It’s hard to monetize off of shitposts
I was shocked when Reddit raised more than $300 million on a $3 billion valuation. I use Reddit frequently and like the product, but still feel like the valuation is unjustified. The round was led by Tencent, but a16z and Sequoia also participated, both of whom should have known better. Because, if there’s one law on the Internet, it is that it is hard to monetize off of shitposts.
A shitpost (SP) is content that has little value. Think of it as memes, hate speech, cat gifs, tabloids, your personal diary, etc. This is not to say that SPs are unpopular; the internet is built on sharing cat videos and funny memes, but having a venture-backed startup operate as a platform for SPs is very bad. An early example is 4chan, a hugely popular site in the early 2000s. Since then, there’s been Tumblr, Yik Yak, Imgur, Reddit, and 9gag. These sites are popular, but it’s been hard for any of these platforms to convert traffic and engagement into long-term value.
The degree of shittiness exist on a spectrum.
In the context of other shittier startups, Reddit doesn’t seem too bad. But when we include other social companies, Reddit falls way behind.
All social apps need a mix of shitty and valuable content. If a social company only optimized for value, then it becomes a utility like Google Maps that gets very little virality and engagement. On TikTok, you can find videos of people shouting at ducks and videos of science teachers demonstrating experiments. Both are necessary as the funny duck videos get people to download the app and the science videos make it seem like this is time well spent. Similarly, what makes Instagram and Facebook valuable are posts from your close friends. If Instagram only had photos of strangers and food, most people would feel much less inclined to check in regularly.
Like diamonds or oil, value follows scarcity. There are lots of places on the web with cat gifs, but only a few places to see what your friends are up to. Similarly, if you want to watch Ninja play Fortnite, you have to go to Twitch Mixer. Platforms have outsized value when they have content that’s scarce. The problem occurs when the majority of content on a site are shitposts with limited retention loops beyond the content itself. In that case, the site becomes an aggregator without stickiness.
Above is a screenshot of Reddit’s homepage for a logged out user. There’s stuff about politics, an ad, a discussion, news, animal photos, screenshot from Facebook, screenshot from Twitter, etc. With the exception of the post in r/AskReddit, none of the other posts are generated on Reddit itself. Users might say that the value of Reddit is in the comments, but how much does the opinions of u/TheLegendOfEatingAss ultimately add to the valuation?
Reddit will likely try and monetize by increasing ad load, and getting people to download their mobile app (to serve even more ads). They’ve also ran a bunch of monetization experiments in the past, including a subscription service (Reddit Premium) that I don’t understand and a currency (Reddit Coin) that I also don’t understand. Reddit is severely under-advertised compared to Facebook or Instagram. This is the crux of the issue as Instagram users are okay with watching another Away ad for a glimpse of what their friends are up to, whereas Reddit users, when frustrated by ads, can just leave and find another outlet for memes. As any Instagram influencer will tell you, there’s a fine balance between retaining your followers and monetizing on a sponsored post, and right now, Reddit functions more like kookslams than Instagram itself.
So, what is Reddit to do? I would pivot the site towards the likes of Twitch, Roblox, Patreon, and Substack, platforms that allow content creators to monetize from their work. For example, if you are really into cat gifs, you can follow and subscribe to u/catlady420. Reddit will get a % from any donations or subscriptions sold by the creator. This is not a novel idea; there’s already a thriving community of women (and to a lesser degree, men) selling nudes on Reddit (don’t ask me how I know this). Users willing to pay for panties might also be willing to pay for political commentary. Reddit has the additional advantage of being a distribution channel, something that Patreon can’t claim.
It’s always risky to predict the demise of a social company because consumers apps can reach overnight success. I don’t see this path for Reddit right now and from what I’ve observed, the site has gotten “shittier” over time. Still, I think this is somewhat of a controversial view since Reddit is still one of the most popular sites on the web today (18th most popular according to Alexa). Luckily, I know at least one company who agrees with me. As far as I know, Facebook has not tried to acquire Reddit.