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Reddit never seemed to behave in a way that made any business sense. VC money has distorted its business model since the beginning, and now it seems that Reddit

Reddit never seemed to behave in a way that made any business sense. VC money has distorted its business model since the beginning, and now it seems that Reddit is willing to burn itself to the ground to put up a barrier for preventing new players from accessing the data that OpenAI and other big tech companies have already used to train their LLMs. I guess that since it never turned a profit this is the only way VCs can get their money back. Honestly, I find this a very repugnant way of dealing with the user base. A business that never tried to earnestly generate enough value to be sustainable can only be classified as a scam in my book.

blitzar 3y ago
I know it will be as popluar as rabies around here ... but that is litterally the entire business model of Silicon Valley, including YC (https://www.ycombinator.com/companies?batch=S05 https://www.ycombinator.com/companies?batch=S05).
- ramijames 3y ago
  Absolutely agree with this. Everything that is wrong with modern tech business models has to do with VCs and chasing funding or valuation.
- eschaton 3y ago
  No, it’s the business model of YC and “New Silicon Valley.” The original companies that caused people to start calling this entire region Silicon Valley were making—and, in a few cases, are still making—real things intended to make their users’ lives better. It was the dot-com bubble and its couple of resurgences that really fucked things up here and made everything off-kilter. The finance bros were drawn like vultures to “easy profit,” and brought with them attitudes like treating Google’s chef getting rich too as a “problem” to be “solved” rather than the system working as designed.
  - rvense 3y ago
    Wait, I thought it was called Silly Con Valley because of this exact model?
    - TeMPOraL 3y ago
      Yes to both of you. Silicon Valley became Silly Con Valley after the dot-com bubble.
  - BasedAnon 3y ago
    As usual the financial sector is responsible for basically all the financial problems.
    - phpisthebest 3y ago
      Well when everything is based on unsound money, and a literal ponzi scheme the entire financial sector is the largest con ever created I am not sure how civilization was dupped into the mass delusion of our current economic systems but I do believe we are seeing them unwind right now... the Fed and other controllers have been attempting to catch a falling knife for at least 15 years if not longer... at some point they will loose that battle
      - BasedAnon 3y ago
        It starts with interest on a loan, then slowly snowballs as everything is gradually cleaved away from reality.
- marginalia_nu 3y ago
  I think a traditional venture capital model makes sense for some businesses, but not others. There are many cases where you might need initial investment to reach escape velocity, and you probably won't be very profitable in the first few years. Something like Spotify is a good example of this working as intended. It's not without its problems, especially their blatant rent-seeking within the podcast sphere, but at the core it's VC working well. That's not what Reddit and indeed many other VC funded enterprises are doing. Reddit was never going to make a profit without upending its entire value proposition. They may or may not successfully cash out, but what's in store for them if they don't flame out immediate is essentially turning into Facebook. Not cool 2008 facebook, but lame minions memes and grandmas Facebook.
  - lotsofpulp 3y ago
    > There are many cases where you might need initial investment to reach escape velocity, and you probably won't be very profitable in the first few years. >Something like Spotify is a good example of this working as intended. Spotify is a 26 year old business with zero moat. It’s most valuable to the 3 major record labels as a negotiating tool against Apple, Alphabet, and Amazon. That means the 3 record labels need to price their music just low enough to keep Spotify limping along, resulting in a cap on the profit margin Spotify can earn. Spotify’s only move is to try to become a record label themselves, but due to excessively long copyright terms and cultural longevity of music, they basically have to keep buying from the 3 major record labels.
    - rvense 3y ago
      I had to look that up - you probably just mistyped, it's 16 years old.
      - lotsofpulp 3y ago
        Yes, sorry, thanks for the correction.
    - marginalia_nu 3y ago
      Spotify's moat is the byzantine legal maze of negotiating music rights with the record labels which needs to happen in a by-country basis. Their profit cap is mostly the result of actual competition. That's a healthy market, which is fundamentally a good thing for the consumers since it means they need to innovate and provide a good service.
hhmc 3y ago
Aomngst all the dicsussion of reddit's flawed business model, I haven't seen much conjecture into how they _should have done it_. Clearly they need to make money at some point -- I'm curious if they ever had a route to do this that wouldn't alienate their userbase?
- blitzar 3y ago
  They could accept that "reddit the product" (in its current form) is a 2-5bn market cap business with solid 0.5bn revenue; run the business on that basis (all values in today $$'s). Not every product / market is a trillion dollar business. Trees dont grow to the sky. This isnt to say dont innovate. If they invented a new product; the VR Meta TikTok Shorts iPhone Satellite Headset Watch (TM), then one can reevaluate what "reddit the product" means, but charging for your API or introducing a paid verified badge isnt changing that definition.
  - dumpsterdiver 3y ago
    The revenue doesn't matter though if their expenses exceed it. Reddit is not a profitable company. So the parent poster's question remains valid: was there ever going to be a way to "make money" (i.e. profit) without alienating the user base?
    - wasmitnetzen 3y ago
      Why is Reddit not already profitable? They don't pay their moderators, they don't pay for their content, it's mostly text- and image based, very little video, they have a userbase which buys meaningless awards for real money, they should have "native advertising" deals to no end, and very high CPR for their ads since the userbase tells them about their interests. Sounds to me like they're just bad at running a business.
      - dumpsterdiver 3y ago
        I don't know. I can only guess that it's because it was created by two college students with the intent of allowing people to share interesting content with each other (a pet project), and then became more popular than they could ever have imagined. Server costs went up in order to keep the site alive, and investors saw the potential and subsidized those costs, and everything ticked along swimmingly until the investors became impatient. Again, this is just speculation.
drumhead 3y ago
It's not a and never has been a traditional company. Lots of people have said it should be a trust like Wikipedia. It was was always a republic in a world full of Kingdoms.
- hughesjj 3y ago
  i loved the idea of reddit gold. if they did a dontation drive like wikipedia i would have donated.
The_Colonel 3y ago
The training data argument is a red herring. It's not difficult to scrape all of that via web for training purposes.
- pbmonster 3y ago
  It's a legitimacy issue. If you get the data through the API, you don't have to hide that you used it. Which might be a big advantage if you want to publish/sell what you've been doing.
  - TeMPOraL 3y ago
    But isn't it the case that all that could be scrapped from Reddit before ChatGPT came on-line already has been scrapped, and is publicly available? Anything post-ChatGPT is going to be increasingly worthless, as there's an unknown amount of LLM-generated content mixed in it, which is going to be wasteful, and potentially poisonous when used in training next-gen LLMs (some early studies already indicate that training LLMs on LLM output leads to visible degradation very quickly).
    - CodesInChaos 3y ago
      Yes, there is a publicly available 2TB dump containing every post/comment until Feb 2023.
      - Applejinx 3y ago
        Astonishing that it's only 2 TB…
    - bombcar 3y ago
      I thick Reddit management believes they’re able to close this barn door and that additional horses will appear because Reddit content will continue to remain high quality and LLM-free. Wow that sentence was hard to write with a straight face.
  - rcxdude 3y ago
kramerger 3y ago
> preventing new players from accessing the data that OpenAI and other ... Sam Altman is a Reddit investor and was until recently a board member.
- blitzar 3y ago
  Reddit is OpenAI’s moat - https://news.ycombinator.com/item?id=36325958 https://news.ycombinator.com/item?id=36325958

blitzar 3y ago

I know it will be as popluar as rabies around here ... but that is litterally the entire business model of Silicon Valley, including YC (https://www.ycombinator.com/companies?batch=S05 https://www.ycombinator.com/companies?batch=S05).

ramijames 3y ago
Absolutely agree with this. Everything that is wrong with modern tech business models has to do with VCs and chasing funding or valuation.
eschaton 3y ago
No, it’s the business model of YC and “New Silicon Valley.” The original companies that caused people to start calling this entire region Silicon Valley were making—and, in a few cases, are still making—real things intended to make their users’ lives better. It was the dot-com bubble and its couple of resurgences that really fucked things up here and made everything off-kilter. The finance bros were drawn like vultures to “easy profit,” and brought with them attitudes like treating Google’s chef getting rich too as a “problem” to be “solved” rather than the system working as designed.
- rvense 3y ago
  Wait, I thought it was called Silly Con Valley because of this exact model?
  - TeMPOraL 3y ago
    Yes to both of you. Silicon Valley became Silly Con Valley after the dot-com bubble.
- BasedAnon 3y ago
  As usual the financial sector is responsible for basically all the financial problems.
  - phpisthebest 3y ago
    Well when everything is based on unsound money, and a literal ponzi scheme the entire financial sector is the largest con ever created I am not sure how civilization was dupped into the mass delusion of our current economic systems but I do believe we are seeing them unwind right now... the Fed and other controllers have been attempting to catch a falling knife for at least 15 years if not longer... at some point they will loose that battle
    - BasedAnon 3y ago
      It starts with interest on a loan, then slowly snowballs as everything is gradually cleaved away from reality.
marginalia_nu 3y ago
I think a traditional venture capital model makes sense for some businesses, but not others. There are many cases where you might need initial investment to reach escape velocity, and you probably won't be very profitable in the first few years. Something like Spotify is a good example of this working as intended. It's not without its problems, especially their blatant rent-seeking within the podcast sphere, but at the core it's VC working well. That's not what Reddit and indeed many other VC funded enterprises are doing. Reddit was never going to make a profit without upending its entire value proposition. They may or may not successfully cash out, but what's in store for them if they don't flame out immediate is essentially turning into Facebook. Not cool 2008 facebook, but lame minions memes and grandmas Facebook.
- lotsofpulp 3y ago
  > There are many cases where you might need initial investment to reach escape velocity, and you probably won't be very profitable in the first few years. >Something like Spotify is a good example of this working as intended. Spotify is a 26 year old business with zero moat. It’s most valuable to the 3 major record labels as a negotiating tool against Apple, Alphabet, and Amazon. That means the 3 record labels need to price their music just low enough to keep Spotify limping along, resulting in a cap on the profit margin Spotify can earn. Spotify’s only move is to try to become a record label themselves, but due to excessively long copyright terms and cultural longevity of music, they basically have to keep buying from the 3 major record labels.
  - rvense 3y ago
    I had to look that up - you probably just mistyped, it's 16 years old.
    - lotsofpulp 3y ago
      Yes, sorry, thanks for the correction.
  - marginalia_nu 3y ago
    Spotify's moat is the byzantine legal maze of negotiating music rights with the record labels which needs to happen in a by-country basis. Their profit cap is mostly the result of actual competition. That's a healthy market, which is fundamentally a good thing for the consumers since it means they need to innovate and provide a good service.

hhmc 3y ago

Aomngst all the dicsussion of reddit's flawed business model, I haven't seen much conjecture into how they _should have done it_. Clearly they need to make money at some point -- I'm curious if they ever had a route to do this that wouldn't alienate their userbase?

blitzar 3y ago
They could accept that "reddit the product" (in its current form) is a 2-5bn market cap business with solid 0.5bn revenue; run the business on that basis (all values in today $$'s). Not every product / market is a trillion dollar business. Trees dont grow to the sky. This isnt to say dont innovate. If they invented a new product; the VR Meta TikTok Shorts iPhone Satellite Headset Watch (TM), then one can reevaluate what "reddit the product" means, but charging for your API or introducing a paid verified badge isnt changing that definition.
- dumpsterdiver 3y ago
  The revenue doesn't matter though if their expenses exceed it. Reddit is not a profitable company. So the parent poster's question remains valid: was there ever going to be a way to "make money" (i.e. profit) without alienating the user base?
  - wasmitnetzen 3y ago
    Why is Reddit not already profitable? They don't pay their moderators, they don't pay for their content, it's mostly text- and image based, very little video, they have a userbase which buys meaningless awards for real money, they should have "native advertising" deals to no end, and very high CPR for their ads since the userbase tells them about their interests. Sounds to me like they're just bad at running a business.
    - dumpsterdiver 3y ago
      I don't know. I can only guess that it's because it was created by two college students with the intent of allowing people to share interesting content with each other (a pet project), and then became more popular than they could ever have imagined. Server costs went up in order to keep the site alive, and investors saw the potential and subsidized those costs, and everything ticked along swimmingly until the investors became impatient. Again, this is just speculation.

drumhead 3y ago

It's not a and never has been a traditional company. Lots of people have said it should be a trust like Wikipedia. It was was always a republic in a world full of Kingdoms.

hughesjj 3y ago
i loved the idea of reddit gold. if they did a dontation drive like wikipedia i would have donated.

The_Colonel 3y ago

The training data argument is a red herring. It's not difficult to scrape all of that via web for training purposes.

pbmonster 3y ago
It's a legitimacy issue. If you get the data through the API, you don't have to hide that you used it. Which might be a big advantage if you want to publish/sell what you've been doing.
- TeMPOraL 3y ago
  But isn't it the case that all that could be scrapped from Reddit before ChatGPT came on-line already has been scrapped, and is publicly available? Anything post-ChatGPT is going to be increasingly worthless, as there's an unknown amount of LLM-generated content mixed in it, which is going to be wasteful, and potentially poisonous when used in training next-gen LLMs (some early studies already indicate that training LLMs on LLM output leads to visible degradation very quickly).
  - CodesInChaos 3y ago
    Yes, there is a publicly available 2TB dump containing every post/comment until Feb 2023.
    - Applejinx 3y ago
      Astonishing that it's only 2 TB…
  - bombcar 3y ago
    I thick Reddit management believes they’re able to close this barn door and that additional horses will appear because Reddit content will continue to remain high quality and LLM-free. Wow that sentence was hard to write with a straight face.
- rcxdude 3y ago

kramerger 3y ago

> preventing new players from accessing the data that OpenAI and other ... Sam Altman is a Reddit investor and was until recently a board member.

blitzar 3y ago
Reddit is OpenAI’s moat - https://news.ycombinator.com/item?id=36325958 https://news.ycombinator.com/item?id=36325958