Different people have different hobbies. Mine are coffee, running, and finding patterns in how firms scale (don’t judge). But very seldom do I find myself discussing all of them in the same article. Reddit went public last week, and an intriguing aspect of the IPO is the opportunity to retrospectively analyze the data, offering us insights into how the company has scaled.
FWIW - at my last startup I looked at using Reddit's ad product to target sub-reddits relevant to our product. Reddit would not let me target sub-reddits with below a certain threshold of members.
While something they control and therefore could adjust, this also points to the constraint not just being number of sub-reddits, but number of sufficiently large sub-reddits. That also runs counter to being to target those smaller, but higher potential communities with a positive CAC over a more generic and diluted audience.
Do you think the constraint for growth could be building in enough viral loops for users to visit Reddit more frequently? Resulting in being able to charge higher CPM/CPC rates?
Also given the edgy nature of Reddit's content & user-base along with pseudonymity probably makes it less attractive for traditional advertisers
A lot of this might be tied to how Reddit monetizes - if it's ads, it's likely via a CPM or CPC model (vs. a fixed priced for something like sponsoring a sub-reddit). If it's CPM/CPC, then a lot of monetization will depend on (1) the ad inventory available and (2) how well that is monetized. This might mean that the true underlying factor of Reddit's revenue will be things like user engagement and time spent that impacts the ad inventory (along with ad load) - something the number of subreddits is only a proxy for.
I suspect that two value factors may dampen Reddit’s future growth metrics. The first and most obvious is time constraint. After all, there are only so many hours in a day that users can devote to subReddits, no matter how interesting new groups are. Secondly, I suspect the marginal utility of each new subReddit (and member) added decreases with scale.
Nonetheless, hats off to Reddit for presenting the most intriguing application of Metcalf’s and Reed’s Laws!
FWIW - at my last startup I looked at using Reddit's ad product to target sub-reddits relevant to our product. Reddit would not let me target sub-reddits with below a certain threshold of members.
While something they control and therefore could adjust, this also points to the constraint not just being number of sub-reddits, but number of sufficiently large sub-reddits. That also runs counter to being to target those smaller, but higher potential communities with a positive CAC over a more generic and diluted audience.
Interesting to note that Reddit's DAU/MAU ratio ( 8-9 %) is significantly less than the standard for social media companies like IG/Snap (20-30%) - https://www.businessofapps.com/data/reddit-statistics/
Do you think the constraint for growth could be building in enough viral loops for users to visit Reddit more frequently? Resulting in being able to charge higher CPM/CPC rates?
Also given the edgy nature of Reddit's content & user-base along with pseudonymity probably makes it less attractive for traditional advertisers
A lot of this might be tied to how Reddit monetizes - if it's ads, it's likely via a CPM or CPC model (vs. a fixed priced for something like sponsoring a sub-reddit). If it's CPM/CPC, then a lot of monetization will depend on (1) the ad inventory available and (2) how well that is monetized. This might mean that the true underlying factor of Reddit's revenue will be things like user engagement and time spent that impacts the ad inventory (along with ad load) - something the number of subreddits is only a proxy for.
I suspect that two value factors may dampen Reddit’s future growth metrics. The first and most obvious is time constraint. After all, there are only so many hours in a day that users can devote to subReddits, no matter how interesting new groups are. Secondly, I suspect the marginal utility of each new subReddit (and member) added decreases with scale.
Nonetheless, hats off to Reddit for presenting the most intriguing application of Metcalf’s and Reed’s Laws!