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Ever Wonder How Reddit Makes Money? Find Out Here

Reddit

I never really understood how Reddit could make any money, but now one of the guys running it has outlined their exact business model and plans for the future. Check it out here.

Everyone loves Reddit – it’s just such a simple idea executed perfectly that enables a whole bunch of great content to be shared easily and effectively. We’re not ashamed to say we get a lot of content from Reddit because it’s a great site, why would we be? We love Reddit.

I’ve often wondered how Reddit can exist as a company though as they don’t seem too dependent on adverts or product placement – it was pretty confusing for me. So I was really interested yesterday when some guy from Reddit posted this statement up explaining how it all worked. It’s kinda boring and fascinating in equal measure.

Turns out they weren’t making money and are in the red, so I guess that explains it a bit more. Hopefully with this new methodology they’ll be able to get back to making money so the site can stay open. I mean where the hell would Sick Chirpse gets its content from right?

Here’s the statement from Reddit user yishan. You can check out the Reddit thread HERE because there’s a lot of comments/debate going on.

☛ More Money:

How Google Makes Its Money 

Making Deviant Dough On eBay 

Guy Makes A House Out Of Money

I guess I’ll make a statement about our revenue plans vs our community activity.

1/ We didn’t make the frontpage changes for any revenue-related or mainstreaming reason. We made them because (as has actually been discussed in this very subreddit quite often) the default subreddits all evolve in different ways and the community itself begins to find one or more of those subreddits more or less valuable/desirable. (I think you all know what I’m talking about; this will be the only paragraph where I talk a bit sideways, because I don’t want to shit on people) Similarly, other emerging subreddits begin to show a lot of promise so in the interests of adding more fresh material, we’ve added them to the defaults.

1a/ There is a minor point that sometimes taking a subreddit out of the defaults and removing the pressures of the limelight can allow it to incubate and improve, but that wasn’t a reason in our decisions; it’s just something that occurred to me today.

2/ Our revenue plans encompass the following areas:

  • We run ads. Even though we are really strict about ad quality (no flash, spammy, etc), we don’t have a problem finding advertisers, and we don’t get any complaints from them about our defaults and it doesn’t seem to affect their decisions. It just… isn’t an issue. /u/hueypriest says that sometimes they are concerned about /r/wtf, but you’ll notice that (1) we left that in the defaults and (2) it still doesn’t seem to make much of a difference in their decisions to advertise with us.
  • We sell you reddit gold. Our plan with that is to add features and benefits so that over time your subscription becomes more valuable – at this point, if you are/were intending to buy anything from one of the partners, a month’s subscription to reddit gold will actually pay for itself immediately via the discount. Incidentally I should note again that the gold partners who provide those benefits don’t pay us. The business “model” there is roughly: (1) partner gives users free/discounted stuff. (2) Users benefit, buy gold. (3) Sometimes users have a problem or question, so they post in /r/goldbenefits. The partners (who are specially selected for, among other things, attentiveness to quality customer service) answer questions or resolve your problem in the subreddit, where it can be seen in public and therefore is good for them. (4) Partner’s reputation for good service increases, redditors discover another quality company/product that is actually good.It is marketing, but it’s not what you expect: we think that quality customer service is one of those “difficult to see, but ultimately most valuable” aspects of a company, and companies who do this don’t get enough recognition. Thus, this model helps make it clear when a company provides good customer service. The marketing value to them is not that they are a reddit gold partner, but that they are seen explicitly taking good care of redditors. (as it happens, if they don’t, we will drop them) Again, they don’t pay us for inclusion in that program – they have to be invited, and on the basis of us thinking they have something valuable to offer [at least some subset of] redditors.
  • redditgifts Marketplace is actually turning out to be promising. It’s still nascent, but gift exchanges are quite popular and (again in reddit fashion) we heavily curate the merchants who are allowed in the marketplace. We’ll see how it develops.

In none of these cases do we need (or want) to modify or editorialize the logged-out front page. We do modify and editorialize the front page by selecting the defaults, but we do it entirely for community-oriented reasons. We will probably continue to do so.

The truth (bland and unconspiracy that it is) is that we think if we do things for the community for community- and user- focused reasons, users will continue to be happy with us. Advertisers go where users go, and because subreddits already separate themselves from each other and advertisers can target by subreddit, there’s very little fear of an ad appearing next to “objectionable” content that they didn’t select. The user/community focus of reddit gold benefits and a marketplace is also pretty self-evident: if we make users happy with reddit, they will pay for reddit. There is just so much weird talk these days about financial engineering and weird business models by investment banker types that it pervades and distorts even normal peoples’ expectations of how a business might be run – at reddit we are just trying to run a business in the old fashioned way: we make a thing, we try to make it as good we can for YOU, and you pay us money for it. My background is that of an engineer – I like to keep things simple.

A note about short-term vs long-term money. It turns out that you have to plan for BOTH the short-term and the long-term. If you don’t eat in the short-term, you die and never make it to the long-term. If you do everything short-term, you have no long-term future. So we need to make enough money this year to pay the bills and fund next year’s growth, and we also need to put into place the cornerstones of future growth at the same time. It’s a balancing act.

Finally, if you would like to buy some tinfoil (actually aluminum), please use this Amazon affiliate link:http://www.amazon.com/gp/product/B001R2NM5U/ref=as_li_ss_til?tag=reddit-dh-20

 


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