The Rise and Fall of Reddit
The meme stock trading trend, with its Wall Street bets form, reached a 10 billion dollar valuation in its latest funding round. The company says it has already raised more than 400 million dollars from Fidelity and plans to raise up to 700 million dollars in total in 2021. Reddit was, at its peak, valued at around 10 billion dollars. Today, just two years later, its valuation has dropped to around 5.5 billion. How did a Silicon Valley unicorn slice its value in half in just two years? This is the story of the dramatic rise and fall of Reddit, often called the front page of the internet.
Reddit is one of the most visited websites and consists solely of user-generated content. The site is made up of over 138,000 communities called subreddits that are dedicated to all sorts of topics. Users of the platform, called redditors, use these communities to post ideas, ask opinions, and share common interests. Have you ever been in a group of people and brought up what you think is the most exciting thing you've ever heard, only to be met with blank stares? What you might consider incredibly fascinating, they couldn't care less about. I'm sure most of us have had this happen to us multiple times.
It can be hard to find people who have things in common with us. Even our best friends and family might find certain topics we love strange or boring. And that's the beauty of Reddit! No matter how niche, weird, or dull the topic, there's an active community of people having endless discussions about it. At its best, the site emulates casual conversation between friends, which makes sense because it was founded by two friends from the University of Virginia. Roommates Steve Hoffman and Alexis Ohanian founded Reddit in 2005, and like many successful entrepreneurs, the idea came after the failure of their previous company.
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After My Mobile Menu failed, they applied the same concept of direct communication to a new idea; one that eventually became Reddit. In just 2006, one year after its launch, Reddit was acquired by Conde Nast, one of the largest media companies in the world. Reddit's rise to being the front page of the internet was electric. People who wanted that wide variety of discussions and commentary quickly found a home on Reddit. It became a hub for memes, viral videos, and political activism.
Influential bloggers and programmers began using the site to share interesting nuggets and ideas, and soon Reddit became the go-to site for tech-related news. In 2009, Reddit developed its first on-site advertising strategy to generate revenue. The promise of anonymity on the site has always attracted an incredibly diverse community, bringing in a diverse set of advertisers since anyone can find something interesting on Reddit. Most companies can find a reason to advertise on it.
Reddit has always had a unique approach to marketing for brands. Ad options include sponsored posts, targeted displays, or video ads. Brands can also create their own subreddits for advertising and marketing. If WonderBread wanted to talk about how amazing sliced white bread is, they could start a subreddit for bread aficionados, and there probably already is one. Reddit's strategy paid off. In 2014, the company raised 50 million on a 500 million valuation.
Over the years and several more rounds of funding, Reddit eventually reached that 10 billion valuation in 2021. It was, as they say in Silicon Valley, a unicorn; rare to find but precious to behold. However, as Reddit grew, its users and advertising revenue also grew, which brought its problems. One of the first controversies the site was involved in came on the heels of the 2013 Boston Marathon bombings.
Users created a subreddit to find the Boston bombers. The moderators of the subreddit, unpaid users, tried to enforce the community's rules to ensure that no one's personal information was posted, but things quickly spiraled out of control. Users wrongly identified suspects in the bombing and never correctly named the people who turned out to be responsible. Notably, they spread information about a college student named Sunil Tripathi, who went missing right before the bombings.
After the actual bombers were arrested, Sunil's body was found in the Providence River, having died by suicide. Not only did Sunil's family have to bear the harassment of their missing son from these redditors, but both BuzzFeed and NBC News reporters spread unsourced information from the subreddit, giving it legitimate journalistic credibility. Reddit's controversies didn't end there. The platform has always had sexually explicit material, but things went way too far in 2014 when naked photos of celebrities began circulating on different subreddits, and even worse, some of those celebrities were underage at the time.
In Reddit's defense, it swooped into action, swiftly identifying the photos of minors and removing them from the platform. Then, a year later, the site banned nude images posted without the subject's consent. This move was a win for everyone; it stopped non-consensual explicit material from being easily accessible on the platform but allowed adult performers freedom of expression. Not safe for work, or NSFW, content, as it's now tagged on the platform, wasn't the only thing where it had to stop spreading through its communities.
Sony canceled the Christmas Day release of The Interview, the hackers win; I don't know how else to frame it. Now then, Sony has canceled the release of The Interview, that spoof about North Korea starring James Franco and Seth Rogen. In 2014, redditors shared hacked files from Sony Pictures that included copyrighted material. Leaked documents from the Mormon Church have also been shared. Although the company prides itself on anonymity and free speech, in situations like these, it has had to step in and exert control over some subreddits.
In 2015, Reddit CEO Steve Hoffman made a policy banning several offensive and sexual communities. This included subreddits like Lolicon, which posted sexually explicit animated material featuring children. More bans followed; a subreddit that expressed support for the shooter in the 2015 Charleston Church mass shooting was removed. During the 2016 election, a subreddit that pushed the Pizzagate conspiracy theory that Democratic leaders were running a child sex ring was also banned.
As American politics grew more divisive, more bans took place in response to user demand. After the protests over George Floyd's murder in 2020, Reddit updated its content policies and introduced rules around hate speech. It then banned around 2000 subreddits across the political spectrum in violation of these regulations. Some media outlets and political commentators said banning these subreddits violated the freedom of political expression.
Then in 2021, a subreddit called Donald Trump was banned for policy violations and the influence its posts had on those who stormed the Capitol. Moves like this followed on Twitter, YouTube, and TikTok, but were criticized by those who believed it was censorship. It hasn't been all negative for Reddit these past few years. In 2021, redditors proved how powerful online communities can be with the infamous GameStop short squeeze.
Users in a subreddit agreed to buy stock in the suffering company. When they started, shares were selling for three dollars. As the price increased, because of the Reddit users purchasing the stock, Wall Street traders shorted it, betting it would drop until the company went out of business. But Reddit users shouldn't be underestimated. Within 16 days, they drove the stock up to 347.51, and many of those Wall Street short sellers lost a whole bunch of cash: 6 billion, to be exact.
This highlighted the power of the Reddit community. Redditors aren't afraid to wield this power when they feel it's necessary, even against the platform they call home. Over the years, a battle between Reddit and the company and its users has been brewing, and recently it hit a flashpoint. Some of the most critical users on Reddit are the subreddit moderators. These volunteers manage the communities, set, and enforce specific rules, and remove posts and comments that violate those rules.
Collectively, Reddit moderators do a total of 466 hours of work daily. That's 3.4 million dollars in unpaid labor every year, and that accounts for nearly three percent of the company's annual revenue. Basically, Reddit needs this unpaid labor to survive. So when the moderators fight back on a decision, the company usually listens. But not this time, at least not yet. Reddit announced in April 2023 that it would start charging developers for its API access.
In the simplest of terms, an API, or Application Programming Interface, is software that allows two different applications to talk to each other. This allows you to log onto different websites using your Apple or Google account. The API allows Google to talk directly to the website and share your personal information with them so you don't have to create new usernames and then put all your information for every single account you use. Some companies allow developers to access their API for free, while others charge for it.
Reddit switched from the former to the latter. Reddit's API launched seven years ago and has always been free. Anyone building an app could request data from Reddit and use that data to develop their app. But since July 1st, 2023, developers have had to pay to use Reddit's API. The affected developers and many Reddit moderators haven't been pleased. In June of 2023, moderators organized a damaging blackout to protest this policy change.
The 48-hour blackout, called Red Dark, included 8,500 subreddits that were set to private, meaning no visiting, no posting, no commenting. Six of the most popular subreddits participated, including gaming, food, and funny, which have over 30 million subscribers each. In total, Red Dark accounted for over 2.5 billion users. And it’s happened before! On July 2nd, 2015, a group of moderators participated in a Reddit blackout and temporarily shut down their subreddits. They were protesting the firing of then-employee Victoria Taylor, an administrator who helped organize famous Ask Me Anything interviews.
This act known as AMA, highlighted Reddit moderator's power, but the more recent blackout to protest Reddit's decision to start charging third-party developers for access to the site's data is even worse. CEO Steve Hoffman said that charging for API access was meant to keep artificial intelligence from learning Reddit's data for free. But is it really Reddit's data if all the content on the platform is user-generated? There's no definitive answer but I'd like to hear your thoughts.
Although Reddit has said that tiny apps with less than 100 requests per minute will still be able to use the free API, other exceptions, like accessibility-focused apps, will not have to pay. Unfortunately, it's not just big AI companies like OpenAI and Google that are suffering. Apollo was a popular app that enhanced the Reddit browsing experience for iOS users, and because of its popularity, it made over 7 billion data requests a month through Reddit's API.
Under the new rules, Apollo would have to pay 20 million dollars a year to use the Reddit API—an impossible number for its developer, Christian Salif, to pay. As a result, Apollo went dark. The blackout was supposed to end on June 14th, but almost half of the subreddits involved have stayed down indefinitely. Even the moderators who are reopening are making a joke of it to prove a point.
The Steam subreddit, originally created for the Steam gaming platform, is now all about steam engines. The Pix subreddit is comprised solely of photos of comedian and HBO host John Oliver. Some moderators are marking their subreddit NSFW, as not safe for work, because Reddit can't run ads on NSFW content, while moderators of the famous AMA subreddit say they won't coordinate any more celebrity interviews. Some communities are taking the protests to the extreme and leaving the site entirely for platforms like Cabin and Lemmy.
Could this be the end of Reddit as we know it? The blackout has received a ton of media attention, and at one point, Reddit crashed because it couldn't handle so many subreddits going dark at once. Despite the damage, Reddit refuses to change its course on its API policy. Users have claimed that the company is forcing moderators out of their subreddit, which Reddit corporate denies. Reddit announced the API policy change because its current model wasn't sustainable, and it claims it wants to be fairly paid for API access since it costs Reddit money to provide API services.
The problem is that this is happening with little to no warning, sending moderators into their collective rampage against the company. Also, in the words of tech creator MKBHD, the number one rule on the internet that's never been successfully broken is to charge for something that was previously free. And it's not just Reddit. Elon Musk has started charging a subscription fee for the verification badge on Twitter, and he also charges for API access, which shut down dozens of third-party apps. Meta, too, has introduced a paid verification plan: a monthly fee for better customer service, increased visibility, and the coveted blue check mark.
But aren't they successfully breaking that rule? Because all of these companies still have billions of users. Sure, a small vocal selection will leave, but most people just return to the platforms after a few days or weeks as if nothing happened. Whether it's Reddit, Twitter, or even the new threads from Meta, we're quick to return to something comfortable, even if we don't particularly like it, especially when there's no viable alternative. So, is this the fall of Reddit? Well, I doubt it.
But who knows? It might be the start of something else. Because while it may be idealistic to think that we, as everyday people, have the power to change things, maybe that's the idealism we need. Thank you.