Reddit CEO Admits 'We're Still In The Red'
In a Reddit comment elaborating on the reasons he changed the default subreddits on the site's front page, he explained that the quirky news aggregation site might break even at the end of the year.
Here's what he said:
Yep, the site is still in the red. We are trying to finish the year at break-even (or slightly above, to have a margin of error) though.
We are thinking of posting a public graph with no numbers but updated regularly with the relative amounts of revenue vs expenses on a quarterly/monthly basis (depending on how precisely we can get our accounting) so that people can see how far/close we are from being profitable. There is a common misconception that we are "part of a billion-dollar conglomerate" and/or "already very profitable, so why keep giving them money" that is kind of frustrating for us: reddit was given its freedom when we were spun out, so the price of freedom is paying our own way and no one else is paying the bills - a graph like that might help make things more clear.
The comments came as Wong explained why subreddits on atheism and politics will no longer appear on the default front page. They were not removed because of advertiser pressure, Wong says.
Don't worry about Reddit's finances, however. Wong's problem is not that the site doesn't make money. It could almost certainly become profitable overnight if it allowed advertisers to buy ads the way most publishers do — its audience is so massive and so well segmented that advertisers are likely champing at the bit for that kind of inventory.
Rather, it's that Wong knows if advertising becomes too intrusive or spammy that it will drive his readers away. Thus Reddit must find ways to monetize the site in ways that are useful or at least unobtrusive to the experience. Plus, his server costs have grown massively:
We're not grossly unprofitable (i.e. we're not hemorrhaging money), but revenues are still a bit short of expenses.
One reason we're not quite profitable is that as reddit becomes more popular, it means more traffic, which means more servers needed to support the traffic. Our traffic serving bill has risen steadily over the past year, though we have at least been able to stave off super-linear cost growth there by implementing efficiency improvements. We've also hired people, though we have been quite careful with that - it's true that if we fired half the reddit staff, we would technically be profitable, but then things would probably fall into disrepair almost immediately. I don't know if people here remember the bad old days of 2010 and early 2011, before /u/alienth greatly improved our infrastructure - we are ten times bigger now in terms of traffic and users. o_0
Our ads also don't make quite as much money as most ads in other places do. The reason is because big, invasive flashy ads actually have the highest CPMs, and we don't allow those. So we probably make a bit less on ads than most people expect.
Wong said these were Reddit's three main revenue drivers at the moment:
We run ads. Even though we are really strict about ad quality (no flash, spammy, etc), we don't have a problem finding advertisers, and we don't get any complaints from them about our defaults and it doesn't seem to affect their decisions. It just... isn't an issue. /u/hueypriest says that sometimes they are concerned about /r/wtf, but you'll notice that (1) we left that in the defaults and (2) it still doesn't seem to make much of a difference in their decisions to advertise with us.
We sell you reddit gold. Our plan with that is to add features and benefits so that over time your subscription becomes more valuable - at this point, if you are/were intending to buy anything from one of the partners, a month's subscription to reddit gold will actually pay for itself immediately via the discount.
redditgifts Marketplace is actually turning out to be promising. It's still nascent, but gift exchanges are quite popular and (again in reddit fashion) we heavily curate the merchants who are allowed in the marketplace. We'll see how it develops.
Wong then suggested that readers who believe corporations hold undue sway over Reddit should buy a tinfoil hat on Amazon.