As of Wednesday, the Reddit blackout continues to impact some of the service’s largest communities—and it shows no signs of ending soon. A number of sub-groups on the platform have vowed to remain closed indefinitely as a protest to changes to Reddit’s data policies.
The extended protest has only served to highlight the commitment of some of the service’s users, moderators, and developers in the ongoing standoff with Reddit’s management following a decision to begin charging steep fees for third-party data access, which some have viewed as a critical resource. Many third-party apps, citing the high costs, have already announced they might be forced to shut down as a result.
UPDATE: Reddit responded to a request for comment, and a spokesperson said via an email, “We’re not planning any changes to the API updates we’ve previously announced.”
“We’re in contact with a number of communities to clarify any confusion around our Data API Terms, platform-wide policies, community support resources, and timing for new moderator tools,” the spokesperson added, further noting, “We’re committed to fostering a safe and responsible developer ecosystem around Reddit—developers and third-party apps can make Reddit better and do so in a sustainable and mutually-beneficial partnership, while also keeping our users and data safe.”
One Active Community
According to figures from the company, there have been more than 13 billion posts on Reddit, while the more than 100,000 active communities attract some 57 million daily active users. Despite those figures, as with other social platforms, revenue has primarily been through advertising and via its ad-free premium membership plan. According to eMarketer data, Reddit made more than $100 million in revenue through ads in 2019.
That may sound like an enormous sum, but Reddit isn’t currently profitable, unlike some of the third-party apps that many currently use to navigate the site.
“Reddit isn’t profitable but it is very popular. It is trying to find a way toward profit but their path is rolling against users who have been used to Reddit’s prior policies with regard to third-party apps and data access,” explained technology industry analyst Rob Enderle of the Enderle Group.
“The situation at Reddit illustrates a challenge that online service providers have dealt with for years: How to run a financially sustainable business for clients who are accustomed to using those services freely,” added Charles King, principal analyst at Pund-IT. “There’s no easy way to enable this transition—it’s bound to tick off many of the people affected.”
The Incredible Shrinking Profits
The situation at Reddit could also be a portent for other social media platforms—as it follows Twitter’s decision to change its verification system to a paid subscription model. This could impact other social media networks and no doubt they’ll be watching to see what fallout there is.
“Moves like this have the potential to cause a broad and possibly terminal boycott of the service,” added Enderle. “The issue is they are making changes that damage the user experience in order to increase revenue so they can go public and get a big payday.”
Enderle compared this move by Reddit to what Netflix recently did as it cracked down on password sharing to boost its bottom line.
“It looks like they looked at what Netflix did with shared passwords and saw the revenue jump and figured something similar would work for them but Netflix is a user-funded service not a free service,” Enderle suggested.
Users Like Free
It also casts the spotlight on the problem of trying to get anyone to pay for something that they had received for free. These services have relied on ads, but users can often get around the ads, or simply ignore them entirely. In this case, Reddit was looking for a solution that only served to inflame the user base, and they’re now rebelling in a way that hasn’t been possible with the other platforms.
It is now anyone’s guess how long the blackouts could last.
“The larger questions are how long they’ll stay angry and whether they’ll eventually shrug and come back or take their business elsewhere,” suggested King. “Reddit appears to be betting that the vast majority of Sub-Reddit operators and users will return and it will take time to see whether the company’s strategy will pay off.”
Seeing Red: End Of The Reddit Community?
It could be argued that Reddit simply underestimated how much backlash there would be from the changes to the data policies.
“Whenever you treat the users like they are the product it becomes problematic because the users think they are the customer and in an ad-based revenue model they aren’t, they are the product and companies seem to feel they can abuse the product,” said Enderle.
He added that the path Reddit took is very similar to what Elon Musk did at Twitter, and it could likely end badly for the company.
“The right path is to find a way to user subscription funding, then the user and the customer become the same thing and you are less likely to screw them,” Enderle continued. “Another path is to find a way to make the ads worth watching by improving content and hyper-targeting but no one does this well yet, not even Facebook.”
Better Dead Than Red(dit)
What makes the situation all the more difficult for Reddit is that users could easily find a new home on another service.
“A point worth considering in all this is that due to the continuing migration of Twitter users, alternative forums exist today that could support Reddit users and communities,” said King. “If the blackout of Reddit continues, the company may seek out ways to placate users, perhaps by delaying the pricing changes, implementing them gradually, or finding a way to charge high volume users, like AI developers.”