Why I Don't Read Reddit

And why I did read Reddit's IPO filing—here are seven things I learned

I get bad vibes from most social media platforms. (That probably doesn’t surprise you.)

I signed up for Twitter years ago—but only because a literary agent told me this was absolutely necessary to promote my books. I joined other platforms for similar reasons.

As it turned out, I do enjoy having contact with readers. So I’ve stayed on social media despite all the toxicity and bots—and try to make a positive contribution to my small community there.

But it gets harder all the time. I post less often nowadays, and sometimes think about walking away completely. The larger negative effects on society are hard to ignore.

I’ve already abandoned some platforms completely.

Reddit is one of them.

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A few years ago, I followed a dozen or so music Subreddits, and occasionally browsed other Reddit forums on fun topics. But at some point I stopped going, and never went back.

The moderation was heavy handed—and sometimes tyrannical. The quality of discourse was often disappointing. I came there to learn and discover new things, but that rarely happened. I eventually decided Reddit isn’t for me.

Also, the mascot gives me the creeps.

Before writing this, I consulted with a few Reddit users. Some are enthusiastic. But others are even more disillusioned than me.

One informant offered a sharp critique—which perhaps goes too far. But I want to share it, because it helped me understand why I lost interest in Reddit:

You need to remember that Reddit enforces a harsh hierarchy. Comments get upvoted and downvoted, and this determines what we see. But is this wisdom of crowds or just the worst kind of mob mentality?

My view is that the Reddit platform is a case study in the Dunning–Kruger effect. According to that hypothesis, the less people know, the more confident they are in their opinions.

You see this everywhere on Reddit. Discussions are dominated by the most vocal and assertive Redittors, who are rarely the best informed. Just watch and see for yourself—posts filled with the most embarrassing misunderstandings and factual errors rise to the top.

I’ve seen entire threads based on the misunderstanding of a technical term, but nobody seems to notice—instead they go viral. Vehemence and piling on are almost always rewarded. Intelligence goes into hiding.

If you have deep grasp of a subject, you really don’t belong on Reddit. It will just cause you endless frustration. The company motto ought to be ignorance is bliss.

Is that unfair? Or does it provide some insight into the Reddit experience?

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I can’t judge that, because I don’t read Reddit anymore. But I did read its public stock filing.

I study these documents the way other folks read the gossip column. I’m looking for all the dirt and secrets.

You would be surprised how much you can learn from these public filings. When Spotify listed on the stock exchange in 2018, I studied its S-1 filing with the SEC. I could see that the company had a broken business model, and repeatedly told people that Spotify would struggle to make a profit.

That turned out to be true. Six years later, Spotify still hasn’t achieved profitability.

So what about Reddit? What can we learn from its public filing?

The company certainly has loyal fans. Reddit shared this graphic at the very start of its S-1 filing.

And the company offered a timeline of its milestone moments.

But other important facts are harder to find—some are buried deep in the document.

Let me share a few details that caught my attention.

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1. Reddit relies heavily on unpaid labor.

The company describes Reddit moderators as “volunteers”—but I had to wade through more than one hundred pages before I found an actual headcount.

On page 143, I finally encountered this disclosure:

In December 2023, we had an average of over 60,000 daily active moderators.

In contrast, Reddit only employs around two thousand people. So this business has thirty times as many volunteers as paid workers.

I don’t like this—but I wasn’t shocked by the revelation. Unpaid labor is the engine for many web platforms. Facebook convinces us to write for free. Twitter does the same. Social media doesn’t exist without unpaid labor.

Reddit, however, pushes this practice to an extreme—and is poorly equipped to deal with a backlash from its volunteers. Moderators have responsibilities, and if they get upset at Reddit, they can do a lot of damage. Reddit specifically admits the risk in its public filing and mentions its battles with its own moderators in June 2023.

The company doesn’t provide many details of that conflict in the public filing. But I know from separate sources that 8,400 Subreddits went dark during the protest.

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2. Reddit has been operating for 18 years and still isn’t profitable.

After years of burning through cash, Reddit has an accumulated deficit of $717 million.

How is this even possible?

You and I could never get away with it. Our parents would have kicked us in our collective posteriors and told us to earn some money long before we blew through $717 million.

But, like Don Corleone, today’s venture capitalists are indulgent parents. So tech companies run on different economics than our households. To be fair, Reddit’s financials look better than most of the startups I’ve analyzed over the years

• In 2023, Reddit’s net income was negative $91 million—not very exciting, but an improvement over a loss of $159 million the previous year.

• Total revenues are increasing at a healthy rate. They grew 21% to $804 million in 2023.

• In fact, Reddit is only losing money because of huge investments in research & development—a total of $438 million last year. This means that 52% of all the money the company collects goes to fund R&D.

So I’m fairly confident that Reddit can start generating profits in the near future.

Reddit’s homepage back in 2005 (Source)

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3. Reddit’s CEO made $193 million last year.

That seems on the high side, no?

The boss’s compensation was mostly in stock, not cash. That softens the blow a wee bit. But still….

I did the math—and calculated how much Reddit could pay moderators if the CEO was a volunteer, and moderators divided up his salary among themselves. This revealed that they could pay all 60,000 moderators more than $3,000 each for the cost of one man.

Maybe Reddit should follow the Reddit philosophy, and crowdsource all CEO decisions.

I doubt that diverting cash to moderators would improve matters much. I haven’t had especially happy experiences with Reddit moderators, many of whom seem to have trained on a mix of Machiavelli, Kim Jong Un, and Dolores Umbridge. And I don’t mind if successful leaders are well paid. But…

But still, $193 million for a CEO who hasn’t yet generated a profit does seem excessive.

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4. Reddit brags about letting AI train on its users’ comments.

They say it loud and clear on page 2:

Our content is particularly important for artificial intelligence (“AI”)—it is a foundational part of how many of the leading large language models (“LLMs”) have been trained…..

Our massive corpus of conversational data and knowledge is what makes us unique, and we believe its value will continue to grow over time as our user generated data continues to grow.

I find this alarming—and not just because of intellectual property rights.

The amount of sophistry and misinformation spread on Reddit is substantial. Would you train anybody on Reddit comments?

Trust me, you don’t want to see your neurosurgeon checking out the r/surgery Subreddit before your operation.

But what we think doesn’t matter. Reddit will monetize user comments, and we all will live with the consequences.

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5. The list of major shareholders had some interesting names.

These include Chinese conglomerate Tencent and OpenAI CEO Sam Altman. Both control around 10% of the company, prior to the public listing.

But the largest shareholder is Advance Magazine Publishers, parent of Condé Nast. You may recall that the latter recently got called out for a brutal slash-and-burn job at Pitchfork.

Looking at this list, I am forced to borrow a line from drummer Buddy Rich. When berating his road band after a poor performance, Rich would announce: “These guys are not my kind of guys.”

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6. Reddit’s future depends on advertisers—they contribute 98% of revenues.

Honestly, I was relieved to learn that.

I feared that Reddit was making boatloads of money from selling users’ private information—or cutting other deals that make me squeamish, like its AI agreement.

I was also pleased to see this disclosure in the public filing:

Reddit stands for privacy. Redditors have complete control of their identity and are empowered to share as much or as little personal information as they want. Redditors do not reveal information about each other without permission, and Reddit does not use nonpublic information about Redditors without their consent.

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7. Will Reddit Go to War with Google?

This heavy reliance on advertising does bring risks.

It puts Reddit in direct competition with Google. But Reddit also relies on Google for search engine placement. The company actually highlights this risk in its public filing:

We rely, in part, on internet search engines, such as Google, to generate traffic to our website, primarily through free or organic searches…..If a major search engine changes its algorithms in a manner that negatively affects the search engine ranking of our website or those of our partners, our business, results of operations, financial condition, and prospects could be adversely affected.

Reddit also reveals that it is investing heavily in improving its own search capabilities. They brag that users conduct 35 million searches on Reddit every day.

But Google is so much larger in search—it handles 8.5 billion searches per day. In other words, it is almost 250 times larger than Reddit in search. So it doesn’t need to feel threatened by this tiny competitor.

But what happens if Google decides to send a firm message to Reddit? An adversarial relationship with this web behemoth could cause huge problems.

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The Bottom Line:

The numbers don’t look bad, even after I factor in the losses. And maybe the comments on Reddit are mediocre (if you believe the assessment at the top of this article). But mediocrity isn’t always the worst business model. More than a few entrepreneurs have built fortunes on it.

So I will grumble about unpaid moderators and an overpaid CEO. And I still need to be convinced that Reddit deserves a $10 billion valuation. But I won’t pretend that this isn’t a growth business.

If you want to buy shares, I won’t try to dissuade you.

But I’m not planning to check out Reddit, no matter how much money it makes. These Snoos are not my kind of Snoo.