Of course they're not profitable.
Most growing tech companies aren't, because most geowing tech companies will take their revenue and immediately reinvest it back into more growth, as they know growth attracts further VC investments, which will actually cover paychecks in the meantime. This is exactly how the world of tech works nowadays.
Being profitable or not is meaningless if you're talking about a company exploding in revenue.
If reddit "isn't profitable" why is spez worth over $10 million? That's not money you just stumble into having, and if your company "isn't profitable" wouldn't you not be making enough to be worth $10 million after only a decade? Wouldn't your money be going into keeping the lights on and not enriching yourself?
*billion
And profitability is not the same as generating revenue.
You can earn $200M a quarter and still have expenses of $220M, meaning you're making a net loss.
That's why companies focus on exponential growth first and don't really care about portability, but once the userbase is large enough, they will try to monetize it. Either through ads, or paid subscriptions, premium plans, special avatars, etc.
That will surely piss of some of the early adopters, but usually isn't significant enough to make an actual dent.
The last step (which we have also seen) is then kicking out staff. That has two effects:
1., It brings down the overhead (= salaries and attached taxes & social security) 2. The revenue per capita is inflated, i.e. it looks as if every employee is generating 4000 bucks instead of 2500 (random example), which is something that looks good in an IPO prospectus.
Thank you for the explanation, I'm having a hard time understanding how an "unprofitable" business has managed to stay afloat this long.
Investors will give cash in exchange for equity in the company. The cash is used to fund whatever expenses aren't covered by revenue. Those investors are going to expect profitability to come eventually. Sometimes the business winds up doing some stuff that damages their product in order to achieve profitability.
Through investors, who consider the revenue a good indication for future profits. So they float the bill and receive shares in the company instead, and cash out during the IPO.
A company that isn't profitable will still compensate their CEO, so spez is certainly taking gone a big paycheck. In addition, these net worth calculations also take into account stock. Spez most likely still owns a piece of Reddit, and that would be a factor.
You can still get very rich off of a company that isn't profitable.
Case and point: Adam Neumann
Steve Huffman continues to piss on Aaron Swartz's grave.
There were 3 things going for Reddit, content wise: memes, news, hobby subs. It was a 50/50 if my Google search included reddit or Wikipedia. If reddit threw up a banner every 6 months and asked for a donation, I'd gladly throw 20 bucks their way. Reddit should have been a non-profit.
Going public was the absolute worse decision they ever made.
I used to buy a pretty good amount of gold before they let in actual fascists and then downplayed their toxic impact on the community and the internet in general.
Agreed, I don't know why Reddit is pushing to go public. Personally I don't see the value in a business that admits that they aren't profitable, but that raises the question if they aren't making money how as Reddit operated for so long? The upside to them going public is that they'll have to start publishing financial statements and we'll get to just how much money the "unprofitable" business is making.
I think it's probably being pushed by the people who invested in Reddit to make it go public so they can sell shares / cash out. But this is just my opinion
These are the steps the current admins are following:
Every exec wants money for themselves, even if it comes at the cost of the company they run
they fumbled so hard. they could have had millions of new subscribers if they locked the api key under reddit premium and allowed 3rd party app to enter user api keys
50 a year isn't terrible depending on your use case, but they burned so much good will
Yup, Spez claims that $2/user/month is all they're asking. I'd have happily paid that direct to reddit if they'd been upfront from the get-go. Instead, I've deleted my account and left the site after a decade of contributions. Very sad to see it go, but I'm not going to be like those idiots whose still hanging around on twitter constantly complaining about the way it's managed
Absolutely. I probably would have paid. I'm not big on subscriptions as I prefer one time upfront costs or lifetime subscriptions when possible, but I did use Reddit a lot.
Instead I deleted my posts and moved on. Now, where do I find huskytantrums?!
Sometimes I think there isn’t much I miss from Reddit. And then someone mentions a community I miss. Gotta find me a new huskytantrums.
For me it’s catswhoyell
This is what I was thinking. Heck, they could've increased the price of premium, locked the API behind it and keep a certain percentage of the third party apps' cut, similar to how the App Store runs.
They could've been greedy pigs and STILL won.
I don't know if I'd call it a fumble so much as a death march. They know what they're doing is wildly unpopular, they know they'll hemorrhage users, and they never change course. Full steam ahead with the Titanic.
Spez has a very punchable face, if I ever saw one.
If I delete my account, how will I use it to sabotage reddit?
It’s insane to me that a site with as much activity and engagement as Reddit is allegedly “not profitable”. He’s either flat-out lying or they have mismanaged the site to a legendary degree.
Either way, it’s pretty pathetic.
This seems typical for dot com/social/next best thing. They grow at all cost in angel funding. Then cash out.
I think a large portion of the profit losses might have to do with reddit hosting video/images.
IPO'ing an unprofitable company in the current economy is a pretty ballsy move. More power to them I guess...
We’ll continue to be profit-driven until profits arrive. Unlike some of the 3P apps, we are not profitable.
Maybe fix your product before you expect the money to come pouring in.
wal-mart is profitable and they at least pay workers minimum wage. u/spaz can't make a profit when unpaid mods do most of the work for them. Not a very good CEO
That would require reddit to make good decisions, which they've repeatedly demonstrated is impossible
It's not impossible, they've just chosen not to. That says more than any AMA
That was such a tiny violin moment from u/spez. Redditors are the ones making all the content. Their job is no more difficult than 3rd party apps for the most part
and unpaid mods moderating
All spez wants it to keep things going until the IPO where he gets paid big. He's doing these changes to appeal to IPO purchasers and "maximize" the value.
He just publicly admitted Reddit is not profitable and he’s mad that third party apps are. That IPO is not going to go well lol.
They would have to show their books as part of an IPO anyway, and everyone already knows its not profitable. It's not like he accidentally dropped a big secret here.
Moar ads!
He's just digging the grave more and more... but I doubt spez cares as long as he gets his golden parachute in the end
We're going to be profitable by completely decimating our product.
No, wait. That doesn't seem like the right thing to do!
The guy is a complete clown.
The beatings will continue until ~~morale~~ profit improves