Competition Not Found: The Rise And Inevitable Fall Of Reddit

Reddit really needs no introduction at this point. However, if you’ve been living under a rock over the last few years, you can check out CGPGrey’s ‘What is reddit’ video which explains the site quite brilliantly.

For a long time — back in the mid-late 00's — reddit was fairly unknown to most of the web. It steadily built up a small active community and kind of kept to itself.

One of its first major breakthroughs came with the great Digg migration of 2010. At the time, reddit wasn’t top dog. Its main — and bigger — competitor Digg was driving the bus. Digg was widely successful, but its revenues reeked. Digg’s investors started pushing for better monetization. They got greedy and crafted their brilliant plan to turn it into a money printing machine, as reddit user rugtoad helps describe.

Their main problem was that they didn’t really understand the fundamentals driving the users to the site. They took away most of the tools and functionality because it didn’t fit the new business model. They essentially put the user up for sale.

This new version 4.0 was a buggy, untested and rushed interface that involved a complete overhaul of the front end and the back end. It was built it in such a way that there was no going back, as another reddit user exdiggemployee describes. The loyalest of their users started revolting, mass spamming reddit links, and eventually jumping ship. Digg was left a ghost town, and reddit went on to dominate uncontested.

Digg’s fate as illustrated by The Oatmeal.

3 years have since passed, and reddit has smoothly sailed to secure itself a spot in the top 100 websites in the world, and is viewed by an astonishing 6% of adults online. And, it has virtually no competition.

That’s great news for Reddit, right? — Wrong.

Reddit is still in the red. Its current CEO publicly announced that it burns more money than it makes. With no real competition on the horizon, and as reddit continues growing, it will get an itchier trigger finger. If they butcher their inevitable monetization strategy — like Digg did — there is seemingly nothing else similar that users can jump ship to. They know this.

In a recent reddit thread called “What will eventually cause Reddit to lose its popularity?”, a few users make some valid points.

User fjord104 writes,

“Reddit will eventually have extremely high potential marketing revenues. Someone will recognize this, and make Reddit’s owner(s) at the time an offer they can’t refuse. Over time, new, very profit-oriented management will saturate the cite with adds and drive away the userbase to a newer, cleaner option.”

Another user liskoturri in a similar thread writes,

“My educated guess is that Reddit’s fate will be what Slashdot’s was, but even worse. Reddit is sold to a big company. The new owners dictate new rules for running the site. Now we’re in here for the money; we’re gonna see integration to one of the parent company’s services and someone gets a great idea: let’s sell upvotes and “positive stories”! Advertisers are jizzing their pants for this, but you can’t read on it on Reddit, because every time someone upvotes a story with suspicions of Reddit selling itself out, it’s automatically removed.”

And I agree. There’s no doubt that reddit learned an invaluable lesson at Digg’s expense. But business is business. And you’re in business to make money.

Reddit has to keep from the temptation of turning it into a corporate cash cow, something that I just don’t see happening for much longer. Reddit’s co-founder Alexis Ohanian just recently stated that they will continue selling premium memberships to try to reach the black. But they have been selling memberships since 2010 — even before Digg’s suicide — so this is nothing new or groundbreaking. Reddit’s platform simply doesn’t have an ad-friendly infrastructure.

Get your passports and passwords ready, the web immigration office may be opening shortly.

The destination? No idea — but Snapzu looks promising.

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