Many startup companies run mostly on VC money instead of actually making enough revenue.
Due to the way investor money works, you can keep your company running on VC money for many years. Making the company profitable in the early stages isn’t entirely necessary as long as the investors get their money back within a reasonable time period.
The idea is, that if you’re able to make your shiny new service very popular, that will be the valuable product you can eventually sell in a merger, IPO or whatever. In some cases like Skype, the intellectual property was also an important part of the deal; not just the userbase. After that, the new owners are free to enshitify the service as much as they like. It’s their problem to make the service actually profitable in the long run while the founders get to drive their Lamorghinis in Dubai.
That’s when the new owners really have to crank up the data leeching and ads, which will kick out a decent percentage of the previous users, but that’s ok as long as enough of them remain.
You’re ignoring that the users and in many cases the mods were the ones adding value to Reddit. It’s a running joke that Reddit corporate is always working on things nobody asked for. Reddit has had 18 years to figure out how to figure out a profitable ad business and they’ve failed miserably. I think charging for api access to put up a barrier for people to continue to add value to the site they own is stupid and short sighted.
It’s absolutely sustainable- but once you aren’t satisfied with sustainability and want it to produce an ever growing profit, that’s when things start going sideways and eventually downhill.
The few people actually contributing to the platform within the sea of lurkers and bots helped Reddit attain the value it has today, and has been a useful tool to attract investors.
I do agree that people have unrealistic expectations about the stuff they’re getting in exchange for ads they block anyway, but Reddit wouldn’t have existed if it weren’t for mods and users doing Reddit’s work for free.
It’s also important to consider that a significant amount of the audience has grown up with things being given to them for free. Whether you got your start online from MSN, MySpace, Youtube, or Reddit, free online services gambling with VC money have been the norm for any sizeable platform for decades now.
It’s ridiculous of course and anybody budgeting a normal business will know this stuff is unsustainable, but kids, teenagers, and young adults have been made to believe thst they can just get video hosting and complex social networks like Reddit for free. Most people don’t know that ads are worth thousands to millionths it a cent and that the glorious profit margins platforms like Reddit are publishing are all flowing back into loads the company has taken out years ago.
I’m pretty sure it’s part of the strategy; nobody likes platforms thst openly admit thst they’re not viable businesses without millions of loans or injections, so companies don’t talk about this stuff to their users.
Here on Lemmy things are different; public servers run on donations are publicly staying how much money is coming in and how much money keeping stuff online is costing. Just one script kiddie with a grudge is making the masses dump lemmy.world (because if you create an account you’re entitled to a disruption free service forever) but nobody thinks about the huge investments commercial platforms have made to stay up in the face of much larger attacks.
Now that the economy is turning and VC money is drying up, every service floating on free magic money is starting to charge people for subscriptions. The response is clear: nobody wants to pay for anything, everything should be free, and ads are unacceptable. Self hosting is too hard, everything needs to have an app ready, and platforms in beta (like Lemmy, two months ago) must be able to compete with Reddit or people will take their stolen memes elsewhere.
It’s sad thst ut has come to this. Then again, maybe these sites are just filled with broke people and kids, that would explain why a six dollar subscription to watch terabytes if video is too much for the people here on the internet.
I guess the era of getting everything for free wasn’t entirely sustainable after all. Who would have thought.
We never got anything for free. That’s not how capitalism works my dude. We paid, and are still paying, with our data. Only now they want more
Many startup companies run mostly on VC money instead of actually making enough revenue.
Due to the way investor money works, you can keep your company running on VC money for many years. Making the company profitable in the early stages isn’t entirely necessary as long as the investors get their money back within a reasonable time period.
The idea is, that if you’re able to make your shiny new service very popular, that will be the valuable product you can eventually sell in a merger, IPO or whatever. In some cases like Skype, the intellectual property was also an important part of the deal; not just the userbase. After that, the new owners are free to enshitify the service as much as they like. It’s their problem to make the service actually profitable in the long run while the founders get to drive their Lamorghinis in Dubai.
That’s when the new owners really have to crank up the data leeching and ads, which will kick out a decent percentage of the previous users, but that’s ok as long as enough of them remain.
deleted by creator
deleted by creator
The downvotes in our comments tell an interesting story. It seems that people don’t want to hear about the strange world of VC money.
[This comment has been deleted by an automated system]
Please tell me how it really is.
deleted by creator
Wasn’t surprised, but I am disappointed.
You’re ignoring that the users and in many cases the mods were the ones adding value to Reddit. It’s a running joke that Reddit corporate is always working on things nobody asked for. Reddit has had 18 years to figure out how to figure out a profitable ad business and they’ve failed miserably. I think charging for api access to put up a barrier for people to continue to add value to the site they own is stupid and short sighted.
It’s absolutely sustainable- but once you aren’t satisfied with sustainability and want it to produce an ever growing profit, that’s when things start going sideways and eventually downhill.
Late stage capitalism in action
We never got anything for FREE.
The few people actually contributing to the platform within the sea of lurkers and bots helped Reddit attain the value it has today, and has been a useful tool to attract investors.
I do agree that people have unrealistic expectations about the stuff they’re getting in exchange for ads they block anyway, but Reddit wouldn’t have existed if it weren’t for mods and users doing Reddit’s work for free.
It’s also important to consider that a significant amount of the audience has grown up with things being given to them for free. Whether you got your start online from MSN, MySpace, Youtube, or Reddit, free online services gambling with VC money have been the norm for any sizeable platform for decades now.
It’s ridiculous of course and anybody budgeting a normal business will know this stuff is unsustainable, but kids, teenagers, and young adults have been made to believe thst they can just get video hosting and complex social networks like Reddit for free. Most people don’t know that ads are worth thousands to millionths it a cent and that the glorious profit margins platforms like Reddit are publishing are all flowing back into loads the company has taken out years ago.
I’m pretty sure it’s part of the strategy; nobody likes platforms thst openly admit thst they’re not viable businesses without millions of loans or injections, so companies don’t talk about this stuff to their users.
Here on Lemmy things are different; public servers run on donations are publicly staying how much money is coming in and how much money keeping stuff online is costing. Just one script kiddie with a grudge is making the masses dump lemmy.world (because if you create an account you’re entitled to a disruption free service forever) but nobody thinks about the huge investments commercial platforms have made to stay up in the face of much larger attacks.
Now that the economy is turning and VC money is drying up, every service floating on free magic money is starting to charge people for subscriptions. The response is clear: nobody wants to pay for anything, everything should be free, and ads are unacceptable. Self hosting is too hard, everything needs to have an app ready, and platforms in beta (like Lemmy, two months ago) must be able to compete with Reddit or people will take their stolen memes elsewhere.
It’s sad thst ut has come to this. Then again, maybe these sites are just filled with broke people and kids, that would explain why a six dollar subscription to watch terabytes if video is too much for the people here on the internet.