6 ms·

Reddit is the perfect example of "why we can't have nice things because every company aspires to be Facebook" It seems no company is happy with being the viral

by elif 3y ago

Reddit is the perfect example of "why we can't have nice things because every company aspires to be Facebook" It seems no company is happy with being the virally adored single product little niche 50 employee powerhouse. It's so much sexier to bloat the org and then try to justify the economics afterward.

strangattractor 3y ago
Looks like the "Freemium" business model has it's drawbacks. Especially when you want to make more money:) They are probably looking to sell and buyers are balking.
USB5 3y ago
[dead]
xyst 3y ago
Vulture capital firms don’t like boutique companies to stay boutique after acquisition. Got to get them to IPO asap
- TremendousJudge 3y ago
  Isn't reddit on venture capital since pretty much the start?
  - Melting_Harps 3y ago
    Yes, 2005 [0]. But the point remains, that regardless of it's thin veneer of being the funding source of disrupters what VC really seeks is to use the stock market chicanery that major banks who underwrite FB do in order to rig the game in the favour for an obscene profitable exit: hence why they were allowed to buy pre-market in the case of FB. Or my favorite from the pandemic: Doordash. wherein Softbank incurred so much loss after several years to consuldate market share in this stupid race to the bottom and had to cash in on the market being flooded with cheap money during COVID and getting that IPO to get maximum ROI from an otherwise terrible business model whose understanding of last mile logistics was incredibly poor to say the least, and had no problem exploiting its contractor model labour force or taking a large sum from it's restaurant owner partners. Seriously can we just admit VC is mainly just banksters trying to do what they always done in New York or in London in the Valley, and other tech cities? 0: https://www.crunchbase.com/funding_round/reddit-series-unknown--efe1e2d6 https://www.crunchbase.com/funding_round/reddit-series-unkno...
- johannes1234321 3y ago
  The question is: Does it have to be sexy to get this funding? Why can't it be more sexy to run a sustainable small business? - I think they could run reddit profitable with less staff, which focuses on the core functionality instead of trying to grow into new markets and segments. Sure, there is a risk that some new platform disrupts that segment they are serving, but even then there is enough of a longtail to prepare an alternative and hardly those bets on expanding reach works. Let's look at Twitter as a sample case: the features which were successful, were the ones where they followed what users were doing and supported that (adding @-mentions, adding retweets, adding quote retweets, some degree of threading support, etc. all came after users used those things) most things where they added stuff their PMs invented is mostly forgotten already, but building all that cost resources.
  - kemayo 3y ago
    That's why the venture capital industry exists, though -- to get reasonably-quick returns on their investment, at a higher rate than just putting their money into an index fund. If you're not going to potentially give them back 10x their investment in one big lump sum, you're not worth it to them. It's also why VC deals are generally structured as stock purchases, rather than loans that expect repayment. They're genuinely not in it for slowly raking in small returns over the next 50 years. (And then, of course, they spread their investments out so that the one big success that gives them 1000x their money back pays for all the companies that flamed out chasing inadvisable growth.)
  - ilyt 3y ago
    > Why can't it be more sexy to run a sustainable small business? - I think they could run reddit profitable with less staff, which focuses on the core functionality instead of trying to grow into new markets and segments. Investor returns, obviously. The whole funding model is throw money, make it big, monetize, sell out. I do think it would maybe be possible to make company like Reddit "just" be profitable and keep on chugging but that's not what the investors throwing millions at it want. The funding model is antithesis to "just a sustainable company in their niche"
    - 3y ago
- LorenPechtel 3y ago
  I don't think it's so much a matter of getting them to IPO than in getting the maximum price at the IPO. Effectively, a pump and dump scheme except it's not considered such by the SEC. The third party clients hurt ad revenue, kill them. Once the stock is out the door the problems that result aren't going to hurt them, just the suckers who fell for it.
- roncesvalles 3y ago
  Exactly. VCism is always done with the goal of getting more from the next sucker. The final sucker being the public.
predictabl3 3y ago
It's just raw capitalism and enshitification [1] which is why I'm going to be the annoying, stubborn guy and stop using proprietary platforms, especially ones where I'm inadvertently contributing to building some company's dataset or usage state that is just waiting to be later milked once the platform decides their users are too entrenched. I was on digg. I was on reddit. I was on Twitter. I was on Facebook. Every platform has its day, and I like investing in things for the long term. It's a much harder battle, but even my code is now used by MS/GitHub to train ML. It's so hostile and folks are so used to it that I feel like I have to tip-toe around saying "No, this isn't okay for me." [1] https://pluralistic.net/2023/01/21/potemkin-ai/#hey-guys https://pluralistic.net/2023/01/21/potemkin-ai/#hey-guys (credit to mostlysimilar! thank you! I despise Medium but hadn't found this link)
- mostlysimilar 3y ago
  Link to Doctorow's personal blog instead of yet another platform: https://pluralistic.net/2023/01/21/potemkin-ai/#hey-guys https://pluralistic.net/2023/01/21/potemkin-ai/#hey-guys
- throw10920 3y ago
  > It's just raw capitalism Um, no. It's Reddit being led by a corrupt CEO seeking short-term profits through an IPo(. That's not capitalism. I'm also very curious as to what you would suggest as an alternative to "capitalism".
michaelt 3y ago
> It seems no company is happy with being the virally adored single product little niche 50 employee powerhouse. Imagine you had such a company, someone offered you $700 million for 10% of the company valuing it at $7 billion. You don't understand why they'd value it that highly. But if you're willing to pretend you do for a few years, you can siphon off enough of that money that even your great-great-great-grandkids won't have to work a day in their lives. Would you turn down that deal? Because I doubt I could resist it.
- parthdesai 3y ago
  Not saying I would turn down or won't turn down, but you've companies like 37signals and folks like DHH who are very happy making millions and not having a boss rather than making billions
  - user_named 3y ago
    They are the bosses
  - Justsignedup 3y ago
    37signals (basecamp now) is an exception. They didn't seek investment to get started. They are able to fully control their destiny because they don't have investors, they asked for Bezos to invest because they wanted him as an advisor, not because they needed the money. So yes DEFINITELY possible to do a 37signals, but you need starting capital. Or at least an ability to live for free for 24 months while you figure out how to make cash from your business. Most companies of that nature are started by either of the following scenarios: - Kid(s) from a middle-to-upper class family who can live off their parent/grandparent's money for a few years while they figure things out. Maybe even family throws in a few hundred grand as a gift to get you started. Definitely have collateral for a loan. - Already successful founders who have the ability to drop 200-500k into their company to get started, and already able to live off their wealth.
  - danudey 3y ago
    37signals is profitable, though. It's easy to say "I'm happy just being a small company making a good product" if you're making enough to keep the lights on, but if you don't know how to monetize your audience and user base then the pressure to accept investor money starts getting pretty high.
WeylandYutani 3y ago
You can only burn through cash for so long.
ilyt 3y ago
And "we're not happy with earning just some money, we need to earn ALL the money"
mikae1 3y ago
Stock owners always want to see growth, growth, growth. That's why they buy stock. With growth enshittification will eventually come and people flee. Then a new cycle begins…
- layer8 3y ago
  This is why I’ll never work for a publicly traded company.
- cykros 3y ago
  This is mostly true, but does depend a bit. There are of course investors looking for a steady price and steady dividend (income investors, as opposed to growth). Nobody is ever annoyed when their stock goes up of course, but it isn't always the primary factor in selecting securities. That said, TECH stock investors mostly are growth investors, because the dividends are typically fairly paltry.
BaseballPhysics 3y ago
Don't take VC money if you don't wanna be forced to find a 10x exit for those investors. The investors want an exit, so they have to IPO. To IPO at a reasonable valuation, they need to demonstrate significant revenue potential. And to get significant revenue, they need to monetize the hell out of the userbase. You can do that through: 1. Ads--monetize your user's attention. 2. Subscriptions--monetize your user's attachment to your service. 3. Surveillance capitalism--monetize your user's data. Very few services have shown the ability to hit that 10x target with #2, and thus Reddit chose paths #1 and #3. The lesson: Once again, for those in the back row 1) if you're not paying for the product, you are the product, and 2) don't build communities on closed platforms unless you're comfortable with the potential of a rug-pull.
- moneywoes 3y ago
  How to build a business of this size without VC money?
  - JohnFen 3y ago
    The old-fashioned way, over time. But I would question the goal of building a business this size. Why do you want to?
  - rvz 3y ago
    It's possible, Basecamp, Jetbrains, and Zoho have done so.
  - BaseballPhysics 3y ago
    Slowly. Or don't. Who decided every company must be a global blitzscaled decacorn monopoly?
- JohnFen 3y ago
  > if you're not paying for the product, you are the product The problem with this saying is that it implies that you can avoid being the product by paying for the product. But that is increasingly not true, and is a bad bet.
Barrin92 3y ago
>It seems no company is happy with being the virally adored single product little niche 50 employee powerhouse. There's Valve or JetBrains, which are not even niche or small but very successful that have stayed private, focused and avoided money from the public markets. But yes the software industry desperately needs a Mittelstand economy. Probably won't happen without actually breaking apart some of the platforms though. Historically breakups have increased total shareholder value so it would even be a good deal for investors. In Spain for example where Uber is regulated they're essentially just a software vendor rather than trying to capture the market. If they were just a 100 person company licensing software worldwide that sounds like a more attractive business than what they are now. It's kind of hilarious how few people even manage to benefit from the system as it is, which is mostly just VCs, managers at bloated firms and people who get rid of their stock at the right time.

by elif 3y ago

strangattractor 3y ago

Looks like the "Freemium" business model has it's drawbacks. Especially when you want to make more money:) They are probably looking to sell and buyers are balking.

USB5 3y ago

[dead]

xyst 3y ago

Vulture capital firms don’t like boutique companies to stay boutique after acquisition. Got to get them to IPO asap

TremendousJudge 3y ago
Isn't reddit on venture capital since pretty much the start?
- Melting_Harps 3y ago
  Yes, 2005 [0]. But the point remains, that regardless of it's thin veneer of being the funding source of disrupters what VC really seeks is to use the stock market chicanery that major banks who underwrite FB do in order to rig the game in the favour for an obscene profitable exit: hence why they were allowed to buy pre-market in the case of FB. Or my favorite from the pandemic: Doordash. wherein Softbank incurred so much loss after several years to consuldate market share in this stupid race to the bottom and had to cash in on the market being flooded with cheap money during COVID and getting that IPO to get maximum ROI from an otherwise terrible business model whose understanding of last mile logistics was incredibly poor to say the least, and had no problem exploiting its contractor model labour force or taking a large sum from it's restaurant owner partners. Seriously can we just admit VC is mainly just banksters trying to do what they always done in New York or in London in the Valley, and other tech cities? 0: https://www.crunchbase.com/funding_round/reddit-series-unknown--efe1e2d6 https://www.crunchbase.com/funding_round/reddit-series-unkno...
johannes1234321 3y ago
The question is: Does it have to be sexy to get this funding? Why can't it be more sexy to run a sustainable small business? - I think they could run reddit profitable with less staff, which focuses on the core functionality instead of trying to grow into new markets and segments. Sure, there is a risk that some new platform disrupts that segment they are serving, but even then there is enough of a longtail to prepare an alternative and hardly those bets on expanding reach works. Let's look at Twitter as a sample case: the features which were successful, were the ones where they followed what users were doing and supported that (adding @-mentions, adding retweets, adding quote retweets, some degree of threading support, etc. all came after users used those things) most things where they added stuff their PMs invented is mostly forgotten already, but building all that cost resources.
- kemayo 3y ago
  That's why the venture capital industry exists, though -- to get reasonably-quick returns on their investment, at a higher rate than just putting their money into an index fund. If you're not going to potentially give them back 10x their investment in one big lump sum, you're not worth it to them. It's also why VC deals are generally structured as stock purchases, rather than loans that expect repayment. They're genuinely not in it for slowly raking in small returns over the next 50 years. (And then, of course, they spread their investments out so that the one big success that gives them 1000x their money back pays for all the companies that flamed out chasing inadvisable growth.)
- ilyt 3y ago
  > Why can't it be more sexy to run a sustainable small business? - I think they could run reddit profitable with less staff, which focuses on the core functionality instead of trying to grow into new markets and segments. Investor returns, obviously. The whole funding model is throw money, make it big, monetize, sell out. I do think it would maybe be possible to make company like Reddit "just" be profitable and keep on chugging but that's not what the investors throwing millions at it want. The funding model is antithesis to "just a sustainable company in their niche"
  - 3y ago
LorenPechtel 3y ago
I don't think it's so much a matter of getting them to IPO than in getting the maximum price at the IPO. Effectively, a pump and dump scheme except it's not considered such by the SEC. The third party clients hurt ad revenue, kill them. Once the stock is out the door the problems that result aren't going to hurt them, just the suckers who fell for it.
roncesvalles 3y ago
Exactly. VCism is always done with the goal of getting more from the next sucker. The final sucker being the public.

predictabl3 3y ago

It's just raw capitalism and enshitification [1] which is why I'm going to be the annoying, stubborn guy and stop using proprietary platforms, especially ones where I'm inadvertently contributing to building some company's dataset or usage state that is just waiting to be later milked once the platform decides their users are too entrenched. I was on digg. I was on reddit. I was on Twitter. I was on Facebook. Every platform has its day, and I like investing in things for the long term. It's a much harder battle, but even my code is now used by MS/GitHub to train ML. It's so hostile and folks are so used to it that I feel like I have to tip-toe around saying "No, this isn't okay for me." [1] https://pluralistic.net/2023/01/21/potemkin-ai/#hey-guys https://pluralistic.net/2023/01/21/potemkin-ai/#hey-guys (credit to mostlysimilar! thank you! I despise Medium but hadn't found this link)

mostlysimilar 3y ago
Link to Doctorow's personal blog instead of yet another platform: https://pluralistic.net/2023/01/21/potemkin-ai/#hey-guys https://pluralistic.net/2023/01/21/potemkin-ai/#hey-guys
throw10920 3y ago
> It's just raw capitalism Um, no. It's Reddit being led by a corrupt CEO seeking short-term profits through an IPo(. That's not capitalism. I'm also very curious as to what you would suggest as an alternative to "capitalism".

michaelt 3y ago

> It seems no company is happy with being the virally adored single product little niche 50 employee powerhouse. Imagine you had such a company, someone offered you $700 million for 10% of the company valuing it at $7 billion. You don't understand why they'd value it that highly. But if you're willing to pretend you do for a few years, you can siphon off enough of that money that even your great-great-great-grandkids won't have to work a day in their lives. Would you turn down that deal? Because I doubt I could resist it.

parthdesai 3y ago
Not saying I would turn down or won't turn down, but you've companies like 37signals and folks like DHH who are very happy making millions and not having a boss rather than making billions
- user_named 3y ago
  They are the bosses
- Justsignedup 3y ago
  37signals (basecamp now) is an exception. They didn't seek investment to get started. They are able to fully control their destiny because they don't have investors, they asked for Bezos to invest because they wanted him as an advisor, not because they needed the money. So yes DEFINITELY possible to do a 37signals, but you need starting capital. Or at least an ability to live for free for 24 months while you figure out how to make cash from your business. Most companies of that nature are started by either of the following scenarios: - Kid(s) from a middle-to-upper class family who can live off their parent/grandparent's money for a few years while they figure things out. Maybe even family throws in a few hundred grand as a gift to get you started. Definitely have collateral for a loan. - Already successful founders who have the ability to drop 200-500k into their company to get started, and already able to live off their wealth.
- danudey 3y ago
  37signals is profitable, though. It's easy to say "I'm happy just being a small company making a good product" if you're making enough to keep the lights on, but if you don't know how to monetize your audience and user base then the pressure to accept investor money starts getting pretty high.

WeylandYutani 3y ago

You can only burn through cash for so long.

ilyt 3y ago

And "we're not happy with earning just some money, we need to earn ALL the money"

mikae1 3y ago

Stock owners always want to see growth, growth, growth. That's why they buy stock. With growth enshittification will eventually come and people flee. Then a new cycle begins…

layer8 3y ago
This is why I’ll never work for a publicly traded company.
cykros 3y ago
This is mostly true, but does depend a bit. There are of course investors looking for a steady price and steady dividend (income investors, as opposed to growth). Nobody is ever annoyed when their stock goes up of course, but it isn't always the primary factor in selecting securities. That said, TECH stock investors mostly are growth investors, because the dividends are typically fairly paltry.

BaseballPhysics 3y ago

Don't take VC money if you don't wanna be forced to find a 10x exit for those investors. The investors want an exit, so they have to IPO. To IPO at a reasonable valuation, they need to demonstrate significant revenue potential. And to get significant revenue, they need to monetize the hell out of the userbase. You can do that through: 1. Ads--monetize your user's attention. 2. Subscriptions--monetize your user's attachment to your service. 3. Surveillance capitalism--monetize your user's data. Very few services have shown the ability to hit that 10x target with #2, and thus Reddit chose paths #1 and #3. The lesson: Once again, for those in the back row 1) if you're not paying for the product, you are the product, and 2) don't build communities on closed platforms unless you're comfortable with the potential of a rug-pull.

moneywoes 3y ago
How to build a business of this size without VC money?
- JohnFen 3y ago
  The old-fashioned way, over time. But I would question the goal of building a business this size. Why do you want to?
- rvz 3y ago
  It's possible, Basecamp, Jetbrains, and Zoho have done so.
- BaseballPhysics 3y ago
  Slowly. Or don't. Who decided every company must be a global blitzscaled decacorn monopoly?
JohnFen 3y ago
> if you're not paying for the product, you are the product The problem with this saying is that it implies that you can avoid being the product by paying for the product. But that is increasingly not true, and is a bad bet.

Barrin92 3y ago

>It seems no company is happy with being the virally adored single product little niche 50 employee powerhouse. There's Valve or JetBrains, which are not even niche or small but very successful that have stayed private, focused and avoided money from the public markets. But yes the software industry desperately needs a Mittelstand economy. Probably won't happen without actually breaking apart some of the platforms though. Historically breakups have increased total shareholder value so it would even be a good deal for investors. In Spain for example where Uber is regulated they're essentially just a software vendor rather than trying to capture the market. If they were just a 100 person company licensing software worldwide that sounds like a more attractive business than what they are now. It's kind of hilarious how few people even manage to benefit from the system as it is, which is mostly just VCs, managers at bloated firms and people who get rid of their stock at the right time.