Reddit chief executive Steve Huffman. Photo / Getty Images
Reddit is digging in its heels in a tense stand-off with its own online communities over the cost of data access, in a move that could threaten its nascent advertising business ahead of a potential listing in New York.
Users in charge of moderating more than 8,000 Reddit forums, known as subreddits, blocked or restricted access to their content this week.
The blackout began on Monday (US time) as a two-day protest over the platform’s decision to charge third parties to access its data but escalated into a weeklong blackout with nearly 5,000 forums still dark on Friday.
It marked the latest showdown between Reddit’s unruly user base, who has long been protective of the platform, and chief executive Steve Huffman, who is tasked with making the company attractive to Wall Street as it pursues its ambitions for an initial public offering.
Huffman on Thursday said in an interview with NBC News that he might consider rule changes to allow users to vote out moderators if they disagree with decisions affecting their community. He also likened some longstanding moderators to “landed gentry”.
Brian Wieser, an advertising analyst and principal at Madison and Wall, said seeking new revenue streams through the introduction of a paywall for access to its application programming interface, or API, would be best attempted while the company remained private. But Wieser warned that, as the stand-off dragged on, it was becoming increasingly worrisome for advertisers, whose campaigns typically lasted six weeks.
“A few days is not a problem but if it starts to get into a large share of the duration of a campaign, then that’s a problem and the campaign is not going to reach its goals,” Wieser said.
Reddit said the impact on advertising campaigns was minimal, and that in some cases this week campaigns had beaten targets given the heightened interest in the protests. However, it acknowledged that several advertisers had postponed certain premium ad campaigns in order to wait for the blackouts to pass.
Founded in 2005, Reddit has grown to have more than 57 million daily active users across more than 100,000 subreddits, which focus on specific interests or topics, such as sports, stock trading and relationships. After years of criticism for its light-touch approach to moderation, Huffman has slowly sought to temper the dark underbelly of the platform — once a hotbed for far-right and misogynist groups — though this has occasionally led to clashes with users.
In April, Huffman announced Reddit would start charging certain third parties for its API, a tool for them to access the company’s data. In particular, the company said it planned to charge companies such as Google, OpenAI and Microsoft that use all of its data to train their large language models, the technology underlying chatbots such as ChatGPT and Google’s Bard.
This follows a similar move by Twitter under the leadership of billionaire entrepreneur Elon Musk.
At Reddit, the shake-up prompted many volunteer moderators that help police the platform to complain that it had priced out vital third-party applications that support their moderation processes, such as curating content, deleting spam and removing toxic posts.
“Reddit needs to be a self-sustaining business and, to do that, we can no longer subsidise commercial entities that require large-scale data use from our API,” the company wrote in a post on Thursday.
The company has also insisted that 90 per cent of developers would be able to still access the API for free, and charges for premium access would be minimal for the average Reddit user.
Reddark, a data project dedicated to tracking the protests, estimated that on Monday, some 8,830 subreddits took part in the blackouts, accounting for 65 per cent of the top 1,000 subreddits on the platform. About 7.4 billion comments were restricted on the platform, or half of the total, it found.
Reddit also suffered an outage on Monday, related to the changes. In a memo on Monday leaked to the Verge, Huffman said there had been no “significant revenue impact” and anticipated many subreddits would return to normal by Wednesday. However, by Friday more than 4,800 subreddits remained dark, with many signalling their intention to extend the protest.
“It is a short-sighted grab for revenue which is also undermining their revenues because these apps are shutting down, not paying up,” said Fraser Raeburn, a historian at the University of Sheffield who helps moderate a subreddit called “r/Askhistorians”. The forum had more than 1.8 million subscribers and had been taking part in the boycott, he said, urging Reddit to consider options such as reducing pricing or delaying the implementation of the new policy.
“If they refuse to budge in any way I do not see Reddit surviving as it currently exists,” Raeburn said. “That’s the kind of fire I think they’re playing with.”
The rebellion comes as Huffman has been focused on building up the platform’s ads business in preparation for a now-delayed stock market debut. Reddit was expected to launch an IPO last year, after lodging a confidential filing to go public with the US Securities and Exchange Commission in December 2021, several months before a deep tech stock rout took hold.
It is unclear if and when its debut will take place, but the company, which was last valued at US$10 billion ($16b) in 2021, has been fleshing out its senior leadership team and making cuts.
While many big brands and agencies favour larger rival platforms such as Meta and Google, Wieser noted that there were a “lot of growth opportunities” for Reddit.
Nevertheless the protest has had a ripple effect on the company’s fledgling advertising business. In an internal memo obtained by the Financial Times, GroupM, part of the advertising agency WPP, told its marketing staff on Monday that brands concerned about “their individual adjacency or suitability of being live during a boycott” should make a decision on the next steps based on their goals and own “risk assessment and tolerance”.
Darren d’Altorio, head of social at digital marketing agency Wpromote, said he was compelled to pause two premium ad campaigns on the platforms on behalf of clients. He also rescheduled planned “ask me anything” sessions in which brands interact with users.
The estimated cost of ad impressions ticked up when the protest began because of the disruption, but had since stabilised, he said.
“Reddit is a very special place in how it is community driven and run,” d’Altorio said, urging a compromise between both sides to “maintain the magic of Reddit and the [moderators’] important role all while angling towards a profitable, growing future.”
Written by: Hannah Murphy
© Financial Times
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