7 ms·

Can anyone explain how much pressure and where it comes from for the “raise revenue at all costs” pre-IPO. Is it common for other companies to shoot themselves

Can anyone explain how much pressure and where it comes from for the “raise revenue at all costs” pre-IPO. Is it common for other companies to shoot themselves in the foot by layoffs and policy changes that alienate users? Just feels like no one was smart enough to say “we can try and raise revenue by doing this, but we could lose everything” - maybe companies just constantly forget how defiant and fickle the internet can be.

KnobbleMcKnees 3y ago
It's purely a numbers game. If the amount of revenue you'll achieve from less users gives you a more positive multi year outlook financially then losing the users is "worth it", especially if those users fall into cohorts that are less financially valuable. Unfortunately that includes people who take part in blackouts as they correlate highly with people who e.g. run adblockers, use third party apps, etc.
- selcuka 3y ago
  > [...] especially if those users fall into cohorts that are less financially valuable Maybe, but my guess is they also produce the majority of the content that other users come to Reddit to consume. So it's a dangerous game.
  - logifail 3y ago
    > So it's a dangerous game Of course the managers/executives making/approving decisions like this know it's a dangerous game, but it's not dangerous for them because they know IBGYBG[0] They have no "skin in the game"[1] meaning the incentives are all wrong, how do we expect them to behave any better? [0] "I'll be gone, you'll be gone" [1] https://en.wikipedia.org/wiki/Skin_in_the_Game_(book) https://en.wikipedia.org/wiki/Skin_in_the_Game_(book)
  - TeMPOraL 3y ago
    There's going to be some inertia. You can recycle old content to mix with the "native advertising" spam that will fill the vacuum left by the people who used to "produce the majority of the content" - it's not a long-term solution, but if it keeps the user bleed in check until IPO, then the C-suite and the investors win; afterwards, the site can go to hell, it's not their problem anymore.
  - pmoriarty 3y ago
    I don't know where you got the idea that power users produce most of the content. As far as I can tell it's ordinary users who produce much of the content.
    - KeplerBoy 3y ago
      the vast majority of users doesn't comment, let alone post.
      - pmoriarty 3y ago
        They don't, but those that do are just ordinary users. Power users are a tiny minority, and most of them don't post either.
    - tommit 3y ago
      Then what is your definition of a power user?
      - pmoriarty 3y ago
        Someone who, like the GP says, uses third party clients and ad blockers, who is very technically knowledgable, who may even use Reddit's API directly themselves, or write tools/clients for Reddit. Contributing to Reddit's content doesn't require any of that, and I'd wager the overwhelming majority of Reddit users don't do any of that but do contribute most of Reddit's content. Just because you're a content creator doesn't mean you're a power user. The concepts are mostly orthogonal. Though if you're a mod you probably use some mod tools, which makes you a bit of a power user by definition. But mods are a tiny minority of Reddit users and don't contribute most of Reddit's content.
- larksimian 3y ago
  Has this strategy ever worked in the history of social media businesses?
  - KnobbleMcKnees 3y ago
    For social media, I would hazard not given that it is such a young industry.
  - SpicyLemonZest 3y ago
    Instagram broke a bunch of apps in 2018 with no notice or comment and it turned out fine for them. (https://techcrunch.com/2018/04/02/instagram-api-limit/ https://techcrunch.com/2018/04/02/instagram-api-limit/)
    - TulliusCicero 3y ago
      I suspect reddit is more reliant on third party apps and tools than Instagram was.
- worrycue 3y ago
  > less financially valuable Don’t think the moderators who moderate your forums everyday for free should be included in that category …
  - KnobbleMcKnees 3y ago
    Agreed. The tools that moderators are losing definitely don't fit into the category I'm describing. Reddit failing to bring the tools up to par in the first party app is notably low hanging fruit and I'm equally confused as to why they wouldn't have pursued it.
csomar 3y ago
The product is the stock price, not "revenue" or "users". If this increase their stock valuation at IPO and destroy the company in a month time, they'll go for it. This is the free market at play, you are welcome. Couldn't be more relevant: https://www.youtube.com/watch?v=YZFTaEenaHM https://www.youtube.com/watch?v=YZFTaEenaHM
joshjob42 3y ago
They went from a few dozen people in 2015 to 400 in 2019 to 2000 today, and also started hosting images and videos in 2016-17. The result of all this is that they spend way more money than they did a decade ago and despite now making an estimated $600M/yr and 50M daily active users, they are apparently still losing money. A company that's 15 years old, never turned a profit really or made much profit if it ever did, and is still losing money is not in a good place to IPO, which existing investors want to recoup some of their investment.

KnobbleMcKnees 3y ago

It's purely a numbers game. If the amount of revenue you'll achieve from less users gives you a more positive multi year outlook financially then losing the users is "worth it", especially if those users fall into cohorts that are less financially valuable. Unfortunately that includes people who take part in blackouts as they correlate highly with people who e.g. run adblockers, use third party apps, etc.

selcuka 3y ago
> [...] especially if those users fall into cohorts that are less financially valuable Maybe, but my guess is they also produce the majority of the content that other users come to Reddit to consume. So it's a dangerous game.
- logifail 3y ago
  > So it's a dangerous game Of course the managers/executives making/approving decisions like this know it's a dangerous game, but it's not dangerous for them because they know IBGYBG[0] They have no "skin in the game"[1] meaning the incentives are all wrong, how do we expect them to behave any better? [0] "I'll be gone, you'll be gone" [1] https://en.wikipedia.org/wiki/Skin_in_the_Game_(book) https://en.wikipedia.org/wiki/Skin_in_the_Game_(book)
- TeMPOraL 3y ago
  There's going to be some inertia. You can recycle old content to mix with the "native advertising" spam that will fill the vacuum left by the people who used to "produce the majority of the content" - it's not a long-term solution, but if it keeps the user bleed in check until IPO, then the C-suite and the investors win; afterwards, the site can go to hell, it's not their problem anymore.
- pmoriarty 3y ago
  I don't know where you got the idea that power users produce most of the content. As far as I can tell it's ordinary users who produce much of the content.
  - KeplerBoy 3y ago
    the vast majority of users doesn't comment, let alone post.
    - pmoriarty 3y ago
      They don't, but those that do are just ordinary users. Power users are a tiny minority, and most of them don't post either.
  - tommit 3y ago
    Then what is your definition of a power user?
    - pmoriarty 3y ago
      Someone who, like the GP says, uses third party clients and ad blockers, who is very technically knowledgable, who may even use Reddit's API directly themselves, or write tools/clients for Reddit. Contributing to Reddit's content doesn't require any of that, and I'd wager the overwhelming majority of Reddit users don't do any of that but do contribute most of Reddit's content. Just because you're a content creator doesn't mean you're a power user. The concepts are mostly orthogonal. Though if you're a mod you probably use some mod tools, which makes you a bit of a power user by definition. But mods are a tiny minority of Reddit users and don't contribute most of Reddit's content.
larksimian 3y ago
Has this strategy ever worked in the history of social media businesses?
- KnobbleMcKnees 3y ago
  For social media, I would hazard not given that it is such a young industry.
- SpicyLemonZest 3y ago
  Instagram broke a bunch of apps in 2018 with no notice or comment and it turned out fine for them. (https://techcrunch.com/2018/04/02/instagram-api-limit/ https://techcrunch.com/2018/04/02/instagram-api-limit/)
  - TulliusCicero 3y ago
    I suspect reddit is more reliant on third party apps and tools than Instagram was.
worrycue 3y ago
> less financially valuable Don’t think the moderators who moderate your forums everyday for free should be included in that category …
- KnobbleMcKnees 3y ago
  Agreed. The tools that moderators are losing definitely don't fit into the category I'm describing. Reddit failing to bring the tools up to par in the first party app is notably low hanging fruit and I'm equally confused as to why they wouldn't have pursued it.

csomar 3y ago

The product is the stock price, not "revenue" or "users". If this increase their stock valuation at IPO and destroy the company in a month time, they'll go for it. This is the free market at play, you are welcome. Couldn't be more relevant: https://www.youtube.com/watch?v=YZFTaEenaHM https://www.youtube.com/watch?v=YZFTaEenaHM

joshjob42 3y ago

They went from a few dozen people in 2015 to 400 in 2019 to 2000 today, and also started hosting images and videos in 2016-17. The result of all this is that they spend way more money than they did a decade ago and despite now making an estimated $600M/yr and 50M daily active users, they are apparently still losing money. A company that's 15 years old, never turned a profit really or made much profit if it ever did, and is still losing money is not in a good place to IPO, which existing investors want to recoup some of their investment.