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I agree that their hardware strategies are bordering on the insane, I can host much (and really, like 10 times or so) cheaper by simply getting dedicated servers with fat pipes than I could ever do using EC2, that part makes no sense at all to me. Scaling issues aside, if they ran an efficient shop serverwise I think they could easily operate the whole thing from their subscription potential. Typically you can count on between 0.5 and 2% of your users signing up for a 'gold' service, provided you give them some extra goodies on top of the free product.

The 'news' angle is a silly one, but they could definitely think up features that people would pay for that are not available right now in the free product.

The real issue with reddit making money from advertising (aside from the ad blocking) is that the CPMs that are quoted here (between 2 and 9$) are not realistic for their number of pageviews. By the time all the unsold inventory is taken out you probably end with $0.05 ECPM or maybe 10 cts per click (and that would be pretty good).

I'm really interested in how much they were paying before for their bandwidth and hosting if going to EC2 actually lowered their costs, they must have had the worst deal on the net for that to be true.

Right now, $30K / month buys you 20 (very) fat servers and 20 Gbps flat rate, managed hosting.

I'd really like to see someone make the case they can get that kind of performance out of EC2 for a similar cost.

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