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.
2. Refresh the page 25 times
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)
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.
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..
Still, that remains one of the least agressive revenue models I've seen.
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?
This probably isn't it, but Reddit may yet find a 'native advertising' format that works really well for them without angering the community.
Here's a screenshot from the self serve control panel: http://i.imgur.com/QaevQ.png
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.
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.
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.
Reddit... well it's mainly a time sink.
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.
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.
^ Reddit`s CEO.
(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)