Reddit - The Social Network's Money Making Struggle

“I am the person at Reddit charged with making money out of you guys, ask me anything.”

So might have said Ellen Pao on Reddit’s popular “ask me anything” page when she became interim CEO of the social networking and news site last year. Her mandate was clear: turn Reddit into a profitable company.

Actually such an open attitude might have been no bad thing. Since Pao took her new role, there has been a growing conflict between Reddit’s desire to make money and its need to keep on board the community which has driven its success.

This came to a head last weekend when Reddit users, led by the site’s volunteer moderators, shut down hundreds of message boards – or subreddits – in response to the firing of a popular senior executive. 

The firing wasn’t the main issue. The problem, as Pao admitted in a mea culpa on Monday, was that Reddit “hadn’t communicated well” with its users. They had “screwed up”, she said.

In Reddit’s bid to become a fully-fledged media company, it had made a series of decisions which alienated the very people responsible for its success. 

Reddit’s problem isn’t unique. It’s not the first start-up to focus on a “users first, money later” strategy, only to then encounter problems when trying to make some of the latter. The likes of Facebook, Twitter, Snapchat and Instagram are all facing similar challenges.

The kernel of the issue is that these platforms live and die by their users. Lose them and they’re nothing. Just look at Myspace.

It’s easy to lose sight of this point when trying to embrace new audiences and strategies in order to make money. This has been keenly felt by Reddit because its users are so anarchic, so naturally averse to clear commercialism, but mainly because they haven’t been treated in the right way.

Even the most difficult users can stay on your side. But they all need to be treated like your most important customers, a way shown by the retail industry. Strategy changes should always be discussed, or even co-created, with them first and communicated thoroughly. User experience should be front of mind. Your most loyal users should be rewarded. How retailers behave can serve as a salutary lesson.

Start-ups can face an entirely new world when it comes to making money. And so perhaps following those retail giants, where the customer is everything, wouldn’t be such a bad idea.