No Stupid Questions

It's the money.

US Fed has raised interest rates, destroying money for the first time in decades in an effort to stop our inflation problem

The knock on effects is that banks literally have less money to lend to companies. Some companies are affected more than others by this environment. Tech was hit hard, extremely hard.

With hundreds of thousands of layoffs, tech industry is contracting. Silicon Valley bank literally evaporated in the span of 3 days. Twitter was losing money and had to sell out. StackOverflow is losing money and is currently selling out.

In this environment, Reddit is about to launch it's long awaited IPO, the time when the public is allowed to directly buy Reddit stock and invest into the company. That's what Initial Public Offering means. If Reddit does well, Reddit will pull in lots of money this year through this IPO.

The CEO of Reddit needs to prove Reddit is profitable, or if not profitable... Will eventually be profitable. Stockholders don't care about Reddit drama for the most part, but most are smart enough to read financial sheets. Reddit needs to show growing revenue, growing profits and cutting costs to attract money.

As such, all of what Reddit's CEO has done makes sense in the context of the IPO. He is betting that shareholders won't notice the drop of high quality content creators from Reddit, since that's not a financial number that's reported. He can IPO, raising millions, maybe even billions for himself. The golden parachute outta here when everything gets screwed up in a year or two and collapses.

I think today's investors are smarter though, and the bearish economy and high interest rates means more investors will pay attention to underlying issues.

Lets take the example of Reddit. Reddit could have kept its costs to the minimum and could have run the site with the ad revenue that came in. In fact they could have talked transparently about their opex and asked for a simple donation drive every now and then like Wikipedia. If need be, they could have removed silly GIF replies and other stuff and focused on text alone. However this would not let them become the next Facebook. That's what they wanted to be. At some point in their story was a choice to be forums 2.0 or get into a race to become a cash grab. Sadly they went for the latter.

Late stage capitalism You make a business and it goes well, you make some money everyone is happy.

But with time your profits will plateau or even decline. It's natural, but businesses don't understand that it is insane to expect a company to always turn crazy profits when the product does not evolve.

Companies like apple and Microsoft don't worry as much because they are constantly evolving with new product.

Companies like Twitter, Facebook, reddit, Netflix have hit a wall where there really isn't anywhere else to go so they start making shareholder centered decisions made by people who aren't even in touch with the user base of their product.

This is just what living in late stage capitalism looks like.

The VC money is drying up and they're demanding a return on investment as the world's economy struggles on at the moment.

Economy is going bad, interest rate are up, and all Silicon Valley's company are built upon VC loans and expansion goals. Scale economy is bound to fail, and it's happening now.

Search for 'Enshittification' if you want a pretty good analysis of what's going on. But basically greed, capitalism and the never ending pursuit of growth.

Silicon Valley Bank collapsing is putting pressure on tech companies to actually turn a profit, so they're turning to slimy tactics just to survive IPO

Capitalism slowly shits up everything. Even the things it helps create.

I mean this in the most general way possible. Not just platforms. Even if reddit was profitable it would still continue. It's just part of the cycle of seeking not just profits but ever rising profits.

It's just more obvious lately on digital platforms because it has been kind of compressed into smaller amounts of time.

That which is free must find a way to cost.

That that makes money must find a way to make more.

And slowly but surely its takes on a fine shine. A glean seen from a distance. But when you get close you realize. "oh, its fucking shit all over it."

Public companies are legally required to always do their best to grow year over year. Eventually these companies get so large they can't realistically get more market share so they have to figure out how to make more money from their users. This leads to them squeezing users for cash in the hunt for short term gains because they've already realistically capped out on how much money they can make per year. It's a dumb system that can't work in the long term.

Because of capitalism, no seriously these decisions are based on money and growth. But both of these things are relatively finite. You can't keep have exponential growth year after year. Eventually you will plateau but there isnt a mechanism in capitalism to accept that. So companies start forcing monetary gain.

I think the free money train in leaving the station and everyone is scrambling to be profitable. But that's just an assumption based on twitch and Reddit right now.

It's Enshitification https://knowyourmeme.com/memes/enshittification

I think also we've become so dependent that they can just do whatever the fuck they want.

I've lived in a bunch of countries and FB messenger is the only way for me to keep in touch. FB can do whatever they want to me because I'm never going to persuade a bunch of people to all move to signal or something.

Reddit has communities that simply don't exist on any other platform.

They have the critical mass.

Reddit, Twitter, etc, have been running at a loss for ages, burning through vulture capitalist money to build up a solid userbase. Now they need to start turning a reliable profit, which means enshittification of the user experience to make more money per user.

All these companies have done about as much growing as they can. I remember listening to the radio on my drive to work a year or two ago, and they were talking about how Facebook had done internal research and concluded that they had captured something like 95% of the possible user demographics, meaning that they were unlikely to be able to reach new customers because either you have Facebook and you use it, or you've already heard of it and you don't want it/don't use it anymore.

It was interesting, because Facebook/Meta, like Twitter, Reddit, Discord and Tumblr are all for-profit companies that exist to make money, and yet, the expectation of infinite growth from the market never ceases. There will never be a time when the company has grown "enough". Enter the short-term smash-and-grab strategies. The idea is that they know that their business model has peaked in terms of growth and profit and they now need to extract value from the company before the market catches up to that fact. Social media is inherently unprofitable. Nobody wants to actually pay for it, and they do not produce a product, so eventually once the ad revenue has reached critical mass, the users become the product and are essentially ransomed off. Reddit just tried to pass the buck onto the 3rd party app developers rather than the users, but since the API restrictions affects regular users as much as it does developers, it had the same effect.

Suffice to say, unless you are a member of a social media platform that is a non profit, this is going to keep happening. Even if you land on a site that prides themselves on being excellent stewards of their company and never prioritize profits and growth over stability and customer satisfaction, eventually they will be forced to make a decision - lose a lot of money or lose some customers. The answer, sadly, is all too obvious to them by now.

There is the “enshittification theory” — https://pluralistic.net/2023/01/21/potemkin-ai/#hey-guys

Article specifically mentions TikTok but is relevant for Reddit.

Here is how platforms die: first, they are good to their users; then they abuse their users to make things better for their business customers; finally, they abuse those business customers to claw back all the value for themselves. Then, they die.

Capitalism, babyyyyy!!!

Related question: why does it feel like hollywood is intent on completely destroying all of our beloved franchises? It's not like the place isn't overflowing with incredibly talented artists, writers, actors, producers, etc. I just don't understand why it's so hard for them to make something that isn't garbage.

These companies are overvalued. Currently we're operating in supply side economics where the wealthy have all the money and companies do everything they can to attract those big investment dollars.

But the truth is social media companies (despite being household names) don't really make the revenue that warrants their high valuation by investors. Investors are starting to figure this out, and now they're desperately throwing shit at the wall to try to keep from losing those big supply side dollars.

Social media companies can break even and employ a lot of people while doing so. They could have a good user experience, and it would be all fine. But they wouldn't have sky rocketing share prices doing that. The leadership wouldn't get fat bonuses. So they implement all these crazy schemes so they can make projections about future revenue.

It doesn't matter if these schemes actually will make money or not. They just need to show X number of users multiplied by Y additional revenue per user and that's enough to attract investment. And it doesn't matter if it destroys the company either, the people at the top will get their bonuses.

Interest rates went up and investors aren’t able to get cheap money. So investment is drying up. A few banks collapsed. Tech companies are trying to make a profitable business. Instead of a zombie company

a lot of people have already basically made this point, but ad revenue isn't really good enough to make massive massive tech platforms profitable, and there's only so much VC money they can all burn. we saw the first stage a few months ago when basically every major tech company had massive layoffs, now all these companies are trying to become profitable all at once

It's odd that all of this is happening at once, but if I had to bet on a cause it is complacency.

The internet used to be fast in trading the hands of "power". Social medias/major forums would fall just as quickly as they rose. This began to change in 2008-2010 when we sort of developed the Status Quo of websites we see nowadays.

I think these corporations forgot that social medias are not indefinite, and assumed that they could safely get away with much more now than they actually can.

Glad to see new platforms such as Lemmy rising to the task. Change the status quo.

Actually I once applied for a job at Reddit, there were like 5 or 6 interviews spread over 2 days basically. And almost everyone I talked to did something related to Ads. (The position I was considered for would have been about some service to deal with problematic posts, hate etc.) So it's just a huge ad machine.

This reminds me also about this Facebook documentary from 2 years ago, how ML algorithms implicitly shape how we interact. Maybe such efforts were better put into good moderation (oof), and a well-working UI...

That said, I wouldn't mind paying a little and already even did so to give awards and also for an App. (Can't be that much they earn with ads anyway?) I hope Lemmy is there to stay though, I'd be happy to donate/contribute every once in a while.

Because you are the product, not the client. You are only catered to enough so that you may be coralled. You are basically cattle to these corporations.

As for why this is happening now:

• The economy is in a downswing right now so we are going to see cost cutting and belt tightening.
• Entrenched proprietary social media platforms are basically monopolies. You cannot choose to use an alternative because these are walled gardens and leaving means losing your ability to communicate with large groups of people. The larger and more entrenched these big firms get, coupled with lack of regulation means they can do whatever the fuck they want. You have no power and no choice (except for the Fediverse, a one-time pain to migrate to).

This is the consequence of the fed raising interest rates and companies finding it much harder to find money to pay salaries and operating costs. So companies have to actually seek profit or go bust and CEOs and board of directors are getting desperate and showing how little they understand what makes their products great.

A lot of them go into business with venture capital, a great idea with future potential, but no idea how to monetize any of it.
Eventually the capital is starting to dry up and the owners will want return on their investments - so the company is forced to start turning profit. Enshittification of service at all costs follows. And then perhaps public IPO and the founders cashing out and buying yachts.

That's the lifecycle of a tech-startup

Because capitalism, that's why.

I think it’s the fallout of allowing private companies to monetize the internet. Way back in the early days of the internet, it was a pretty de-centralized experience. Then we started centralizing things, companies realized there was revenue to be made, and those companies (because they were corporations) valued the money over the people. Capitalism, basically. Only way to fight this is to take the internet back to what it was in about 2006.

If people don’t use Reddit or Twitter or Facebook, those companies have very little value. The value in any social media is generated by the people who use those things. If there’s no people, there’s no value.

I literally just came across an article that talks about why and how it happens https://open.substack.com/pub/catvalente/p/stop-talking-to-each-other-and-start?utm_campaign=post&utm_medium=web

I reckon there are two factors at work here, the profit imperative and enshitification. The profit imperative relates to how corporations have to make exponential profits every single year (and as we all should know you can't have exponential growth in a finite system.)

And enshitification is a result of the profit imperative, with all the corporations trying vainly to keep the profits rolling in they have to cut quality, be it through replacing ingrediants with inferior ones or pumping in the sugar so it's harder to taste the wood chips, killing third party alternatives for viewing your site to keep all the ad revenue to yourself, putting out unfinished products and charging top dollar while treating your users as unpaid testers.

Or any other of the million shitty practices corporations can think up to keep the economic perpetual motion going, it's all going the same way in the end though because you can't get blood from a stone and as a great man once said “You can fool some of the people all of the time, and all of the people some of the time, but you can not fool all of the people all of the time.”

Higher interest rates, less vc money, have to actually start being profitable

Because easy money from a decade of low interest rates is disappearing.

Because nobody can make a platform and just leave it alone, it always has to grow and make profit. All of the apps we use to communicate should be a public service but that's totally utopic.

Over-centralisation.

This kind of slow degredation of services is quite normal, however, this time around the wider use of these degrading platforms is hitting harder. Even 5 years ago, most communities had an IRC rather than a discord, and most ran a forum, or a community forum, with other info being on a wiki.

These days a lot of content that used to sit on a forum now sits on twitter, or on reddit. Discord is the new IRC, and so on. These separate services were a lot less convenient, but more resilient.

Odds are, we might see similar smaller communities pop up again as things get worse in the larger ones. Folks are pinched for cash at the moment, and so free services like neocities might see a boom as fandoms abandon larger sites (again).

Many tech companies were overvalued for a long time. Everyone was happy to invest and pump money into those companies because "those platforms are going to be the future and I want to be part of it when they are starting to make a ton of money". It didn't matter that many of those companies were not profitable because they always promised to make up for that in the future.

This classic idea is starting to break down a bit. Many Tech companies have become profitable in the meantime, but many of them also have various troubles like moderation.

So why are so many media companies making "shitty decisions"? Well, because from a business perspective, they aren't necessarily "shitty decisions", they are kinda smart decisions. Reddit makes money by gathering data and by showing ads. They cannot show ads on apps they don't control. So they have to handle a lot of traffic for which they get nothing back. That's why they are trying to push as many people to use their app as possible. They know that the hardcore oldschool community won't like that, but they are probably pretty sure that enough will switch to the app to make it worthwhile for them.

Meta is fighting to stay relevant as well. Facebook was the foundation of social media for a long time, but in the digital space, this can change very quickly, so they constantly have to try new things.

And if we look at games like the Sims, the game who really escalated the whole DLC thing, it's a similar story. From a consumer perspective, what they are doing is bad. From a business perspective, it's smart. And that's what it ultimately comes down to.

Companies' main goal isn't to satisfy their customers, it's making money. If fucking over customers makes them more money, they do it in a heartbeat.