Redd(it) Alert!

Hola!

You can now read our weekly newsletter from the scenic islands in the Atlantic Ocean!
Ireland is paying upto $92,000 for people to move into homes on idyllic remote islands.

Oh, but here’s an interesting fact that will leave you gobsmacked: In 2008, Iceland experienced a financial crisis so severe that the value of its currency, the Icelandic Krona, became less valuable than the currency in the online game “World of Warcraft”.

Red(dit) Flag Ahead 🚩

The recent storm surrounding Reddit’s announcement and a controversy that has set the online realm ablaze. Part of this included a subreddit blackout (meaning, the subreddit was made private) on June 12th, which lasted 48 hours or longer.

❓ r/what’s happening?

• Reddit Inc. is the 6th most used social media website with 52 million daily active users & over 100,000 active communities that attract over 500 million monthly global visitors.

• Third-Party Reddit apps (such as Apollo, Reddit is Fun and others) used to facilitate browsing and posting comments on the site as they had free access to Reddit’s application programming interface or A.P.I.

• In April, Reddit announced that the currently free access to the API would be subjected to fees starting July 1st.

🤔 r/so what?

• Third-Party Reddit apps are going to become ludicrously expensive for its developers to run, which will in turn either kill the apps, or result in a monthly fee to the users if they choose to use one of those apps to browse.

The developers of Apollo were quoted around $2 million per month for the current rate of usage. Covering those fees for Apollo’s million users will cost approximately $20 million a year, its founder estimates.

⏭️ r/what’s next?

• Reddit said the price increase was necessary because so much of its data is being used to train artificial intelligence models being developed by Microsoft and Google. 

• Reddit is an ad-supported business and in mid-2021 its quarterly ad revenue hit $100 million for the first time.

• The still-unprofitable company’s annual revenue is less than $1 billion.

• Reddit management likely made the decision to raise the price of its API out of financial necessity.

📈 r/let’s talk business

• Reddit’s main revenue stream is advertising sales and premium subscriptions.

• Reddit is prioritising getting to ‘breakeven next year’ and funding data and API tools for the platform’s moderators.

• The company was planning to go public by the end of this year at a valuation of $15 billion but the ongoing strike seems to be a wrinkle in this plan.

• Reddit Inc. has raised more than $1 billion and was valued at $10 billion at the time of its last funding round in August 2021.

🛣️ r/the road forward

• Fidelity, which led Reddit’s $700 million funding round in 2021 has slashed its valuation by over 40% as of the end of April 2023.

• The blackout’s impact on the company was minimal according to Reddit CEO Steve Huffman as roughly 80% of Reddit’s top 5,000 communities are back open.

• Steve Huffman will have to find a way to align the moderators of these subreddits who perform at least $3.4 million worth of labour annually, according to researchers at Northwestern University.

Sources:

https://www.indiatoday.in/technology/news/story/reddit-ceo-not-worried-about-protests-regarding-api-prices-tells-employees-the-blackout-will-eventually-pass-2392790-2023-06-14

https://www.forbes.com/sites/petersuciu/2023/06/14/reddit-blackout-casts-spotlight-on-its-failure-to-turn-a-profit/?sh=5e838975458c

https://www.gizmodo.com.au/2023/07/reddits-valuation-has-fallen-even-further-fidelity-says/