Reddit's inedible free lunch
A highly-coveted free lunch. The so-often said wisdom and truism, that there is no such a thing. But what happens when you get a free lunch and somebody decides that it is time for you to pay for it?
This is where Reddit comes in.
Many of my readers will know of Reddit - but you might not know how significant its online footprint is. This is a website which brands itself as the 'front page of the Internet' which allows millions of people to post, vote and comment on almost any topic you can imagine. With over 57 million daily users, 100,000 communities and 13 billion posts and comments, it is the 10th most visited website on the Internet.
Reddit’s business model is similar to many other sites like Facebook or Twitter. Users sign up for free and in return for their free activity and content, they receive a dose of advertisement. What Reddit sets apart is that many of the communities, especially the most popular ones, depend on the volunteer work of their moderators to keep things within the rules of the website and the respective community.
The other thing which separates this site from the others, is that it allows (or better say allowed) free access through an API (application programming interface) to all of its content. That access allowed researchers and other application developers to create new, better and different access to the content. Sometimes, this content and its users are praised for showcasing the possibilities of freedom of speech. Other times, they’re scoffed at for being merely average.
That access to the data was well-used (or sometimes misused). Either way, it created a burden for the company to maintain, to a point where Reddit decided to start charging for the use of the API. That created a revolt among the moderators who staged a protest and took their communities private.
While this is happening, Reddit, a company with 2,000 employees, with millions of dollars in funding and a valuation in billions of dollars is trying to go public. It needs to demonstrate how it can make money. The investors are curious about when they will get back their money (plus a nice return). And you know that things are not as rosy when its own Reddit corporate website cites the number of daily users as 'Last updated January 2021'. That was around the time when Covid locked in millions of people with nothing else to do.
The moderators are unhappy that their free work is used to prop up the company valuation and make the rich even richer. The developers of various popular applications are suddenly faced with paying millions in access fees.
The other side of the argument from Reddit is that many companies used access to its website to siphon all the content. They trained Large Language Models (LMM) like OpenAI's GPT3 completely for free with no benefit to Reddit. However, most applications below a certain threshold will be able to use the API access for free.
The addiction to free (and its withdrawal) suddenly creates a sense of entitlement and outrage. The business model built on top of that free access to the API, when faced with financial reality shows a major weakness. Just ask Twitter and its owner how that has worked out. The moderators unhappy with Reddit are planning to leave for other platforms like Discord or Lemmy - places where free lunch is still on the menu.
The recurrent pattern? Businesses serving a free lunch rarely stay in business for a long time.