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  • The interest rate hike in the USA by the federal government caused this. The companies can't borrow money for nearly free any more. All the entities who would have been offering these loans are now able to buy government bonds with a much more guaranteed return on investment. This means the corporations must squeeze more profit out of their products to pay back loans. There are an enormous amount of large money transactions like this used to run a large business. They do not operate on cash reserves all the time. They have assets and are always evolving to stay relevant. Most businesses have enormous asset holdings but limited liquidity.

    • This best answers the OPs question. We know why it happens in general, but this is why everything is doing it in overdrive right now.

      I also think Spez is trying to rush into an IPO before the bottom truly drops out and the company folds.

  • Can't fight the class war if they have us either fighting the culture war, or not talking to each other intelligently.

  • In short: money.

    Long story is that a lot of these tech companies started as startups funded by VCs.
    Borrowing money was cheap so they got dumped buckets of money onto them to burn in an effort to try to get a foothold and/or kill off competition by undercutting them.

    Now that they've gained a foothold and in some cases have a near monopoly or duopoly and now that borrowing money isn't cheap anymore, they need to start cutting cost if not outright turn a profit.

    And so the enshittification begins.

    Specifically for Twitter, Musk needs to cut cost because he bought Twitter at a severe premium and has made it less valuable by the minute ever since he took over. This to the point that he is leaving bills unpaid.

    Specifically for Reddit, they've burned through all that VC money and have been eying a juicy exit in the form of an IPO. An IPO would be a payday for everyone who initially invested into Reddit because now they can sell their shares for more than what they invested (or at least that's their hope). In order to get a good price once they go public they want to cut cost and increase revenue to seem as valuable as possible.

    Specifically for YouTube, the ad game has been generating less and less revenue over time and advertisers have been burned in the past by having their ads placed next to objectionable content.
    So the knee-jerk reaction is to severely tighten the rules for content, lest they be demonetized.
    This however made creators realize that their livelihood in the form of the pittance that's called AdSense payout is very fragile, so they started moving to doing sponsorships, soliciting Patreon donations and partnering with Nebula.

    Now YouTube is missing out on those revenue streams and often ad revenue as well as creators often turn off ads on their video when they have sponsor deals etc. So what does YouTube do? They started monetizing videos of creators who are not eligible for their partner program (i.e. place ads on videos and not share it with creators) and not give those creators the option to turn off ads, they started severely increasing the amount of ads on videos that do run ads, they started severely pushing YouTube Premium and now they're cracking down on adblockers.

  • These are old era internet companies from when it was considered fiscally fine to be unprofitable as long as you were growing. Those days of the internet are over and the last few companies clinging to that model now have to plan their shift toward either profitability or being sold off for parts.

  • The tech markets have tightened.

    To take Reddit’s case: so far, they could raise money at increasing valuation, and that’s how they’d fund their operations without having to have solid monetization. Now that all valuations are down including theirs, they can’t raise anything anymore, leaving them with four (non-exclusive) choices: running out of money soon and closing shop, exiting as fast as possible to get capital injection that way, letting go of most of their staff quickly in order to get leaner, or finding aggressive ways to monetize shortly.

    I think Reddit’s monetization situation was grim enough that they’re making precipitated moves towards all the last 3 options, in order not to pick option 1 and die soon. For having been a part of it, a startup looking to exit will choose some very specific metrics that they’re choosing to market their exit on, and then they’ll make all their subsequent moves based on ruthlessly optimizing for those metrics alone. Since those metrics can be way different from the ones the company was using to raise money so far, that by itself can turn a company’s ethos on its head.

    I think that’s what we’re seeing across the board in tech companies; except Twitter, which was a rare case of being driven by political calendar, and one person’s political goals. The acquisition agreement was signed just before the markets tightened, and in fact, Musk tried hard to wiggle himself out of it when the market started tightening, because that kind of wasteful ownership doesn’t make sense in the new climate. But this is really specific, and I believe the timing is a coincidence; unlike all the other ones.

  • The companies want to make more money, and they have (what they think) a captive audience that will put up with the increase in costs. Pull off the bandaid all at once to maximize the probability that everyone will shrug and take it.

  • I feel like they all see the inevitability that AI will drastically change the money model very soon. And it will not be to their profit, so best make every penny they can right now is their mentality.

112 comments