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Wait. Why is Reddit losing so much money?

Reddit kind of anticipates this critique in its investor docs, and argues that it didn’t really start operating as a serious business until 2018 when it finally started “meaningful monetization efforts” — that is, trying to make money for real.

But that’s still six years ago. What has Reddit been doing since then?

One big, obvious answer: It has been hiring a lot of engineers and spending a lot of money on their salaries…

…What am I missing? I asked Reddit comms for comment but they declined, citing the company’s quiet period before the IPO.

Internet Archive capture

Anticorp ,

I just read yesterday that Spez was paid $193M last year. Idk if that’s accurate (it seems very high), but if it is, y’all might start looking there for the missing money

melmi ,
@melmi@lemmy.blahaj.zone avatar

The $193 million figure is misleading because the majority of it is stock, so that number isn’t cash and is just an estimate of value since there isn’t even an open market for the stock. The IPO will show how much it’s really worth I guess.

He was paid a little over a mil in actual salary + bonus, which is still too much but not nearly as ridiculous.

Anticorp ,

That’s an enormous stock package. Stock carries real value, and when the stock IPOs he could have considerably more value than the current estimate. Even huge companies with billions in profits don’t generally give their CEO such a large compensation package for a single year. The decision to award that to him certainly raises questions about management’s competence. Well, it raises additional questions, since I don’t think anyone doesn’t already have questions about their competence.

spider OP ,

From what I understand, a relatively small part it is his actual salary, and most of it is deferred compensation.

bigfoot ,
@bigfoot@lemm.ee avatar

I have a feeling Reddit users are much less likely to click an ad than a Facebook, Twitter or Google user.

I believe that is why they have been dumbing down the site and encouraging low effort stuff like memes and tiktok reposts.

TeoTwawki ,
@TeoTwawki@lemmy.world avatar

Wait. Why is Reddit losing so much money?

Leadership makes bad decisions and is greedy and stupid. This isn’t complicated.

spector ,

I think a quirk of reddit is that conventional finance doesn’t account for its value. Reddit in and of itself just operates a barebones site as the article says. While the site itself is ostensibly worthless. It has had incredible amount of value to those using it for commercial and political purpose. Nation state actors too even (cougheglincough). These days what organization isn’t using or trying to use reddit. Such things don’t appear in financial statements. I think they’ve been propped up with funding for so long because its a nexus of zeitgeist. There are enough organizations who it is useful to such that it’s better to keep reddit alive rather than risk having to establish their dark presence on new competitor platforms. I suspect spez knows he has everyone by the balls too.

Rentlar ,

Reddit’s spending on this spez guy is making them lose money. If they can cut back on that small expense, good chance they’d be more profitable.

Lulzagna ,

They have 2000 employees and that don’t do anything

_haha_oh_wow_ ,
@_haha_oh_wow_@sh.itjust.works avatar

Including one that just got paid 193 million, holy shit!

spider OP ,

Most of that includes options that he would have to wait to cash out, which is probably what inspired him to blow things up over the summer.

elxeno ,

They spend that much in R&D and can’t come up with a better UI than old.reddit

EmpathicVagrant ,

The golden age was when they had r/PAN and therapy gecko and that guy that stacks blocks, and everyone with half a musical instrument was on to watch.

_haha_oh_wow_ ,
@_haha_oh_wow_@sh.itjust.works avatar

Can’t or won’t?

spider OP , (edited )

The most accurate explanation is probably don’t want to.

TWeaK ,

Shortly after they introduced reddit gold, they made enough money to cover the server costs for decades. A few years later, with continued revenue from this (until they scrapped it last year), all the money was gone.

The reason reddit loses money is because it’s poorly managed.

Hyperreality ,

You say that like it's incompetence.

They're deliberately lining their pockets with exhorbitant executive pay-outs.

madcaesar ,

Poorly managed as in stolen. The fucking ceo was paid 193 MILLION. For what exactly???

drislands ,

(Note: There are some dumb stories floating out there about Reddit CEO Steve Huffman getting paid $193 million last year. You can ignore those in general since they are really about stock and options awards with a long vesting period. And you can specifically ignore them for this story since those costs aren’t included in the R&D totals.)

From the article. Reddit wants you to believe it had $193m to throw at the CEO, to imply they are great at making money. The more people spread this lie the more reddit wins.

hansl ,

That’s a deep misunderstanding of how that number came to be. He wasn’t paid 193 millions. He was paid something like 6 millions.

The rest is shares that he got and kept through the whole period. When you setup a company you create a number of shares that founders buy (with most kept on the side for investors). As you grow so do those shares value, and you’re also granted some as bonus/salary/et . At 10B those share are worth 190 millions. If Reddit would be worth 1 billion those shares would be 19 millions.

Basically he owns about 2% of Reddit.

Almost every IPO in history has resulted in a significant drop in value on the first weeks as early investors drop their shares on the market and hype goes down. I would be surprised if Reddit loses half of its value in the first month alone. It is much less bullish than a lot of other recent IPOs.

livus ,
@livus@kbin.social avatar

They would be in profit if they paid Spez and co normal amounts of money instead of nearly 200 million per year on Spez alone.

Basically Reddit is a scam in terms of investment.

Dhs92 ,

Isn’t his salary only 300k per year with 200mil being an estimate of what he’d make from the IPO

livus ,
@livus@kbin.social avatar

@Dhs92 nope. His salary used to be 300k but last year he got paid $192 million, including stock etc.

Kecessa ,

The stock options wouldn’t have an impact on their current revenue though, would it?

livus ,
@livus@kbin.social avatar

It would have an impact on their current profit or loss, yes. Stock options are an expense in accounting.

Even without the options though, look at the actual stock they handed out:

Huffman’s compensation package for 2023 was worth $193.2 million, which included salary of $341,346, stock awards worth $98.3 million and stock options valued at $93.8 million. Wong’s total comp of $92.5 million included a base salary of $583,820, stock awards of $45.7 million and stock options worth $45.7 million.

Kecessa ,

Yeah, sorry, I always mix up revenue and profit

Chainweasel ,

Nope, that was last year’s income.

spider OP , (edited )

Basically Reddit is a scam in terms of investment.

By the way, I think r/WallStreetBets users should set up an alternate community elsewhere (like here); I wouldn’t put it past management to shut that sub down if users mention anything about torpedoing the IPO.

livus ,
@livus@kbin.social avatar

WallStreetBets users should really set up an alternate community elsewhere (like here)

Here as in the fediverse, maybe, I don't think lemmy.ml mods would be too welcoming, seeing as how they are marxist leninists. XD

Seriously though I'm sure WSB guys have a ton of offsite back channels. Aside from short squeezes that sub seems to be running pump and dump schemes.

agressivelyPassive ,

They’re spending over 400mio a year on RnD. I was downvoted for stating this somewhere else, but tech workers are drastically overpaid and tech companies are structurally incapable of allocating resources properly.

I’m 100% sure, that reddit has a bunch of technologies, frameworks, components, that were developed inhouse for no other reason than a bunch of engineers trying to reinvent the wheel for the 100th time.

spider OP , (edited )

I was downvoted for stating this somewhere else

You’re not alone; I got two downvotes within a few minutes of posting this – a very Reddit-like phenomenon.

charonn0 ,
@charonn0@startrek.website avatar

That’s enough money to fund a rogue nuclear weapons program. So, I hereby start the rumor that reddit is developing weapons of mass destruction.

dhork ,

It’s always been a weapon of mass distraction, though, and Redditors are poor spellers.

RegalPotoo ,
@RegalPotoo@lemmy.world avatar

If you are a tech company everything you do is R&D and therefore subject to tax breaks.

LibertyLizard ,

Why do you think tech workers are overpaid? I think other workers are underpaid.

Vendetta9076 ,
@Vendetta9076@sh.itjust.works avatar

They think that cause they aren’t a tech worker. Also, as a non American tech worker were also underpaid.

agressivelyPassive ,

I’m a senior software developer. I know how the industry works. And I also know the incredible arrogance of IT people thinking they’re only millimeters away from being literally gods.

zloubida ,
@zloubida@lemmy.world avatar

Username checks out.

Vendetta9076 ,
@Vendetta9076@sh.itjust.works avatar

Sure but thats the same in every technical industry. Doesn’t have anything to do with pay.

agressivelyPassive ,

No, it’s not. Other industries have standards. Nobody would try to re-invent bolts for no reason. Software engineers do. All the time.

And it is related to pay. Or better, willingness to pay. VC funded firms are willing to spend a lot of money on hiring “top talent”, but they let them run relatively free. So instead of using a not 100% fitting solution off the shelf, they build a custom solution, that costs obscene work hours and fits a tiny bit better for 3 weeks. That means, a lot of the work of these very capable engineers gets wasted in the sense that it doesn’t create business value. So the business value they do create gets more expensive to produce.

Baines ,

lol that bolt comment is factually wrong

Vendetta9076 ,
@Vendetta9076@sh.itjust.works avatar

You seem to have a hatred for the tech industry and a very warped view of it vs the work force.

agressivelyPassive ,

Again, I’m part of it.

Vendetta9076 ,
@Vendetta9076@sh.itjust.works avatar

That does nothing to change what I’ve said

agressivelyPassive ,

Do you really think an engineer at Reddit or anywhere in the Valley generates as much value to society as a doctor?

I’m not even close to FAANG, and I earn twice as much as a nurse and slightly more than a doctor of my age. That’s great for me, but I’m not worth that much. And tech workers in the USA earn even more relative to regular workers.

zurohki ,

People aren’t paid for contributing to society, they’re paid to generate wealth for rich assholes. Doctors don’t earn billionaires as many yachts.

agressivelyPassive ,

And you just showed your incapability to distinguish between descriptive and normative.

queermunist ,
@queermunist@lemmy.ml avatar

The purpose of a system is what it does.

agressivelyPassive ,

“Purpose” is the wrong category here.

queermunist ,
@queermunist@lemmy.ml avatar

I meant what I said.

agressivelyPassive ,

Ah yes, a theorem that is so incredibly self-referential, that you could literally justify anything with it.

That’s “it is what it is” for snobs.

queermunist ,
@queermunist@lemmy.ml avatar

Do you think I was justifying the way things are?

Interesting.

exocrinous ,

Programmers aren’t overpaid. Doctors are underpaid.

sincle354 ,

From a software engineering view: Lots of rebuilding the wheel, now with Internet Explorer dependencies. Large tech firms are more and more bureaucratic rather than innovative. Startups slurp up VC funding for the next 200 or so unicorn investments. NVIDIA is THE ENTIRE S&P 500 at this rate with SERIOUS "Peak of Inflated Expectations" valuation. Elon Musk.

All the while the majority of the job is fixing the mistakes of the past, of yourself and of some code monkey in 2003. There's this theory that code replicates the structure of the design team. When that team spans an entire corporate hierarchy with SCRUM standups every 2.5 milliseconds, you wonder if you could do the equivalent of the ending of Office Space to the codebase.

I'm sorry, I'm just... anyway, a sage piece of advice. For the love of all that is holy, write requirements BEFORE doing validation for Aerospace applications, and DO NOT OUTSOURCE THE REQUIREMENTS WRITING. That is all.

boyi ,

During the initial and development stages, the top tech workers were headhunted and paid a lot to set up good infrastructure. Now that the infrastructure is already there, when there’s not much new development being done, they ended up being considered overpaid with respect to the works being done. These companies will end up getting rid of this ‘overpaid’ workers and replace them with migrant workers that they can get for a lot less.

Jagermo ,

And 193 mio for the CEO, that’s a lot of dickpill ads they need to sell…

Perhyte ,

And, interestingly, they lost $91 million last year. If the CEO had instead earned $100 million last year, the company have made a multi-million dollar profit (if only just). If it had been $10 million (still way overpaid for any single person, I’d argue), they’d be nearing the hundreds-of-millions-per-year profit scale.

I’ll never understand companies paying their CEOs hundreds of millions while they’re losing money hand over fist…

Serinus ,

Not quite. He’s paid mostly in stock, not cash.

Still an absurd amount of cash for a single person in a single year. You can effectively own most people for $4,000,000 (40 years at $100k a year.)

This guy is making half a million every single day. Imagine buying someone else’s life’s work every week.

Or, optionally, he could buy a nice house every single day.

Ultimately, cash is a measure of what society owes you.

One person simply can not produce the amount of effort that should be required to earn that amount of debt from society.

athos77 ,

He's literally trying to build up and stock his doomsday bunker.

nayminlwin ,

There is a video somewhere explaining why tech companies need such wasteful bunch of tech workers to give out this image of rapid growth.

athos77 ,

I think what they stated was that they spent $400 on R&D in 2023 - you know, the year where, after 20 years of twiddling their thumbs and doing shit-all, depending on volunteers to run the site, and RES and 3rd party apps to make it usable, and imgur to provide hosting, etc etc - the year when they finally had to actually do some real coding.

I'm wondering how much of 2023's R&D was spurred by restricting the API code, and then allowing certain applications access; having to finally take seriously their decade-old promise to develop mod tools with no planning or preparation; their total surprise at having to provide access to disabled people; and having to update their app. Those are all areas where they were extremely happy to let languish, and which they suddenly had to provide expedited support for after the protests.

agressivelyPassive ,

400 million? For slightly dusting off an app and somewhat improving some aspects of their site?

Think about, what that means. If we assume a very generous 400k per engineer, that would result in 1000 people working full-time for a year. Just in RnD. And for what exactly?

exocrinous ,

Actually, 400 million is exactly as much as it takes to pay 10 engineers 100k to write code, and 399 managers 1 million each to do scrum meetings

Treczoks ,

The key question is: What kind of R&D? I'm afraid their key research is "how to squeeze more money out of our users".

sudneo ,

Hey, until those are money that go from VC leeches to actual workers, I call it a win.

skillissuer ,
@skillissuer@discuss.tchncs.de avatar

spicy take for lemmy, where working in IT seems to be a prerequisite for having an account and engineers disease is endemic

_haha_oh_wow_ ,
@_haha_oh_wow_@sh.itjust.works avatar

Tech worker here: Am underpaid, you are full of shit on that part.

Edit: Looking at your subsequent posts, it seems you are just completely full of shit or quite possibly trolling. Just to be safe: Welcome to my block list! :D

agressivelyPassive ,

Yeah, why would you engage with someone who suggests that 200k per year might not be a fair wage?

altima_neo ,
@altima_neo@lemmy.zip avatar

Because it has no means of generating an income is why

p03locke ,
@p03locke@lemmy.dbzer0.com avatar

Used to be Reddit Gold, but it’s funny how losing a bunch of goodwill impacts a source of income based on social popularity.

DogPeePoo ,

Not funny, “ha ha”; but funny, “fuck you Reddit”

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