Reddit’s growing pains

alienReddit is sort of the weird little sibling of the social web. Founded by two University of Virginia alums (wahoo-wa!) in the same two or three year span that gave the world Facebook, LinkedIn and Twitter, reddit (first letter is properly uncapitalized) has achieved both notoriety and semi-cultish status among the young and techie crowd, but has struggled to gain mainstream adoption. It has also been mostly a failure financially – the company has never been profitable.

Reddit faces some huge problems that will threaten its continued relevance as a major social platform very soon. The biggest issue is not, in fact, that the company doesn’t make enough money. The company’s shareholders don’t really seem to care about that anyway (though if they’re waiting for reddit to become a fount of profitable growth, they seem to have buddha-like patience). Rather, what threatens reddit more than anything is its lack of innovation in the user interface and format of the site, its poor leadership, and how it pursues its mission. Though at some point, they also have to figure out how to eventually make more money than they spend.

In short, the era of being the web’s cutest niche message board site is over. Reddit needs to grow up.

The value of vision

Reddit’s basic ad-supported business model suffers from two big flaws. First, ads are sold against interest communities (subreddits), not individual users. This is essentially the same old media ad model as magazines or TV, in that it relies on user self-selection for ad targeting. Reddit does not mine user behavioral data for marketing purposes, nor target ads to users based on individual preferences, which of course makes their ad product a lot less enticing to marketers. Why spend on a spray-and-pray campaign in /r/technology when Facebook can give you a much bigger, and more closely tailored, audience?

The reason reddit does not mine user data is actually their business model’s second big flaw. Advertising – to say nothing of tracking user behavior for marketing purposes – just doesn’t jive with reddit’s culture. In fact, you might say that marketing generally is pretty antithetical to what many redditors believe in. Simply put, reddit users just don’t want to see ads, don’t want to feel marketed to, and deeply distrust even the smallest steps in that direction.

Of course, the same is true of internet users everywhere. No one likes ads. The difference is that reddit’s leadership fails to consider this user feedback in its proper context. As I’ve written about before, the problem with following user feedback is that most users do not really care about the survival of reddit per se. People simply hate change, especially when it upsets long-standing conventions they’ve grown accustomed to – indeed, every UI change from Facebook or Twitter inevitably provokes howls of complaint from their users, with lots of promises to quit the site forever. But those users keep coming back because of the basic value those services provide.

Unlike its other social peers, reddit’s leadership has not proven strong or confident enough to push through transformative change. Instead, it couches its half-measures in milquetoast platitudes about community, culture and user-centricity, while the company enjoys steadily unprofitable growth.

While the company has tried non-advertising monetization options, they are not a panacea. Besides ads, the company’s other revenue streams are reddit gold and the redditgifts Marketplace. I think these are nice-to-haves, but not pillars of a viable revenue model. Reddit gold basically offers a bunch of extra features that power users might like for $30/year. This might be an interesting proposition to some subset of the tiny proportion of reddit’s overall base who are power users, but it’s hard to see how it grows much beyond that. The Marketplace is essentially a curated gift affiliate program that isn’t likely to scale.

How reddit must evolve

Besides improving its ad products, reddit must also evolve its basic platform to adapt to mobile.

hashtagsCurrently, reddit’s primary format is that of a traditional internet message board: user-submitted posts, with long (sometimes interminable) comment threads below it. It’s not uncommon for a popular post to have thousands of comments in a thread, many of which link back and reference other comments throughout the post, requiring a user to spend a lot of time just keeping up. Posts and comments are often quite long – don’t forget that reddit’s penchant for long, drawn-out entries gave birth to the now-standard tl;dr abbreviation. (Side note – where is the embeddable comment thread ad product, and why didn’t it exist five years ago?)

The whole format is built around a traditional PC interaction model. It presumes a large screen for reading, a keyboard and mouse for navigation and input, and a lot of time sitting around reading text. This was probably appropriate ten years ago, but is increasingly out of sync with the mobile-first consumer web of 2015.

iconReddit’s first official mobile app, iReddit, was pretty terrible. It essentially recreated the same UI on a mobile device, and was hardly better than loading the mobile website. Reddit’s new app, Alien Blue, was acquired from the third-party developer who built it and re-launched in the fall of 2014. While Alien Blue is significantly better, it still feels like you’re seeing a mobile rendition of a non-native format (message board threads). The app is also not available on Android devices, even six months after acquisition.

It’s difficult to imagine how reddit continues to grow, or even stabilize, over the next two or three years without becoming a mobile platform as well. To do that, the fundamental reddit product must be adapted – i.e. changed – to be mobile-friendly. Long, nested message threads do not seem well suited to that future. Something more akin to Twitter’s conversation threads, which themselves are clearly a work in progress, seem more promising: shorter, easier to read on a small screen, and simpler to navigate and browse.

Discovery of new and interesting content is what drives reddit user engagement. How might that discovery change for users with short bursts of “found time” on a smartphone, versus long browsing sessions on a laptop? Currently, Facebook and Twitter are winning that battle on mobile, and with every quarter of growing mobile ad sales, they chip away at reddit’s continued relevance.

Reddit’s leadership is failing

To put it charitably, reddit has suffered from uneven leadership in the last few years.

Reddit’s last CEO, Yishan Wong, lasted two and a half years before resigning last fall in a (still somewhat bizarre) disagreement about the company’s office space and lease. The details that emerged about his departure revealed a troubling gap between Yishan and the company’s board about some important aspects of reddit’s future. Shortly before Wong’s departure, reddit raised $50 million in financing from such tech luminaries as Jared Leto and Snoop Dogg (as well as Marc Andreessen, to be fair). Earlier in 2014, the company also announced a plan to donate 10% of all ad revenues to charity (again, this is pre-profitability).

Where has that infusion of new capital gone? Why, more than six months afterwards, is reddit’s official mobile app available exclusively on iOS? More importantly, how does the current leadership plan to adapt reddit to the changes in the social web?

Ellen Pao, reddit’s CEO since Wong’s departure, hasn’t given much indication of how she plans to guide reddit’s development – or even that she thinks fundamental change is called for. (Pao is a relatively modest user of the platform, at least compared to Wong, judging by her trophy case.) Indeed, one of Pao’s most significant contributions has been changes to reddit’s recruitment policies: new job candidates are screened for their views on diversity, and salary negotiations have been eliminated entirely.

I think this is a major error, and will cost reddit dearly in terms of its power to recruit and retain the best talent. Whatever your opinions about Pao’s famous lawsuit against Kleiner-Perkins, it must inevitably be a distraction for her as well.

What the future holds

Last fall’s financing round probably foreclosed any possibility that reddit would eventually become some sort of non-profit foundation. The investors, and almost certainly the board, would like reddit to become a profitable, legitimate peer to the major established social networks.

As I see it, that will be a tremendous challenge that the current leadership is not prepared to handle. Building its ad business will require more visionary, and confident, leadership, overcoming legacy cultural barriers, and evolving the UI to offer better content discovery (and show better, if not more, ads). Simply keeping reddit relevant in the mobile-first generation will require a complete rethinking of the user experience, and more deeply understanding what it is users need from the service.

Unfortunately, I am not optimistic. But it would be a terrible loss for reddit to simply wither away. We can only hope that reddit’s leadership has taken the right lessons from the success – and failure – of rival social platforms around it.

 


6 Comments

  • Reply Jason |

    Reddit’s growth, though, has been astronomical. And it currently finds the content that will garner clicks for thousands of news sources, (24 hours after the content first surfaced on Reddit.)

    As a driver of virality it is unmatched. The profitability end-game is not clear, but that’s true of a lot of web services that have a lot less impact and user enthusiasm.

    • Reply Blair Reeves |

      Reddit has certainly grown (I dunno about “astronomical”), but that growth has not been profitable. And your point about content is actually exactly the problem – plenty of other sites are making money from reddit’s content, but not reddit itself! That’s actually a big part of the reason why reddit recently introduced embeddable comments – because they want those other sites to share reddit itself, not just the content it surfaces.

      Reddit is also actually a fairly minor driver of content referrals. Facebook is far and away the biggest driver of referral traffic, followed by Pinterest and Twitter. That said, sure – reddit is significant. But those other sites are way more effective at translating their users’ enthusiasm into financial stability.

  • Reply CanadianNomad |

    I started using reddit, when I noticed Slashdot changing, becoming more commercial.

    I stopped using FB when the data-mining became too intrusive.

    I currently like reddit. I hope they don’t mess that up.

    • Reply Blair Reeves |

      Well, that’s an anecdote, but there’s really no data showing that users abandon sites that adopt more user data mining. The classic example is Facebook, naturally – their user growth has exploded. So I don’t think it follows that adopting more individual ad targeting would necessarily hurt the user base.

So, what do you think ?