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I would like a breakdown of Reddit's actual costs vs their proposed fees. Why isn't Reddit profitable? Is there a way to make Reddit profitable without charging

by causi 3y ago

I would like a breakdown of Reddit's actual costs vs their proposed fees. Why isn't Reddit profitable? Is there a way to make Reddit profitable without charging for API access?

bloopernova 3y ago
They have 2,000 employees.
- Aaargh20318 3y ago
  Which is an insane number for an operation like Reddit. I wonder what those people do all day ? I would have estimated Reddit to be 100 people max, and even that seems high.
  - bloopernova 3y ago
    Me too. I was very confused when I heard that number. I was thinking maybe 200 people if they have multiple dev teams and a corporate marketing/sales side for advertising. My employer has slightly fewer people, but we have dozens of clients with sites/apps far more complex than reddit. It just doesn't make sense.
mcpeepants 3y ago
I don't see how this is a play towards profitability, when the (obvious) outcome of their absurd pricing is a massive reduction in API usage. The fact is, advertisements pay better than any amount their users or third-party developers would be willing to bear. This change appears to be more about maximizing that revenue stream (or making it more appealing to advertisers), rather creating a _new_ revenue stream in paid API access.
- bagels 3y ago
  Isn't maximizing revenue and at the same time reducing costs a step in the direction of profitability?
  - mcpeepants 3y ago
    Sure, but isn’t “raise the cost of the API to the point where it is prohibitively expensive for everyone” at best a cost reduction strategy only?
    - bagels 3y ago
      No, it increases revenue and decreases costs, because many of the users of those apps will start using surfaces that show reddit ads.
spiderice 3y ago
The obvious places to start are: 1. Do charge for API access. But be reasonable. Nobody is calling for free api access. Charge like 2-5x their cost of operation. Not 20x. 2. Serve ads to third party apps through the API. This is a no brainer. The fact that they aren't doing this speaks volumes about their true motives with this move.
- bagels 3y ago
  The rational choice for Reddit is to charge at least as much per user as they lose in revenue opportunity. Consider that the users of third party apps may skew towards higher value since they were engaged enough to install an app.
- more_corn 3y ago
  These obvious places to start would have needed to take place months ago before the decision was made, before the deadline set, before management dug in. Before the revolt. What are the obvious places to go from here and now?
  - tmpz22 3y ago
    > What are the obvious places to go from here and now? Act like adults. Admit mistakes. Change policies. Rebuild trust through honest and prompt communications.
    - tezgon 3y ago
      Based off the C-suites I've encountered in my life, that is the last thing that will happen.
- flutas 3y ago
  IMO the best solution is to disable 3P API access, but allow it with a reddit gold sub. Similar to what Spotify does (or did?).
incogitor 3y ago
Regardless they're IPOing, so it's not even about revenue or profit anymore. And it's not even about growth. Public companies are now about growth of growth and are evaluated on that metric. So the incentives suggest they're about to start an intense phase of milking/rent-seeking their users to extract as much value from their existing vertical before they have to make other parallel products (which seems like it's probably going to involve yet another tiktok clone, unfortunately).
mishagale 3y ago
Based on their published user numbers and revenue, Selig estimated that reddit's revenue per user is about $0.12. They are asking for $0.24 per 1,000 API calls. Apollo averages ~345 calls per-user per-day (although some users are much higher), but Reddit claims that other apps are "more efficient" and only use about 100 calls/day. If we assume 100 calls/day/user, then that's 36,500 calls/year/user, and a user is worth $0.12/year, so to break-even, reddit should be charging about $0.003 per 1,000 API calls, instead of $0.24.
- bagels 3y ago
  $0.12 per user per year... how many users are using third party apps to skip out on ads? Is the true value higher once they start seeing ads? Also, that number is so laughably low!
  - aniforprez 3y ago
    The reddit API serves no ads. The Apollo app is ad free and only asks for a one-time payment for posting and a subscription to support development which comes with a lot of nifty but ultimately completely useless features. No third party app is blocking any ads from reddit because there's nothing to block
    - bagels 3y ago
      I didn't say they were blocked, just pointed out the fact that those users are not seeing ads on those surfaces.
  - lazycouchpotato 3y ago
    I believe it's $0.12 per month, not per year. https://old.reddit.com/r/apolloapp/comments/13ws4w3/had_a_call_with_reddit_to_discuss_pricing_bad/ https://old.reddit.com/r/apolloapp/comments/13ws4w3/had_a_ca...
    - mishagale 3y ago
      You are right, my bad.
NoMoreNicksLeft 3y ago
No, there is no way to make it profitable, even with charging. They said that they were going to charge him something like $20 million a year... there are 3 or 4 other similar apps. Does anyone believe that even with $60 million a year, they'd become profitable?

by causi 3y ago

I would like a breakdown of Reddit's actual costs vs their proposed fees. Why isn't Reddit profitable? Is there a way to make Reddit profitable without charging for API access?

bloopernova 3y ago

They have 2,000 employees.

Aaargh20318 3y ago
Which is an insane number for an operation like Reddit. I wonder what those people do all day ? I would have estimated Reddit to be 100 people max, and even that seems high.
- bloopernova 3y ago
  Me too. I was very confused when I heard that number. I was thinking maybe 200 people if they have multiple dev teams and a corporate marketing/sales side for advertising. My employer has slightly fewer people, but we have dozens of clients with sites/apps far more complex than reddit. It just doesn't make sense.

mcpeepants 3y ago

I don't see how this is a play towards profitability, when the (obvious) outcome of their absurd pricing is a massive reduction in API usage. The fact is, advertisements pay better than any amount their users or third-party developers would be willing to bear. This change appears to be more about maximizing that revenue stream (or making it more appealing to advertisers), rather creating a _new_ revenue stream in paid API access.

bagels 3y ago
Isn't maximizing revenue and at the same time reducing costs a step in the direction of profitability?
- mcpeepants 3y ago
  Sure, but isn’t “raise the cost of the API to the point where it is prohibitively expensive for everyone” at best a cost reduction strategy only?
  - bagels 3y ago
    No, it increases revenue and decreases costs, because many of the users of those apps will start using surfaces that show reddit ads.

spiderice 3y ago

The obvious places to start are: 1. Do charge for API access. But be reasonable. Nobody is calling for free api access. Charge like 2-5x their cost of operation. Not 20x. 2. Serve ads to third party apps through the API. This is a no brainer. The fact that they aren't doing this speaks volumes about their true motives with this move.

bagels 3y ago
The rational choice for Reddit is to charge at least as much per user as they lose in revenue opportunity. Consider that the users of third party apps may skew towards higher value since they were engaged enough to install an app.
more_corn 3y ago
These obvious places to start would have needed to take place months ago before the decision was made, before the deadline set, before management dug in. Before the revolt. What are the obvious places to go from here and now?
- tmpz22 3y ago
  > What are the obvious places to go from here and now? Act like adults. Admit mistakes. Change policies. Rebuild trust through honest and prompt communications.
  - tezgon 3y ago
    Based off the C-suites I've encountered in my life, that is the last thing that will happen.
flutas 3y ago
IMO the best solution is to disable 3P API access, but allow it with a reddit gold sub. Similar to what Spotify does (or did?).

incogitor 3y ago

Regardless they're IPOing, so it's not even about revenue or profit anymore. And it's not even about growth. Public companies are now about growth of growth and are evaluated on that metric. So the incentives suggest they're about to start an intense phase of milking/rent-seeking their users to extract as much value from their existing vertical before they have to make other parallel products (which seems like it's probably going to involve yet another tiktok clone, unfortunately).

mishagale 3y ago

Based on their published user numbers and revenue, Selig estimated that reddit's revenue per user is about $0.12. They are asking for $0.24 per 1,000 API calls. Apollo averages ~345 calls per-user per-day (although some users are much higher), but Reddit claims that other apps are "more efficient" and only use about 100 calls/day. If we assume 100 calls/day/user, then that's 36,500 calls/year/user, and a user is worth $0.12/year, so to break-even, reddit should be charging about $0.003 per 1,000 API calls, instead of $0.24.

bagels 3y ago
$0.12 per user per year... how many users are using third party apps to skip out on ads? Is the true value higher once they start seeing ads? Also, that number is so laughably low!
- aniforprez 3y ago
  The reddit API serves no ads. The Apollo app is ad free and only asks for a one-time payment for posting and a subscription to support development which comes with a lot of nifty but ultimately completely useless features. No third party app is blocking any ads from reddit because there's nothing to block
  - bagels 3y ago
    I didn't say they were blocked, just pointed out the fact that those users are not seeing ads on those surfaces.
- lazycouchpotato 3y ago
  I believe it's $0.12 per month, not per year. https://old.reddit.com/r/apolloapp/comments/13ws4w3/had_a_call_with_reddit_to_discuss_pricing_bad/ https://old.reddit.com/r/apolloapp/comments/13ws4w3/had_a_ca...
  - mishagale 3y ago
    You are right, my bad.

NoMoreNicksLeft 3y ago

No, there is no way to make it profitable, even with charging. They said that they were going to charge him something like $20 million a year... there are 3 or 4 other similar apps. Does anyone believe that even with $60 million a year, they'd become profitable?