requested" bar, so nobody is going to specify a bar that gets full.
    - benj111 3y ago
      Really? I'd rather contribute to something that is actually going to be successful. If you say you need £1000000 to go to space, and ask for £10 sponsorship, if you tell me you've so far raised nothing, what chance is there of my money going to use as intended? If on the other hand you've raised £999000 I can be more confident you are actually going to reach your goal.

dm319 3y ago

I think we have to stop chasing growth like this. It's destructive to many things.

behnamoh 3y ago
Better still: change the definition of "growth" to encompass more nuanced, non-quantifiable things like user happiness, employee happiness, etc.
- antupis 3y ago
  those can be faked always that's why I personally don't like those kinda metrics.
- chii 3y ago
  why would the current shareholders want anything other than profit (which is by proxy measured by growth)? Shareholders care not for employee happiness, in so far as said employee is working and producing. Ditto with user happiness - if they're not happy they can leave. By not leaving, they must be happy to stay. I think these proposals to "change" the metrics is as flawed as the current system.
hellweaver666 3y ago
on of my favourite books is "Small Giants: Companies That Choose to Be Great Instead of Big" by Bo Burlingham. It's worth a read if this is something that interests you.
simonh 3y ago
I agree in general, but network effect companies are highly vulnerable to being out-grown. A bigger rival with a bigger network is inherently more attractive to users, and it's competitive advantage increases exponentially with size. The only way to avoid that I know is to address a specific target audience and scale up to dominate that. Tumblr has achieved this. A rival then can't dislodge you because you already own the relevant network. It's still risky though, because if a rival builds a product that covers the general audience and also servers that subset well, then the subset might decamp. Hence Tumblr trying to break out of it's niche. G+ addressed a lot of niches very well, but Google just wasn't interested in that kind of network.