Case study on a media-related startup: Reddit

By Marion Ziegler

Reddit is a social news website. Users can actively submit content such as links or discussion questions, they can comment on submissions, or just passively consume information (called “lurking”). Users can also upvote and downvote submissions. Thus, submissions can get closer or further from the so-called front page, which shows the 25 highest rated submissions. As up- and downvoting is a constant process, the content on Reddit and especially on its front page is always in a state of flux.

Reddit is a startup created in 2005 by Steve Huffman and Alexis Ohanian, who were 22-year-old graduates from the University of Virginia at the time. It was one of the first startups supported by Paul Graham’s Y Combinator.

In October 2006, Condé Nast acquired Reddit. At that time, it had raised around $100,000  and was averaging 70,000 daily unique visitors and about 700,000 page views. Despite the acquisition by Condé Nast, the Reddit crew (now counting 4 people) stayed an independent entity in terms of their decision-making.

In June 2008, the Reddit crew announced on their blog that Reddit would become an open source website. They wrote: “We’ve always strived to be as open and transparent with our users as possible, and this is the next logical step.” And also: “We know Reddit’s success has less to do with our technology than it does with you, our community, and now we want to let our community improve our technology.”

In December 2011, Reddit counted almost 35 million unique visitors, over 2 billion pageviews and more than 100,000 subreddits. In less than a year, the traffic had more than doubled.

In February 2013, Reddit  integrated a payment system based on Bitcoin for Reddit gold (see below).

Reddit’s strong user community and the possibility to add friends give it the character of a social network. Paul Graham  described it in the following way: “I never look at any news site now except Reddit … Reddit’s like an RSS feed for the whole web, with a filter for quality.”

 

The problem and how Reddit solved it

The more the Internet developed in the late 1990s and early 2000s, the bigger the information flood became, almost drowning Internet users. Then Google and other search engines  made it possible for users to find exactly what they were looking for. A new problem was that former newspaper readers and TV viewers were not exactly used to looking up what they were interested in. In fact, they were used to being provided with news in an already well-balanced mix. So aggregators, such as newspaper websites, Yahoo and  Google News began to filter the information flood.

What was still missing was the possibility of receiving tailored news. Of course, websites providing tailored news on special topics and niches existed. But Reddit, in 2005, met the new needs: tailored news for readers with general interests. On Reddit, you can have your very personal daily update customized to your very special interests, demands and needs. Reddit is your personal news mix, providing pictures of cute kittens next to a political discussion next to advice about a medical issue – if you decide to have it that way.

What Reddit does and how it looks

Reddit is sort by topics or areas of interest called subbredits. By navigating to a subreddit, site users will only see links submitted to this topic. Registered users can chose which subreddits they want to follow and thus create their very own mix of topics. Thus, Reddit makes it very comfortable to stay updated on news that really interests you. It also affords a great opportunity for journalists when it comes to research on a rare or rather specific story or topic.

The Reddit website does not look modern but rather basic and simple, almost cheap: only blue links, a little advertising and buttons for navigation on the sides. This could be seen as poor design.  On the other hand, you could speculate that by keeping the website simple, Reddit focuses more on content.

 How Reddit is financed

Reddit’s revenue had not been great. In July 2010, the crew used those exact words when they announced a new feature that was supposed to improve their financial situation. The idea was simple: a subscription to Reddit with a membership fee for users who wanted to benefit from some extra features in the future. This was called Reddit gold.

At the time of this announcement, Reddit gold did not yet exist. In fact, the crew was asking the community to name a price they would be willing to pay for the subscription. Users discussed this on Reddit. Only three days later, Reddit gold was already running and the crew had a new announcement: “This was a triumph.”

Another source of revenue for Reddit is of course advertising. In a blog post in August 2010, the crew said it had 200 different advertisers per week – in the form of sponsored headlines. In order to be transparent about this, they started to list the 20 highest-scoring sponsored headlines each week.

Community thinking, honesty, transparency

The concept of transparency applies to Reddit as a whole in a perfect way.

The installation of Reddit gold is a good example of Reddit’s admirable approach to community thinking and honesty. Not only did the crew consult their users when establishing a new feature, but also they were  honest about the performance of their new service: “We wanted to write some cool subscriber-only features first. […] We now realize that we’re going to have to put the cart before the horse: jin exchange for subscribing to reddit, we can right now only offer you our undying gratitude and an optional trophy on your userpage.”

Two weeks after the start of Reddit Gold, the crew made transparenhow they spent the money they had now earned. They also gave information about their current server capacities, future plans for investment, and next business goals.

Why Reddit is a startup worth admiring

Reddit made it from being a small, quirky Internet nerd community to more of a mass medium – it is still considered  kind of nerdy, but has also become very mainstream. The Reddit community has grown really big. Thu,  nowadays, Reddit can even have an impact on actual events – or has at least some potential to. The events around the Boston marathon bombing show this (in a very negative way, unfortunately).

To this day, Reddit sticks to its original principles. It still cherishes those values of the Iinternet as a whole: transparency, the wisdom of the crowd, accessibility (open source). This somewhat resembles professional ethics in journalism (truthfulness, objectivity, fact checking etc.). Those journalistic values are old, but a (good) journalist still stick to them and hopefully will keep doing so.

Reddit is based on a simple but brilliant idea that has not much changed since its first day. There are some additional features that can but do not have to be used. Thus, it seems to be Reddit’s goal to keep it simple. But despite of this simplicity, Reddit is able to satisfy the different needs of a lot of users. The more users it gets, the better it gets. And there is nothing you cannot find on Reddit.

All this makes Reddit a startup worth admiring.

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