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How is a company like Reddit “not profitable” yet?

Beyond spez (and the fact that he is a greedy little pig boy), I’m curious about the corporate dynamics that prevent a company like Reddit from being profitable. From an outside perspective, they make hundreds of millions per year via advertising, their product is a relatively simple (compared to industries that need a lot of capital to build their product), and their content is created and moderated for free by users. Could any offer some insights or educated guesses? Additionally, I’m curious how this all ties into the larger culture of Silicon Valley tech companies in the 2010s.

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  • We'd need to see their financials, which is tricky since they aren't public yet. There's also the issue, Steve lies about everything, so should we believe he's telling the truth?

    But my guesses would go like this:

    Since they've been spending other people's money, they probably haven't been watching expenses closely. Their P&L is probably dominated by payroll and rent. I can't help but feel that programmers are drastically overpaid, which is a symptom of the same issues, that there's a lot of other people's money chasing a finite supply of techbros.

    The reason I think programmers are probably overpaid, by the way, is the number of man-hours they allegedly put in, versus the quality of their output. Reddit is a particularly shocking example of this.

    In any case, the other people's money doctrine is to grow into profitability, which means burning money on spurious shit until some magic happens. Not exactly a winning business model.

    • The same data you use to say that programmers are overpaid could be seen as an indication that professional-level software development is more difficult than you think and warrants the higher salaries. Programming is one of those things that almost anyone can do, but relatively few can do well.

      Either way, if there were people who could do it better or cheaper they would be.

      Edit: In the interest of full disclosure, my view may be slanted because I am a developer. On the other hand, that means I've seen the subject from the inside.

      • The software industry tried that, of course: replaced tens of thousands of software developers in the US with 'outsourcing' to India. Eventually, after fucking up things for tons of people, they figured out that actually working with a team of 20 year olds in a different time zone across the world who don't have perfect command of English is not worth the savings, as it takes 5 fresh Indian grads to do the work of 1 experienced US dev, and it still ends up worse.

    • They're absolutely overpaying. Don't forget that the last revolt was triggered in part by them demanding that all their devs move to San Francisco (where they have to pay San Francisco sized salaries).

      They had remote working teams in place PRIOR to the pandemic, and they scrapped it because all the stupid executives want their taint fondled while they look over their cubicle farm of peons like all the other tech execs.

    • With Splez's political views, highly likely they have some sort of tax avoidance scheme.

    • Liars like Steve are easy to catch. We know he's selfish and unempathic. His behaviors and accusations are clear tells. Remember how he accused the dev for Apollo of trying to extort Reddit when that's what Steve was doing? This recent Reddit move of demanding insane prices for the API and upsetting the community is really good info. He needs money (the price increase), wants more control (API got priced out), and is willing to piss everyone off ultimately sabotaging the company. While we don't know the specifics, we know he's desperate for money, control, and a charade while he's running out of time. Something on his end is blowing up in his face, he's trying to save himself, and he could be saved if someone shows up with a ton of money. Otherwise, he's going dress the Reddit turd up as a sausage, and fake it long enough to pass it onto someone else. I wouldn't want to be involved with him in anyway at the moment. If I worked at Reddit, I'd be sending my resume out to other employers.

    • They're probably overpaying people that do not contribute a ton, eh? Makes me wonder how much the top brass in general earn.

    • I agree with everything you said. It's worth noting that web-based advertising has generally been getting less profitable because everyone is using effective ad-blockers, so advertisers don't want to pay as much. Their expenses could be pretty have to maintain a lot of server farms for all the picture and video content (text doesn't take much) and for redundancy to keep a high uptime. They also have a surprisingly large staff, given all the volunteer mods.

      So for the things you and I both mentioned, it's wouldn't surprise me if they lose money, and I don't begrudge them trying to become profitable, but they sure didn't go about it well.

75 comments