BLACKOUTS: Blackout. On June 12, 2023,
over 8,000 subreddits decided to go completely dark. Users couldn’t join, edit, or even view any
of the content on these subreddits. Instead, they were met with messages like this. CFL has gone
private in protest against Reddit’s exorbitant new API pricing. This community will not grant access
requests during the protest. Please do not message asking to be added to …oh...oops… definitely did
not do that. Clearly, I was not aware of what was going on but like hundreds of millions of
other users, I became aware of the situation quite quickly as some of the biggest communities were
going down. This included r/aww with 34 million members, r/music with 32 million members, and
r/futurology with 18 million members just to name a few. At first, this was seen as one of the most
effective online protests we’ve seen as it not only spread the word but it also made Reddit feel
the pain as they weren’t earning any ad revenue from these subreddits. But, almost as quickly as
the protest gained steam, it disappeared. What did Reddit do you ask? Well, the answer is nothing.
They just stood their ground and waited and things have mostly returned to normal So, join me as we
take a deep dive into one of the biggest online protests we’ve seen and why it utterly failed.
WHAT’S THE BIG DEAL: Alright,
so what’s the big deal anyway. Why are hundreds of millions of users not able to see cat pics
and memes? Well, it all boils down to the fact that Reddit sucks, not as a platform though some
would argue that as well, but as a business. We’ve talked extensively on this channel about companies
prioritizing growth and influence over profits but Reddit is unlike anything else we’ve seen. The
company has been around for nearly 20 years and has 1.6 billion monthly active users. Put another
way, it is the 19th most visited website on the planet and the 12th most visited website in the
US but despite this, Reddit is somehow not only not profitable but they pull in no money. In fact,
Reddit is estimated to only pull in a mere $510 million per year which given their user count is
absolute garbage. I mean, they’re literally making 2.5 cents per user per month. For perspective,
their own paid tier costs $6 per month, so we’re talking about a revenue difference of
nearly 200X between the average user and a paying user. But, not only do they pull in no money,
they also spend a bunch of money. Maintaining a platform with a billion plus users is not cheap
by any means. You need massive server rooms, databases, and lot of tech infrastructure
in general. You also need a bunch of people to maintain all this. And, being headquartered in San
Francisco, Reddit has become accustomed to insane compensation packages of half a million dollars
for software engineers which is great for the engineers but once again garbage for the business.
Virtually no money coming in, exorbitant amounts going out. To be honest, I have no idea how VCs
have put up with Reddit’s financials for so long but it looks like they’re finally pulling back.
In fact, Reddit is planning on IPOing later this year likely hoping that the public markets are
more tolerant of their losses. But before doing that, they wanted to patch things up and make the
business seem as viable as possible. Likely the easiest way to do this would’ve been to
crack down on AdBlock. I don’t have any stats for this but I’d wager that the vast majority
of Redditors use AdBlock given that they tend to be more tech savvy and rebellious in general. So,
eliminating AdBlock itself might increase their revenue by multiple fold and I’m sure they
considered that. But, it looks like they decided against it likely fearing public backlash. Another
easy solution would’ve been to jack up prices on their premium subscriptions. But, then again,
Netflix’s brand favorability dropped to 11% after doing the same thing. With the IPO coming up,
Reddit really couldn’t risk anything that would harm the brand’s image. What they needed was a
revenue stream that no one would bat an eye about, something that no one would even notice like API
usage. Surely, price hikes for API usage would go completely unnoticed. Oh how wrong they were.
SHOTS FIRED: In
late April, Reddit announced that they would start charging for API usage for the first time. The
price $0.24 per 1000 API calls. Wait hold up what even are API calls? Well, API calls are what you
use to integrate various portions of Reddit into your own website or app. API calls are not unique
to reddit. Likely the most popular APIs are Google APIs. For example, if you go onto a restaurant’s
website and see an interactive map showing you where the restaurant is located, that website
is most likely using Google’s Map API. Similarly, if you’re filling in a billing or shipping address
and you see auto complete results, that website is most likely using Google’s Places API. Every
time a user interacts with the map or uses the auto complete feature, an API call is being made
to Google, and these websites are charged based on how many API calls they make every month. For
dynamic maps, Google charges $7 per 1000 requests and for Autocomplete, Google charges $2.83 per
1000 requests. Considering this, Reddit’s $0.24 per 1000 calls is really not out of the ordinary.
Not to mention, Reddit is offering an extremely generous free tier. In fact, you can make up to
100 calls per minute completely for free. So, theoretically, you can make up to 4.3 million
calls per month for absolutely no cost, but then what’s the issue? Well, the issue is that it used
to be free regardless of scale meaning that several substantial businesses have been built
around this idea. One such business is Apollo. Apollo is an iOS app that’s basically a skin
for Reddit. Essentially, it uses a bunch of Reddit APIs to recreate the entire reddit experience but
with a completely new UI which a lot of people prefer. In fact, the app has nearly a million
daily active users. But, here’s the problem, apps like Apollo don’t show Reddit ads because I mean
what’s in it for them. This means that Reddit is essentially having to support all of these users
completely for free. Even worse, apps like Apollo are able to make money by charging users a premium
subscription fee none of which goes to Reddit. So, these businesses basically have no expenses.
All of the backend infrastructure is maintained and paid for by Reddit and all of the front end
runs on iPhones, so the only expense for these businesses is the cost of front end development.
And given that most of these apps are built by a single developer or a small team, this is also a
non expense. So, basically everything that people are willing to pay for these apps is pure profit
of course after the Apple tax. But, while this adds up to a lot of money on an individual basis,
it’s not a lot to run an actual business of their scale. For example, let’s assume that
about 10% of Apollo’s user base actually pays for the app. This would translate to approximately
$130,000 per month which is again great as an individual. But as a business with 900,000
active users making 7 billion API calls per month, it’s nothing. And that’s the problem.
THE BATTLE BEGINS: The core of the Reddit protest is that API
pricing is simply way too high and on the surface this indeed seems to be the case. For Apollo to
continue operations, they would have to pay Reddit $1.7 million per month or $20 million per year.
That’s a crazy amount right? So, 24 cents per 1000 request must be unreasonable. But, here’s
the deal, Apollo is also making a crazy amount of requests. They’re literally making 7 billion
requests per month. That translates to nearly 8000 requests per user per month. That’s why it’s so
expensive. It’s because the API is being used in a way that it’s not meant to be used. Here’s an
example of how APIs are normally used. Maybe, you can integrate a twitter post into an article. This
would only cost a mere fifth of a penny per user according to Reddit’s pricing. A super cheap fee.
But, apps like Apollo aren’t just importing one post. They’re trying to import the entire platform
of Reddit and that’s why it adds up to $2.50 per user per month. And if you’re still not convinced
think about this. Even if Reddit decreased their pricing by 10X down to 2.4 cents per 1000 calls,
that would still cost $170,000 per month for Apollo which would still likely be unsustainable.
So, is this a case of Reddit implementing pricing that’s magnitudes higher than it should be or is
it it a case of apps like Apollo only being viable if Reddit’s APIs are virtually free. I’ll let you
be the judge of that. Feel free to post your thoughts down below. But anyway, much of the
userbases of Apollo, Reddplanet, Sync, and Reddit is Fun naturally felt that it was Reddit’s fault,
and given that this emcompasses much of Reddit’s most dedicated user base,
a lot of them knew mods or were mods themselves. And it didn’t take them long to join forces and
stage one of the largest online protests we’ve seen dubbed Reddark. They would essentially make
8000 of the most popular subreddits in the world private starting on June 12,
2023. And let’s just say, this definitely made a scene. Almost overnight, all reddit users became
aware of the protest against Reddit. And with how quickly drama spreads, it wasn’t long until people
who never use Reddit also knew about it. And given that most people naturally have a tendency to side
with the underdog, they immediately turned on Reddit and especially Reddit’s CEO Steve Hoffman.
Steve was under a lot of fire but he didn’t budge on Reddit’s stance whatsoever. The bottom line was
“Reddit needs to be a self-sustaining business, and to do that, we can no longer subsidize
commercial entities that require large-scale data use.” Reddit had made their position clear but
this only infuriated the community even more. They were gonna band together and protest for
as long as it took. Wait nevermind, just 48 hours later, most of these subreddits would be back up.
THE UNCEREMONIOUS END: You’re probably asking
what happened. Why did the protests die down so quickly? Well, a lot of people point to the
limited blackout period of 48 hours. You see, in order to get as many mods and subreddits on board,
the organizers of Reddark only asked for a 48 hour blackout period. Further protesting would be up to
the discretion of the mods. So, people say that if the mods were more committed, the protest would’ve
been more effective which may have been true but I don’t think it would’ve changed the end result
all that much. The bottomline is that the average Redditor simply did not care about protest more
than simply saying “Oh wow, Reddit is bad”. Now, where are my cat memes and Mr Robot discussion
threads? I know that sounds stupid but that’s the reality. Only 1 million people use Apollo. Over a
billion people use Reddit, so we’re talking about 0.1% of the userbase. So, while Reddark was able
to spread awareness about their campaign and even get people to agree with the ideological effort,
they were not able to get people to sacrifice for the cause and that was really where it all
fell apart. The idea of any protest is that you sacrifice things in the short term to make things
better over the long term. The company Reddit clearly understood this as that was exactly what
they were doing. By protesting the protest, they were essentially sacrificing short term ad revenue
and brand reputation for long term profitability. Now, I do want to mention that a good amount of
subreddits are still protesting but this is increasingly becoming the minority especially
with pressure mounting against mods both from the community and from Reddit. And unfortunately,
it looks like services like Apollo will indeed be closing down at the end of June when the
pricing changes go into effect after which protesting becomes virtually useless. Another
company that might be worth protesting against is Goodwill. Check out this video to learn more.