The article reports: "The huge increase in traffic means Reddit has had to add more servers and other equipment and bring in more staff to maintain its site. This growth has forced it to spend money to keep up with the flow, while also promoting paid subscriptions and advertising."
So I wonder now with all the eyeballs visiting Reddit, how many are bringing along revenue for Reddit, and is there any prospect of Reddit gaining enough earnings (profit after expenses) to reward Condé Nast's investment in buying Reddit with a reasonable rate of return? What are the latest hard numbers on that issue? The Reddit comment kindly linked in an earlier comment on this HN thread
"Actually, reddit is NOT one of the most profitable sites on the web at all.
"In fact, we are not profitable.
"This is because increased traffic results in more server usage, which primarily increases costs, not revenue. In theory advertising revenue should/could scale with traffic, but since we never tried very hard to sell our advertising inventory, we only run ads on a relatively small percentage of our pages and they do not cover our costs. When Obama comes to 'chill on the weekends,' that increases costs, not revenue."
P.S. The comments from other redditors on that thread from Reddit's CEO yishan show how difficult it will be for Reddit to build more monetization into its user culture.
Condé Nast no longer own reddit, Advance Publications (Condé Nast's parent company) do. I believe reddit's admins have commented somewhere saying this allowed them to hire more people and rent more servers as they weren't being pressured into avoiding costs anymore, but I can't find a source for that at the moment.
3. After every page load note down what type of item you see in the advert place (of these 3 types):
- (a) Goodwill notice (eg: "thanks for not blocking our adverts", "try reddit gold!", a cutesy flash game)
- (b) reddit community advert (eg: visit our subreddit!)
- (c) proper advert (eg: "buy starcraft for $40", "watch looper on netflix!")
Here are my results:
a a a a a a a a a a b a b a a a a a b a a b b a a
The goodwill notices are things reddit are displaying themselves, so they generate no revenue. The community adverts are I think currently free due to some sort of promotion, but when they're not free they're a couple of $ through the self serve platform. The proper adverts are... well, I didn't see a single one!
I've just viewed 25 pages and I have not once been monetised. If you view any other website that makes money through advertisements you'll have AT LEAST one or two monetised adverts per page, often more. Here's a website the company I work for runs: http://www.minecraftwiki.net every page load has at least 3 adverts. If you visit our website 25 times you've viewed ~75 monetised adverts, if you view reddit.com you see ~0 monetised adverts.
The problem reddit has is that the community is against adverts, people love reddit because it's not part of the terrible money making internet, they see it as a warm lovable place they can go and be safe from the big bad advertisers and they know when reddit does have paid-for advertisements they're going to be good quality. This is obviously not a good revenue strategy though.
Reddit wouldn't have a problem bringing in revenue if they held themselves to the same standards as the rest of the internet, but they don't, they hold themselves to really really really high standards and have backed themselves into a really shitty corner where they either get money through paid subscriptions, get money through really good quality adverts that users are comfortable with (but are rare) or hope they can scrape by on the single nice advert that might display on one page in every... 100, because that won't upset the users.
Personally I think they're going to have to eventually accept that yes, it's really good to be the one final website on the internet that really does care about their users, but it's not a maintainable business strategy and what matters most to users is not that they don't have to see adverts, it's that the website they have invested their time, energy and care into is going to be there tomorrow.
I think it's comparable to the instagram situation. instagram considered monetising in a way that upset users; reddit fears they will end up doing exactly the same and it isn't just a fear of the users reactions, it's how they want reddit to be. I think it was about 3 years ago that an advertiser sneaked a rogue advert onto reddit through their ad network (it caused some dumb pop-up thing to display, if I recall correctly) and explaining the reddit reaction as "vocal reddit users went ape-shit" would be a gross understatement.
Summary: reddit (as a company) holds itself to standards that are way above the rest of the internet, reddit users love this but it's detrimental to the finances of reddit. reddit could throw in the towel tomorrow and become just like the rest of the internet and they would make money. (obviously doing this would potentially alienate users, which is the downside, I don't believe that this would be bad enough for users to actually leave and is not comparable to the digg situation, but generating ill feelings amongst the reddit community even if they don't leave is still bad)
I see a lot more real ads than that but I'm also subscribed to a lot of sub-Reddits. I wonder if advertisers are using the sub-Reddit targeting a lot more than the run of site.
What percentage of page loads have real adverts for you? I thought maybe it was due to my location (England) but I'm unable to get any real adverts through a US based VPN either (on a clean VM with no reddit session information).
Edit: just had a guy I know from the US do the same experiment, of 20 page loads all 20 were reddit related for him. Not a single "real" advert.
I just did it 10 times. I'm also in the UK and logged in. I subscribe to about 30 sub-Reddits. I got 9 sponsored links, 1 community link.
Specifically (and I hope this doesn't make this comment get marked as spam!): "SNES, SEGA and NES all in one", "Read 'Probability Angels'", "Save up to 76% on your vacation", "Save up to 76% on your vacation", "Need a degree to back up the knowledge you already have?", community link, "'The Year In Music 2012' Video: Tasia Ann Thomas' Impressive Live Mashup Of Hits", "MMS and SMS text messaging API", "MMS and SMS text messaging API", "Read 'Probability Angels'"
(So two of the sponsored linked were duplicates.)
Trying again in a different browser, logged in to a throwaway account. I get a sponsored link, a "blank" space, a sponsored link, a "blank" space.. a sponsored link, sponsored link, sponsored link..
It makes a lot of sense to use the subreddits to provide targeted ads. Being seen as friendly with goodwill notice for visitors might also be part of this.
Still, that remains one of the least agressive revenue models I've seen.
The reddit home page is empty for me (because I'm not subscribed to anything I guess), I normally visit via a shortcut that merges several subreddits. Hard to monetize a blank page.
I just visited with my phone (not logged in) and saw an ad for vacau.com at the top of the page. Were you discounting these ads?
While the homepage was a self-ad, I just visited each of the subreddits in the small row of links along the very top of the page, which I presume to be the most popular ones. Every one except 'WTF' has a 'sponsored link' in the top position, which appeared to be from genuine paying customers. So, they're working in some genuine commercial placements.
This probably isn't it, but Reddit may yet find a 'native advertising' format that works really well for them without angering the community.
The self serve platform has been around for a couple of years now and although I'm not well versed in advertising (so I could be way off the mark) from what I understand a CPM of ~$0.10 isn't particularly good for the publisher (but great for advertisers?) and with the recent talks from Yishan about reddit losing money I guess the self serve platform isn't going to be what rescues them (especially with their big focus on reddit gold?).
Your premise is largely wrong, at least from my experience as an advertiser.
They have two main problems: 1) huge amount of adult/offensive/drug related etc traffic that most mainstream advertisers/adsense etc don't want. 2) antiquated ad infrastructure/targeting options.
The biggest problem: you have only two targeting options. a) no targeting at all - just random traffic ($20/day). b) buy space at the top of a specific reddit ($30/day).
b) is obviously going to be preferable for every single advertiser given how different each community is, but very few reddits have enough traffic to justify it. Nobody is going to pay $30/day to advertise on a subreddit with 5k subscribers, for instance.
Simply putting a PM, a few devs and a few sales reps full-time on it should work wonders. Hell, if they just gave the option to buy CPM ads targeted by subreddit, with no minimum spend per subreddit, it would be a vast improvement.
Reddit is notorious in producing content or making comments when it doesn't have to necessarily. It just makes me think why internet should be paid and why people should produce less content. Produce content only when it's urgent for you to show something to someone and not when you have to say something for propose of just saying.
You can easily make a company not profitable, and generally you don't want to be because then you pay taxes on it. There's no way of knowing if that statement is genuine or not.
Facebook is profitable at the expense of its user base. Reddit is taking a longer view, in part because of the demographic that uses their service and in part due to what happened to Digg.
Given Reddit is 7 years old, it's a dangerous gamble they're taking in not developing some kind of sustainable business model, one that provides cover for disasters that inevitably hit. Obviously Conde may choose to provide for them perpetually, but that's extremely unlikely.
Then again, maybe they're at a large enough scale now to fully run off the Wiki model. More power to them if that's the case and Conde is ok with it.
I wonder how Reddit will monetize in the future. They have been pretty anti-advertisements for the longest time (they have some of the least invasive ads on the net IMO). I read awhile back that they were losing millions of dollars a year. They really need to increase the features of Reddit Gold for that to become a viable option for users rather than looked at as a "donation."
What they should do is do it the same as Wikipedia. I'm not sure what Reddit's costs are like, but if they did a donation drive where it was a choice of donating or more ads, I bet the community would chip in.
Yeah, I think they gotta do more than that though. Go straight up like Jimmy Wales and just say we need X dollars, if you want reddit to stay up. Maybe give reddit gold as a bonus to everyone who donates.
The biggest problem with Reddit Gold is it seems like a feature you can live without (especially if you use reddit enhancement suite). They don't emphasize enough that it's a donation to keep the site going.
Wikipedia is shady at best about how much money they actually need from the community. Reddit does not internet to receive people into giving up money. The recent push to giving gold sounds pretty cool.
The userbase would balk. Private subreddits are already a feature. Asking users to pay money for something they currently use for free would tick off power users who have ungodly influence among the users. I think I get what you're talking about, but Reddit is not like Github enough to pull that off.
That might be viable, but I can imagine that wikipedia receives a large portion of it's donations from the charitable perspective that donating to wikipedia equals furthering human knowledge. Or something to that effect.
I would guess their costs are several steps above Wikipedia. Yes, Wikipedia is pretty much ubiquitous, but I know personally that I only visit Wikipedia occasionally (i.e. not every day) and I only visit a few pages. On the other hand, when I was an active redditor, I'd visit hundreds of reddit pages every day.
Tack on the part where bandwidth is more expensive than equivalent amounts of storage, and you've got yourself a reddit that costs a lot more than Wikipedia.
I'm willing to bet Wikipedia uses far more bandwidth than Reddit. Reddit barely hosts any images, it's mostly just all text, plus plenty of sites hotlink Wikipedia images.
This is a good point, reddit has plenty of images but they are generally hosted elsewhere. The images they do host directly are fairly static, and can be cached.
Two obvious monetizing ideas that would be more or less community compatible:
1) you sign up for reddit gold, you get https access to the "nice" servers that have very low load, low latency, tons of BW, cached (fast) image links ... Non-donators get "the best effort swamp" which doesn't work any worse than it does now, but who doesn't want a faster UI?
2) data mining. Hey "big rich corporation" for only $1000 (a month?) I'll send you a detailed monthly report of what "the internet" REALLY says about you, or your industry segment, or the world in general. Presumably your PR people will be fascinated. You could hire a couple interns to slowly search via the UI and/or google but we have the raw DB data ready to automatically mine and we can summarize it for you far cheaper and more effectively than you could by yourself.
Sources? I'm curious, and I hadn't heard that they were losing money. Seems silly that they'd be added people on a regular basis if they were doing so poorly.
(Related: imgur has more image views than reddit has page views, but their stats page (http://imgur.com/stats) isn't updating at the moment. Also imgur is no longer just an image host for reddit, they've expanded into being their own "social" website)
It was never just an image host for reddit. MrGrim made posts on both reddit and Digg hoping to entice users from both sites to use it as a replacement for Photobucket/ImageShack.
Not to be offensive but advertising on Reddit is basically trolling for cheapskates. Sure you may get a little traffic but they don't buy anything. I know from experience.
For fun I wonder what they'd make if they just put one advertisement per page from Google's ad network on each pageview. There's enough textual content on each page for Google to probably provide relatively targeted ads.
Why not show AdSense ads to visitors that click on through Google? Would be surprised if this doesn't cover their costs, and it would not affect return visitors for the most part.
Too bad the signal to noise ratio is so horrible. Not to mention the addiction / anti-productivity factor. I still love Reddit. I quit because I love it.
So I wonder now with all the eyeballs visiting Reddit, how many are bringing along revenue for Reddit, and is there any prospect of Reddit gaining enough earnings (profit after expenses) to reward Condé Nast's investment in buying Reddit with a reasonable rate of return? What are the latest hard numbers on that issue? The Reddit comment kindly linked in an earlier comment on this HN thread
http://www.reddit.com/r/blog/comments/12v8y3/now_is_the_time...
says explicitly,
"Actually, reddit is NOT one of the most profitable sites on the web at all.
"In fact, we are not profitable.
"This is because increased traffic results in more server usage, which primarily increases costs, not revenue. In theory advertising revenue should/could scale with traffic, but since we never tried very hard to sell our advertising inventory, we only run ads on a relatively small percentage of our pages and they do not cover our costs. When Obama comes to 'chill on the weekends,' that increases costs, not revenue."
P.S. The comments from other redditors on that thread from Reddit's CEO yishan show how difficult it will be for Reddit to build more monetization into its user culture.