No Stupid Questions

It's the money.

US Fed has raised interest rates, destroying money for the first time in decades in an effort to stop our inflation problem

The knock on effects is that banks literally have less money to lend to companies. Some companies are affected more than others by this environment. Tech was hit hard, extremely hard.

With hundreds of thousands of layoffs, tech industry is contracting. Silicon Valley bank literally evaporated in the span of 3 days. Twitter was losing money and had to sell out. StackOverflow is losing money and is currently selling out.

In this environment, Reddit is about to launch it's long awaited IPO, the time when the public is allowed to directly buy Reddit stock and invest into the company. That's what Initial Public Offering means. If Reddit does well, Reddit will pull in lots of money this year through this IPO.

The CEO of Reddit needs to prove Reddit is profitable, or if not profitable... Will eventually be profitable. Stockholders don't care about Reddit drama for the most part, but most are smart enough to read financial sheets. Reddit needs to show growing revenue, growing profits and cutting costs to attract money.

As such, all of what Reddit's CEO has done makes sense in the context of the IPO. He is betting that shareholders won't notice the drop of high quality content creators from Reddit, since that's not a financial number that's reported. He can IPO, raising millions, maybe even billions for himself. The golden parachute outta here when everything gets screwed up in a year or two and collapses.

I think today's investors are smarter though, and the bearish economy and high interest rates means more investors will pay attention to underlying issues.

I think the free money train in leaving the station and everyone is scrambling to be profitable. But that's just an assumption based on twitch and Reddit right now.

Capitalism, babyyyyy!!!

All these companies have done about as much growing as they can. I remember listening to the radio on my drive to work a year or two ago, and they were talking about how Facebook had done internal research and concluded that they had captured something like 95% of the possible user demographics, meaning that they were unlikely to be able to reach new customers because either you have Facebook and you use it, or you've already heard of it and you don't want it/don't use it anymore.

It was interesting, because Facebook/Meta, like Twitter, Reddit, Discord and Tumblr are all for-profit companies that exist to make money, and yet, the expectation of infinite growth from the market never ceases. There will never be a time when the company has grown "enough". Enter the short-term smash-and-grab strategies. The idea is that they know that their business model has peaked in terms of growth and profit and they now need to extract value from the company before the market catches up to that fact. Social media is inherently unprofitable. Nobody wants to actually pay for it, and they do not produce a product, so eventually once the ad revenue has reached critical mass, the users become the product and are essentially ransomed off. Reddit just tried to pass the buck onto the 3rd party app developers rather than the users, but since the API restrictions affects regular users as much as it does developers, it had the same effect.

Suffice to say, unless you are a member of a social media platform that is a non profit, this is going to keep happening. Even if you land on a site that prides themselves on being excellent stewards of their company and never prioritize profits and growth over stability and customer satisfaction, eventually they will be forced to make a decision - lose a lot of money or lose some customers. The answer, sadly, is all too obvious to them by now.

Late stage capitalism You make a business and it goes well, you make some money everyone is happy.

But with time your profits will plateau or even decline. It's natural, but businesses don't understand that it is insane to expect a company to always turn crazy profits when the product does not evolve.

Companies like apple and Microsoft don't worry as much because they are constantly evolving with new product.

Companies like Twitter, Facebook, reddit, Netflix have hit a wall where there really isn't anywhere else to go so they start making shareholder centered decisions made by people who aren't even in touch with the user base of their product.

they are choosing money over people because machines can't say no

Lets take the example of Reddit. Reddit could have kept its costs to the minimum and could have run the site with the ad revenue that came in. In fact they could have talked transparently about their opex and asked for a simple donation drive every now and then like Wikipedia. If need be, they could have removed silly GIF replies and other stuff and focused on text alone. However this would not let them become the next Facebook. That's what they wanted to be. At some point in their story was a choice to be forums 2.0 or get into a race to become a cash grab. Sadly they went for the latter.

I think it’s the fallout of allowing private companies to monetize the internet. Way back in the early days of the internet, it was a pretty de-centralized experience. Then we started centralizing things, companies realized there was revenue to be made, and those companies (because they were corporations) valued the money over the people. Capitalism, basically. Only way to fight this is to take the internet back to what it was in about 2006.

If people don’t use Reddit or Twitter or Facebook, those companies have very little value. The value in any social media is generated by the people who use those things. If there’s no people, there’s no value.

Cory Doctorow has some very interesting blogposts on the topic. He call it enshittification. It's more or less the business model of plattform Capitalism.

My theory? It's Musk.

He's going around saying he only lost bots and scammers, that he's made Twitter profitable, and that advertisers are back and happier than ever

He isn't showing his numbers and there's no way his claims are true, but he's saying what they all want to hear. "Don't worry guys, you can squeeze your users for cash hard as you want, and they might grumble about it but they'll soon come crawling back"

There's also increased pressure to become profitable ASAP, much of it is likely due to the economy, but Musk lying through his teeth is probably getting to the other billionaires. It's worth mentioning, if you're a billionaire the only reason to still care about money is for bragging rights

It's corporate greed. They're just trying to get (more) money out of their users pockets. They're starting not to design their products in a way that the most people use it, but in a way that they get the most money, time and useful, valuable data from their users. That's less people but more profit.

Netflix is showing similar behaviour at the moment.

It' simple: Greed is the reason.

Because capitalism, that's why.

There is the “enshittification theory” — https://pluralistic.net/2023/01/21/potemkin-ai/#hey-guys

Article specifically mentions TikTok but is relevant for Reddit.

Here is how platforms die: first, they are good to their users; then they abuse their users to make things better for their business customers; finally, they abuse those business customers to claw back all the value for themselves. Then, they die.

This is pretty typical for all big companies that take off there is a tipping point when it goes from agile and nimble start up to behemoth company that needs to pay dividends, only they have captured all the market share they can capture and may in fact losing people to other newer services. They're panicking and trying to make things look profitable before it all collapses like Yahoo and they can't sell it. Just my take on it all anyway.

@VoidCrow Everywhere you look you see overpaid executives and CEO’s who think they are actually brilliant enough to deserve their astronomical wages/compensation, and thus think they can do no wrong. Their ideas are always brilliant, and when the shit hits the fan, they blame their staff for a bad implementation and fire them first.

The VC money is drying up and they're demanding a return on investment as the world's economy struggles on at the moment.

Economy is going bad, interest rate are up, and all Silicon Valley's company are built upon VC loans and expansion goals. Scale economy is bound to fail, and it's happening now.

Search for 'Enshittification' if you want a pretty good analysis of what's going on. But basically greed, capitalism and the never ending pursuit of growth.

Interest rates went up and investors aren’t able to get cheap money. So investment is drying up. A few banks collapsed. Tech companies are trying to make a profitable business. Instead of a zombie company

Because nobody can make a platform and just leave it alone, it always has to grow and make profit. All of the apps we use to communicate should be a public service but that's totally utopic.

Because most services we are using aren't sustainable. They all bleed money.

Because user freedom and experience is diametrically opposed to corporate control and ad driven profit seeking.

These companies have continued to function on round after round of VC fundraising, diversifying their corporate holdings to the point that theyre basically wall street funds, and providing little innovation past initial product launch. When the stock market takes a downturn they become insolvent and they have to squeeze profit which means squeezing users. They have no choice, most of these business models weren't viable to begin with.

This is just what living in late stage capitalism looks like.

It's a general trend of vulture capitalism, or more accurately locust capitalism, over the last several years.

Investors want extreme ROI(Return on Investement, aka their money back and some extra), so they'll cut every single corner and monetize everything, and even run companies into the ground to make it happen faster. And then just move on to another company and to the same thing, with absolutely zero interest in long term income, customer retention, etc.

Because they all saw that Elon repeatedly shat all over Twitter and users praised him for it instead of running away. Now all of them are firing half their staff and putting all pretense of caring overboard.

The lie that eternal growth is possible has companies making really stupid moves to increase short term gains at the cost of long term stability.

This is the consequence of the fed raising interest rates and companies finding it much harder to find money to pay salaries and operating costs. So companies have to actually seek profit or go bust and CEOs and board of directors are getting desperate and showing how little they understand what makes their products great.