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Comment by reso | Hacker News Reader

Is there something counter-intuitive about reddit that makes it hard to monetize? That's the core issue. Reddit still makes barely $1/user/month while instagram makes $35. Cutting off the 3rd party apps is a cost-cutting move, not a revenue-generating move. Why haven't they managed to find more revenue?

I'm loath to say it but Huffman has had a decade to solve this and hasn't. Might be time for new leadership with new ideas.

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Cutting off 3rd party apps isn't a cost cutting move. It has two clear benefits - firstly they can push users into the officially supported apps where ads can be shown in a more controlled fashion and metrics on those ads can be gathered. Second, it removes the ability for other companies to programmatically gather Reddit's data - this is important in the context of large language models where investors are convinced that the data sets to train the models will be valuable.

The reason reddit is hard to monetize is actually quite simple, they don't know much about their users so they can't do the high value targeting other companies do, and they have a site where it's very difficult to insert adverts in what looks like an organic way. It's easy to scroll past an advert on instagram and not realise it's an advert, it's visually consistent, on reddit it sticks out like a sore thumb so they get CPS rates of a 90s banner ad - because that's what they're selling.

I disagree with you, but especially the second part. Users advertise their interests by the subs they subscribe to, it would be very easy to target them. You could even go so far and let users up and downvote ads they think are relevant to them. The problem is more with the whole way reddit inc goes about how they interact with their users and power users. You shouldn't be openly hostile against your own users (except if you are the mods of askmen).

It really fascinates me that people think Reddit is hostile to their users, because when you really look at it, aren't reddit's users incredibly hostile to reddit management? Like really if you look at it from the outside you have this community that does this incredibly nasty things and then every time management steps in to try and correct it the community goes into uproar. I'm not saying the management have handled it well, but the userbase is a complete dumpster fire.

Who was nasty first? Are you trying to say the community brought this API change upon itself?

I'm not saying that at all - this API change has to do with business, nothing to do with personal feelings. But I just think it's interesting people criticise the leadership of reddit but look at what the users of reddit have been up to over the years - /r/jailbait, the harassment of Ellen Pao, the fappening, FatPeopleHate, the Boston bombing vigilantes, Pizzagate. Like yeah, sure, Reddit has been a total fuck up of a business proposition, but that really is partly because the site has harbored some really disgusting stuff over the years and it's only extremely recently that the company has even started to try to steer away from that stuff - and when they do large portions of the company react extremely badly.

> but look at what the users of reddit have been up to over the years - /r/jailbait, t

You mean the /r/jailbait subreddit current Reddit CEO Steve Huffman was a moderator of?

Their ads in the iOS app are formatted exactly like normal reddit posts. I’ve tapped on them by accident quite a few times in the last week. I’m going to assume the New Reddit experience is largely the same, but I’m not about to turn off my adblocker on PC to test that.

It seems to me that Reddit knows about as much about its users as Twitter. Am I wrong?

The biggest problem with Reddit is that their only source of revenue basically demands you to create a completely new ad for ONLY that platform. For everything else you can just make an iframe, drop whatever malicious blinking crap you want, send it to the wild and let ad networks sell and resell space and sometimes drop your ad in it, pay pennies for clicks and even less pennies for each time it's been served.

They haven't tried to enter any ad ecosystem, haven't tried to monetize the massive amount of creativity or anything on the platform. Granted, it's really hard to say "Hey, we've shown your news article to 10 million people, pls pay us" when the news site itself is struggling to get any revenue from those millions of clicks. Not to mention the site might have a question reddit reeeeallly doesn't want to answer "So, was it in a neo-nazi subforum or a porn subforum?"

Yeah, there's just been nothing in ten years. An IPO at this point is nothing but a cash grab awaiting the death of the platform.

What's interesting about the "they should go programmatic" argument is that programmatic ads are increasingly less lucrative thanks to low-quality traffic and the perceived ineffectiveness of cookie-based retargeting. (Yes, please, show me a hundred banner ads for that pair of pants I literally just purchased!) Programmatic ads also tend to generate more profit for the middlemen who broker transactions than they do for the publishers who display ads; once all of the ad platforms involved in the transaction have taken their cut, there's not much left.

In response to this, some people have been driving a push back to traditional/contextual ads, similar to what Reddit is currently doing. So, in theory, if Reddit is selling Guaranteed High Quality ad space, and selling it to brands with whom they have a direct partnership,[2] and not getting skimmed off the top by middlemen, they should be raking in the advertising dollars. Right?

But they're clearly not! Or not nearly enough to be profitable.

The efforts against third-party apps are clearly an attempt to drive more ad impressions (because you can't drive impressions if users aren't in an environment where you can serve impressions), but I somehow doubt that that's gonna make a big difference, even if third-party-app-users all threw up their hands and migrated, without protest, to official channels.

[1] The real cash cow among programmatic ads is video advertising, since those placements are more valuable and fetch a higher price, but I also see that as a trap for Reddit—their decision to start natively hosting video seems pretty short-sighted for a company that's already not breaking even. If they wanted to go hard on video ads, they'd have to start prioritizing more video content, which means hosting more video content....

[2] Perhaps not for nothing that half the ads on Reddit these days are for that vaguely evangelistic "He Gets Us" campaign. The buyers clearly have money to throw around, but the relative lack of other ads mixed in has to say something about the (lack of) demand for Reddit's inventory.

Don't disagree with anything there.

There's no reason they couldn't do both, really. They could have spaces for traditional ads, and they could have those direct partnerships.

Direct partnerships might be nice in theory, but it will always require a separate decision and process from the company to partner with Reddit. Considering there are hundreds of different avenues people could be advertising on, I'm guessing Reddit is kind of low on the list.

Reddit has a ton of revenue - $500 million per year. Considering the work of actually running the site is done by volunteers, what is baffling is that they cannot be profitable with this amount of money.

There is profitability and then there is VC-profitability. One of them normal people can understand and the other is absurd IMHO.

VC forces you to staff up, spend like there is no tomorrow, and have a huge return or GTFO.

$500M a year should absolutely support a company like Reddit (even giving the API away for free) but that’s not a 10-100-1000x return so it’s essentially $0 to VCs.

When Reddit says they aren’t profitable they really mean they aren’t profitable /enough/ coupled with their high headcount.

Working at a small startup (or a side project) will show you what can be accomplished with 1-10 or <50 people who are all committed.

Redditors aren't as valuable to sell to because they are more likely to use ad blockers.

That and instagram ads are said to be better.

> Redditors aren't as valuable to sell to because they are more likely to use ad blockers.

reddit's gone so mainstream I'm not sure if this is true anymore.

The problem is that the moderators and content contributors aren't mainstream users... hence the blackout.

Perhaps but I would guess a much higher percentage of the Reddit userbase uses ad blockers than other social media platforms (e.g. Instagram, Snapchat where most - all? - users are using phones and thus it's much harder to install an adblocker).

i hate to say it but instagram ads are REALLY good.

i constantly find good restaurants via ads. out of my top 5 fav restaurants, 3 i found via ads.

I'm surprised reddit can't run with that amount of profit per user per month but more surprised by the Instagram number.

Surely spending there is overinflated? I know whales with bad impulse control are a thing but there's no way the average user there justifies $35 in ad spending.

> Is there something counter-intuitive about reddit that makes it hard to monetize?

There is - it makes little sense to buy ads, when you can buy comments.

https://xkcd.com/1019/

Interesting perspective. But it does beg the obvious question: how effective are comment sections? How many casual redditors in this case actually read the comments and aren't just scrolling through titles?

Either way, the experiment is very cheap and honestly we're dreaming if these were the rates they paid. It's probably more like $2/hour to people in 2nd/3rd world countries.

For advertising your target isn't necessarily someone organically scrolling who happens upon it. It's definitely the people who are googling "best cordless drill reddit" or digging through the stickied megathread of a specific interest's sub. In those cases it would be very very hard to beat the effectiveness of a well-placed comment.

Well places like r/mattresses are frequently astroturfed so I take that as at least weak proof casual readers read comments.

I think it depends on the subreddit. For instance many r/news readers likely only read the title.

But r/ama readers likely always read the comments because they are the core content.

And now misinformation and astroturfing gets worse because GPT makes it dirt cheap.

You can buy upvotes very cheap, and I know people who do it.

I'd just like to point out, that I run a side business selling vinyls/cassettes in a very niche genre. I looked into advertising on reddit, as there were two or three communities that I was already active in with collectors of this type of music.

I thought it'd be better to advertise than self promote. However, Reddit's ad management is a complete cluster. It is confusing, frustrating to set up, and difficult to analyze.

The reason I really wanted to advertise on Reddit rather than Facebook/Instagram is that Facebook's "profiles" of people aren't specific enough for what I am selling. But with Reddit, I literally just want to target anyone who is a member of or visits these specific subreddits.

For me, it is perfect targeted advertising without any invasive tracking of users!

But Reddit wouldn't let me. Those subreddits aren't on their very limited list of approved subreddits. Instead my only choice was to be able to target a really, really big subreddit (/r/Music) which 99.99% of the people there would have no interest in my product, or to use their profiles, which are not nearly as complete as Facebook's.

So, I gave up, and decided I wasn't getting my return on advertising on Reddit.

They haven't tried. Perhaps there's some things I don't see that they thought would work, but it really doesn't look like it.

It looks like they've been mostly user friendly. They were relatively late forcing users to the app, and the app doesn't seem as bad as competition (in terms of privacy, nagging, ect., not quality).

As far as I can tell they've resisted the use of a ton of user hostile forms of advertising. They don't allow software, so no malware. The ads don't intrude on the users. (although they have blended it with normal content, which isn't great).

Do they even sell data. At this point, it seems guarantied that they're selling some data, but they haven't been successful. Haven't heard much on them building detailed profiles on specific people.

Counter-intuitive? Perhaps not. But there are some obvious reasons why it is comparatively harder for Reddit to attract ad spend:

1. Instagram encourages business users to use the service for free. This gives a taste for the platform and reduces the friction in spending money later on. Reddit, on the other hand, discourages free business use.

2. Instagram generally gives the impression that it has real users, with real names and real photos attached. Reddit generally gives the impression of being a fantasy world with anonymous characters. While the latter may be attractive to certain niche products that fit into that fantasy, the average business operating in the real world feels more at home when it thinks it is marketing to real people.

They don't serve ads through the api.

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