A lot of people use online communities for several purposes. The primary reason is to connect to other people, may it be friends, family or people with similar interest. The latter reason has opened doors for the startup of many online communities existing only for a certain interest. These communities are scattered across the internet, dividing individuals across platforms that are close to their interest. However this leaves people, including myself having to jump from one platform to another to reach communities regarding different topics of interest. If I want to be kept up-to-date on technology, but at the same time want to be updated on new game releases and science, it would be easier for me if this information would be all in one place. One platform in particular comes to mind when thinking of a central place for communities: Reddit.
What is Reddit?
Reddit is one of the largest communities in the world with over 200 million unique visitors every month. It was formed in 2005 by Steve Huffman and Alexis Ohanian. It started out with focus on one community: programmers. Soon the platform turned into a place that people could consider a home for discussing anything, no matter how weird or niche it is. With over 7000 active subreddits it shows how the platform is truly used as a place where its users can talk about any topic. Companies often find their way to this platforms in order to engage with their customers, who have created a subreddit for discussion regarding particular brands, products or services or to monitor particular trends that often become apparent first within Reddit . As you can see, Reddit is a versatile platform.
Business Model
The main selling point of Reddit is its subreddits. Subreddits are user-generated topic creations to which other users can subscribe and discussion about this topic can take place. The users (Redditors) create a topic that is then upvoted or downvoted by other users and their opinion of the topic importance. The same system filters out the inappropriate comments from the conversation oriented comments. A few popular subreddits for example are: Science, News, Funny, Gaming, AskReddit etc. Within these subreddits users can create a headline related to the topic, share information, pictures, videos and exchange opinions with other users. Reddit keeps its users engaged by giving them the freedom to decide what they care about and to talk about what is trending for them instead of what the company thinks is relevant. Reddit drives their product by giving up control to the users. The communities appoint their own moderators and rule enforcers and steer their subreddits the way the users want it collectively (ref). We have come to understand the main operation of Reddit as a community, but how is it monetized? Reddit is earning money in 2 ways:
Selling advertising space (since 2009)
Reddit has been making money selling advertising space through managed or self-serve ads. Managed ads start at a price of $30,000 and self-serve ads start at a price of $5,00 cost per thousand. These ads are positioned in such a way that it is whitelisted by Google’s AdBlock and earned a non-intrusive status. However ads alone won’t be enough to monetize the platform due to its users potentially looking for alternatives if excessive advertisement takes place, hence why Reddit has not exploited advertisement to the lenghts that they could. Instead Reddit Gold was invented.
Reddit Gold
Reddit Gold is a member subscription plan that gives users premium features when purchased. The features include: removing ads, change Reddit themes, create a custom Reddit avatar, excluse lounge, awards, better comment and community management features and participation in beta-testing (Reddit, 2017). The membership plan costs $3,99 per month or $29,99 a year. In addition to purchasing Reddit Gold it can also be gifted to other users out of goodness or because they have contributed to the community in such a way that a user deems it fit to gift them Reddit Gold. Reddit’s goal is to rely on Reddit Gold for monetization by increasing features and subsequently help support the community as well.
Efficiency Criteria
Reddit creates value by joint creation and participation of user-generated contect. This value creation is not limited to a specific brand, product or service as this platform serves to create value for anything the users wants. As the users can use this platform to facilitate conversation about certain brands, games, technology, politics etc. or even facilitate exchange of products as a marketplace or facilitate a community for finding ideas as part of a company’s challenge, its limitations are far and few in between. Having introduced Reddit Gold, Reddit can profit from the platforms while enforcing ways of improving the platforms with user input, making sure the users and the company iteratively help each other achieve a better massive community which several parties can benefit off in creating more value.
Sources:
http://www.investopedia.com/articles/investing/093015/how-reddit-makes-money.asp
http://cmxhub.com/erik-martin-reddit-community-interview/
http://fortune.com/reddit-real-business/
Consumer Value Creation 