YouTube disallowing adblockers, Reddit charging for API usage, Twitter blocking non-registered users. These events happen almost at the same time. Is this one of the effects of the tech bubble burst?
Most of the aspects have already been covered but I would want to add one:
This was always the plan, it just wasn’t as highly prioritised as growth.
I work as a developer at a big tech company. We (the company) had our roadmap and it was mostly about getting more users. The more users you have the day the economy turns - the better off you are (… If you manage to turn an profit).
So when the economy went to shit and we (and other tech companies) no longer can loan money for free to cover our running expenses - the priorities shift. Working towards attracting more users is only going to increase your costs at the point and you don’t want to run out of money. So all roadmaps changed and cost saving efforts became the highest prio all of the sudden.
I think it’s a consequence of higher interest rates drying up VC money, meaning that tech companies now have to actually be profitable, rather than just grow.
If the plan was grow now, profit later, then later has come
Nailed it, investors are demanding profit increases, it’s not just interest rates (though they’re the main reason) but also the corporate tax cuts in 2018 basically dumped a ton of profit onto corporations because they repatriated all their offshore cash they’d been hoarding.
That bump lasted 2 years, but the expectation of higher revenue is still there, it doesn’t matter if you got lucky at slots last month, if you make your normal salary this month investors will be absolutely pissed.
This sounds too stupid to be real but I was working for one of the largest corporations in the world during this period and we were congratulated on 20% growth even though we did nothing. Of course we didn’t get an extra bonus or anything but they acted like we had an incredible year when we really just had an average year with a massive tax cut.
Then the next year, our goal was to grow at 20% again and when we missed it by 17%, no one got a bonus or raise.
This timeline is the stupid one.
This is what irritates me. You still made money just not as much as you wanted or hoped so your company punishes you. You can’t have infinite growth
This is also a great example of why higher interest rates aren’t automatically a terrible thing. In general, it’s probably a good sign for the economy that companies are expected to be profitable. Means resources are being used well. The limitless VC money kinda meant any dumb idea regardless of merit got funding.
I wish we lived in a society where not everything needed to be profitable. People deserve treats and sucks to have things that made our lives better go awake because shareholders demand money
There are a number of ways things can function that way. Unfortunately, they don’t scale well.
This is part of my hope of federalisation, it lets a group of small entities act as a single large entity. It also lets non-profit and profit making work together. The for-profit provide the brute force, the non-profits keep them from going off the rails too far. It might be the workaround we need.
Also, be the change you want. For-profit businesses often win due to the far better returns. More people are willing to pour the effort into a business that could make them rich than a charity that never will.
I think we’d see loads of improvements if the philosophy went from “be as profitable as possible” to “just be profitable”. You’re 15% lower than last year, but still profiting? That’s just a smaller bonus for all employees and a smaller dividend for the investors, after putting a healthy amount of it into savings.
There’s no concept of “enough”. That’s the big problem. It goes for both economics and career advancement. There doesn’t always have to be a “higher”. It’s okay to say “it isn’t worth it to go further”.
Whether we like the ongoing enshittification of Reddit or not, I think it’s fair that shareholders expect a return on their investment and they have the right to pressure spez to seek aggressive monetization of the platform.
That problem wouldn’t have existed if Reddit was a non-profit though, like the Wikimedia Foundation.
any dumb idea regardless of merit got funding
That’s still the case and high interest rates haven’t really fixed that because they are still not high enough. Just look at how any company mentioning “AI” in their earnings call gets extra billions in market cap overnight without having a real product yet.
That rather assumes that it actually matters that VC money is being wasted.
After all it keeps the money in circulation and keeps people employed. They then get paid and will then buy useful things from companies that do make profit, so in the end it all works out. It’s only bad for the investors, but that’s always been the thing about investment, it’s always been a risk, and it’s never been guaranteed.
If the goal is simply to keep money circulating and people employed, there are more efficient ways to do that.
Reddit, as a whole only has about 2000 employees.
This seems like a non sequitur: what is good about only profitable ventures getting funding? These unprofitable ventures were creating good jobs and providing enjoyable and sometimes useful products to consumers for low prices. So why is it good that funding is drying up?
It doesn’t seem completely crazy to me that it would be better for money to go to successful projects than just be sprayed like a fire hose in hope that you land a Facebook or Google sized moonshot.
Of course it sucks for the people that lose their job, but presumably that money should go towards sustainably growing things where they could work.
No. I don’t mean to be rude but most of that message is wrong.
VC Money is very much not drying up. 2023 has seen record rounds in most markets. What is drying up is “VC Money for early stage startups with no revenue, no traction, and barely a functional idea”, but even that is not new it has been going on since at least 2018. Remember that guy who raised 1.5M$ with an app that just let you say “Yo” to your contacts ? That was 10 years ago. Those times are dead and buried.
Then the link between VC markets health and interest rates is… contentious to say the least. VCs don’t borrow money - they raise funds from family offices and individual investors, every 2 or 3 years. So every change to the financial landscape will have a progressive effect over 3 years, not a brutal one after a few months. Also you have to bear in mind that the people who bankroll VCs are looking for performance of at least 2X over 10 years. Interests would have to go up to 7% to even be in competition with VC investment. Of course there’s a psychological aspect to investment so the effet is not ZERO but it’s not as automatic as saying “interest go up => vc dry up”.
Finally, the companies we are talking about are in vastly different situations and not necessarily looking for VC money. There is no explaining their behaviour with a single cause, what we’re seeing is probably a cluster effect, because executives are like fish they always follow the movement of the other fish in their field.
- Youtube has been profitable for years and is part of Google which is massively profitable. VC Money has no bearing on their decisions - they are in a quasi-monopoly with no credible competition and want to squeeze their users out of greed
- Reddit has a long and complicated cap table including some very powerful institutional investors so they are aiming at an IPO rather than more VC money. They’re in a pretty good place actually with 1.5 billion MAU, and in the process of shaking off the 10% of hardcore users who are super hostile to monetization. Their monetization is so low (<2$/month/user, when the competition is 10 to 20 times higher) that they could bear to lose 50% of their userbase and still make bank with the remaining ones. They don’t need VC money right now.
- Twitter is… uh… well there’s no telling what Elon is up to but he is absolutely not raising any VC money especially after the shit he’s pulled off since the buy-off. I think it’s just a bunch of bad moves because he’s inept at the social media game.
Their monetization is so low (<2$/month/user, when the competition is 10 to 20 times higher) that they could bear to lose 50% of their userbase and still make bank with the remaining ones.
What’s left unsaid here (but I’m sure you realize) is that these same users whose monetization is so low also provide most of the content and moderation on the site. When you spread out the value of that among the (human) userbase, the total value returned to Reddit by each human is higher.
Steve thought he was targeting the AI with this move, but in reality he has been charging his most engaged users. If he’s upset that Apollo has turned a profit, the correct move was to acknowledge that one guy has done a better job than Reddit’s team, not tell all the users that Apollo helped bring to Reddit that they were no longer welcome
I think they’re operating under the assumption that there is no shortage of people willing to work for clout on a leading social media. They think the users they lose are replaceable and you know what it’s not an unreasonable expectation. It sucks but that’s just the way it is, there will always be people willing to post memes and delete nazi comments.
Only time will tell, but it’s not uncommon to kick out power users when they get uppity and think they run your platform. Way easier/cheaper to fire unpaid volunteers than tech-bros with Silicon Valley salaries.
Couldn’t it be argued that it’s a mistake from reddit to think of themselves as being comparable to platforms that make more money per user?
For example reddit and youtube are completely different in terms of the nature of the platform. Could attempting to monetize an average reddit user to the level of those using youtube might be a mistake? Keep in mind that reddit has much lower overhead for keeping the service running.
The mental image I’m going after is a country that exports mainly wheat arguing that its’ exports should be valued the same as a country that produces complex electronics. The products are at a different realm of complexity. Commodities should be valued for what they are and not be confused with higly refined products.
Couldn’t it be argued that it’s a mistake from reddit to think of themselves as being comparable to platforms that make more money per user?
You’re right it could very much be argued. I mean isn’t that the whole underlying question ? I would imagine that anybody who invests in reddit has the assumption that yes, you can monetize comparably to other platforms. Or even cut the pear in half and sit comfortably at 10$/user which would already be a fucking money printer at >400M MAU.
Now whether they are right or wrong in their thesis is anybody’s guess. Even after the recent debacle reddit is still in a very good position, but social media is such a clown world that you can never really tell.
I’m not so sure about Google nowadays. What started out as an everyday product killing, ended up as the first of many. They killed Stadia from one day to the other, and then started to basically sell and kill everything that is not massively profitable to the point they sold their domain distribution as well to Squarespace. That does not seem like something a massive monopoly with no regards to investor opinion does.
Yeah I think with a net income of $60 billion annually Google is a wee bit past needing VC money lol.
Part of it is the standard crisis of capitalism, the profit you get from doing the same thing always declines, so over time you have to push up revenue (increasing prices, forcing people to pay, showing more ads, gathering more data, etc) & push down costs (fire engineers, run on less hardware, etc)
Part of it is capitalisms natural tendency to create monopolies, and the lack of competition in a given field causing the company to then lose sight of what it’s good at to compete in a bigger field.
Part is that interest rates mean loans are no longer cheap, so taking on debt to get customer, to at some point down the line make money, is a less viable plan. Twitter is a special case where the bad loans are because that was the original deal not interested rate related, and Musk is trying to pull all of the enshitification levers at the same time.
Part is that CEOs generally don’t have a fucking clue about their products or what they are doing (it’s a circuit job about who you know/blow, not what you know), so once one CEO starts firing/enshitifying, the rest just copy them so as to not be left out.
Capitalism is a system built on greed as a foundation to function. In a capitalist system, you must always continue to grow, expand, engulf, absorb, and acquire. This is why it is such a toxic and destructive system. Capitalism will always incentivize companies to get the most people possible to spend as much as possible on as little as possible, that’s literally the core principle of maximizing profitability.
It’s why enshittification keeps happening, the system isn’t broken, it’s working exactly how it’s supposed to.
Wouldn’t capitalism be relatively fine without the function of the Stock Exchange? I feel like the stock Exchange is what causes the issue with the need for continual growth. I feel like capitalism without the overarching need to continuously grow due to the demands of the stock exchange system, could work perfectly fine as you wouldn’t need to continuously grow but to maintain a profit and adjust for inflation where needed.
It’s not pure greed though, if companies do not push down costs & push up revenues enough, they get replaced by those that do.
It is capitalism doing what it does “best”, here’s a clip from I’m A Virgo that explains it better than me: https://youtu.be/lpagmvYZKRc?t=84
There are niches where companies can hide out for a while, especially if they provide a service that needs local implementation, but social media isn’t one of those niches, if you get outcompeted, your toast, no matter how big you peak, MySpace, Tumbler, Digg, Slashdot, etc, this is the monopolization effect of markets.
free money has dried up, now they need to monetise your habits.
Interest rates go up > VCs can’t barrow free money and demand a return on investment > companies try to demonstrate profitability > enshitification
