🛸Reddit's growth to 1 billion monthly users, explained.
This unprecedented growth has led marketing experts to view Reddit as a formidable competitor to the likes of Wikipedia, YouTube, and even Amazon in certain high-value commercial searches.
In 2019, Reddit beat Twitter in terms of Monthly Active Userbase (MAU) and today in 2024, 1 in every 7 humans on planet earth visits Reddit at-least once a month🤯.
The unprecedented growth has led marketing experts to view Reddit as a formidable competitor to the likes of Wikipedia, YouTube, and even Amazon in certain high-value commercial searches.
There’s more. Reddit IPO took place (at $6.5 billion) on March 21,2024, 🌊breaking a 5 year long dry spell of social media platforms not being able to IPO.
This is the crazy growth story of Reddit, and also what a Product Leader can learn from it.
Today in this (free for all) issue we cover:
How Reddit shifted its target customer base to appeal to masses
How lonely covid-stuck humans found peace in Reddit
Reddit vs. Quora: How Reddit better empowers communities
Is Reddit taking over Google? (Google - Reddit’s AI deal)
Reddit’s revenue model, and its new bet
Learnings for Product Leaders
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For those who have been living under a big cave with fellow Neanderthals, here’s a short crash course of what Reddit is essentially:
Reddit is a popular online platform that functions as a social news aggregator, web content rating, and discussion website. It is organized into millions of user-created communities called "subreddits", each focused on a specific topic or interest. Some key terms used on Reddit include:
Subreddit: A community within Reddit dedicated to a specific topic or interest. Examples include r/AskReddit, r/pics, r/technology, etc.
Upvote/Downvote: The ability for users to "vote" on content, increasing or decreasing its visibility.
Karma: A score that represents a user's reputation and contribution to the Reddit community.
Moderator: Users who volunteer to manage and enforce the rules of a particular subreddit.
Reddit's growth story provides a rich case study for product managers and leaders to learn about community building, moderation strategies, niche market opportunities, platform dynamics, and driving user engagement - all critical competencies for building successful digital products and platforms.
Here are the big 5 phenomena that changed Reddit forever:
Addressing its Customer Segment Problem
How Reddit shed its ‘niche and nerdy’ image, to cater to masses
Until 2018, Reddit UX looked like a community started by nerds for nerds. Here’s what top sub-reddits in 2015 looked like:
Of-course, design of the platform (before 2018) was sending a clear signal to wide non-nerdy audience that loved to be on Facebook and Instagram: Stay away!
In 2018, it went through a major site redesign that helped make the platform more user friendly and appealing to a wider audience.
Just the UX wasn’t enough.
As the next step, Reddit also had to focus on supporting more wide range of communities, from technology to entertainment to help broaden its appeal. This vibrancy of new communities led to new kind of topics being discussed, and it became more accessible to non-nerdy and non-techy user base.
This also meant that communities were being started on intent-basis (you create a community of interest and attract users globally) vs. geographically bound communities that were prominent on reddit in the past. The new phenomenon of “intention-based community” also helped Reddit since in modern times and specifically even more so during COVID-19 it became hard to form local communities.
Reddit also gained from trending events, such as the GameStop short squeeze of 2020, which drew millions of users to reddit and helped raise reddit’s profile. Hence, Reddit also became this “cool” platform where amazing events happened.
Today, Reddit has been able to attract a very different segment from its ealry days. Let’s compare. While Instagram user base is more evenly distributed across all age groups and Facebook skews more towards older users (13% of users are >55-year-old), Reddit has much younger user base in general (44% of users are aged 18 to 29).
How Lonely COVID-struck humans found Reddit
For indoor stuck humans, Reddit became the new meaning of community
The COVID-19 pandemic had a significant impact on Reddit's growth and user engagement. Traffic on the platform increased by 20-50% in some subreddits as people sought out online communities during lockdowns.
This surge in new users and increased activity levels helped propel Reddit's expansion, contributing to its transition from a niche "tech-y" platform to a more mainstream and diverse social media destination.
Infact, Reddit was top 3 social media platforms that gained from COVID-19 as it is show below (growth rate in MAU from 2019 to 2021)
However, the pandemic also brought about changes in user behavior and attitudes.
The new wave of users that joined Reddit during the pandemic were fundamentally different from previous cohorts in terms of interests, activity, and likelihood of staying active on the platform:
Veteran Reddit users tended to invoke COVID-related language more than newer users.
The pandemic led to permanent changes in societal norms and behaviors, such as the decline of 24-hour diners and lunch buffets, increased use of QR codes in restaurants, and a perceived decline in social skills and etiquette in public settings.
There was an increased awareness and dissatisfaction with the status quo, leading to a rise in labor movements and a decline in "hustle culture".The pandemic had significant psychological and emotional impacts, with users reporting a sense of lost purpose, nihilism, and a darker overall outlook on life.
Younger users, such as those who turned 21 during the pandemic, missed out on important life milestones and experiences.
Reddit vs. Quora: How Reddit empowers communities to moderate themselves
The number of unique subreddits on Reddit grew from over 2 million in 2022 to over 3.4 million by 2024, indicating the platform's ability to foster the creation of niche communities. The growth was also possible on the backbone of empowered communities with 5 unique traits:
Empowered Moderators:
Reddit's moderators play a "critical" role in the platform's ecosystem, and Reddit is focused on building tools to empower moderators and make moderation more efficient.
Reddit has invested more in equipping its community moderators with the necessary tools and resources to effectively manage their subreddits.
Transparent and Accountable Moderation:
Subreddits with strong, transparent moderation that listens to community feedback tend to thrive on Reddit.
Reddit's moderation approach is more transparent and accountable to the user communities, compared to platforms like Quora where moderation may be less visible or responsive.
Maintaining High-Quality Discussions:
Heavily moderated subreddits like r/science, r/AskScience, and r/AskHistorians are examples of successful communities that use strict moderation to maintain high standards of discussion and content quality.
Reddit is better able to foster high-quality, expert-driven communities through its moderation practices, in contrast to more open-ended platforms like Quora.
Balancing Moderation and User Autonomy:
Overly heavy-handed moderation can negatively impact participation and diversity on Reddit. Reddit tries to strike a balance between effective moderation and empowering user autonomy, which may be a challenge for competitors like Quora.
Google is prioritizing Reddit in its search results and buying Reddit data for its AI
Google spokesperson told Business Insider:
"Our research has shown that people often want to learn from others' experiences with a topic, so we've continued to make it easier to find helpful perspectives on Search when it's relevant to a query. Our systems surface content from hundreds of forums and other communities across the web, and we conduct rigorous testing to ensure results are helpful and high quality."
In recent months, users have been noticing a significant increase in the number of Reddit links appearing in their Google search results.
This strategic move by Google is no accident. For years, the tech giant has observed users appending "Reddit" to their search queries, indicating a strong user preference for the platform's content. Recognizing this trend, Google decided to take action and give Reddit a more prominent position in its search results. In 2022, Google hinted at its plans to prioritize sites that offered more helpful and human-centric content, rather than those solely focused on chasing the top search rankings.
True to its word, Google rolled out a major update to its search algorithm last August, which seemed to significantly boost the visibility of Reddit, Quora, and other forum-based websites. The timing of this Reddit surge has led to speculation about a potential deal between Google and the social media platform.
In February, the two companies announced a groundbreaking partnership that would allow Google to train its AI models using Reddit's vast trove of user-generated content. Some industry experts believe that this deal may have included an agreement for Google to provide better visibility to Reddit in its search results, in exchange for the valuable data.
The impact of Google's push for Reddit has been undeniable. According to data analysis from Semrush, Reddit's traffic has skyrocketed, with the platform projected to have over 346 million visitors in April 2024, up from just 132 million in August 2023. This unprecedented growth has led marketing experts to view Reddit as a formidable competitor to the likes of Wikipedia, YouTube, and even Amazon in certain high-value commercial searches.
Revenue Diversification Plans
Reducing dependency on advertisement revenues
Reddit's revenue has grown significantly over the years, from just $8 million in 2014 to $810 million in 2023. The platform experienced rapid revenue growth, with the annual revenue increasing by 20.8% in 2023 compared to 2022, but it also posted a net loss of $90.8 million in 2023, an improvement from the $158.6 million loss in 2022.
Much of Reddit's recent revenue growth has been driven by its advertising business, which accounts for the "vast majority" of its total revenue.
Reddit is exploring data licensing as a new potential revenue stream, where the platform licenses its user-generated content and discussions to third parties, such as companies working on AI and machine learning.
One specific example mentioned is a $60 million annual deal with Google to license Reddit data for training AI language models.
Reddit expects a minimum of $66.4 million in revenue from data licensing arrangements in 2024.
Lessons for Product Leaders
Reddit's saga offers invaluable lessons in fostering vibrant communities, embracing user-generated content, and navigating the delicate balance between freedom and moderation.
Focus on Community Building:
Example Industry: Social Media Platforms (e.g., Facebook, Twitter, Instagram)
These platforms thrive on fostering communities around shared interests, hobbies, or demographics. Product leaders can learn from Reddit's approach to community building by creating features that encourage interaction, such as group discussions, events, or community pages.
Embrace User-Generated Content:
Example Industry: Content Sharing Platforms (e.g., YouTube, Medium, TikTok)
These platforms rely heavily on user-generated content to attract and retain audiences. Product leaders can follow Reddit's example by providing users with tools and incentives to create and share their own content, whether it's videos, articles, or short-form media.
Iterate Based on User Feedback:
Example Industry: Software as a Service (SaaS) Products (e.g., Slack, Trello, Dropbox)
SaaS products often undergo iterative development cycles based on user feedback and usage data. Product leaders in this industry can learn from Reddit's commitment to listening to its users and continuously improving the platform to better meet their needs and preferences.
Maintain a Balance Between Moderation and Freedom:
Example Industry: Online Marketplaces (e.g., eBay, Etsy, Airbnb)
Online marketplaces must strike a balance between allowing users the freedom to transact and communicate while also ensuring safety and security. Product leaders can draw lessons from Reddit's approach to moderation, implementing clear guidelines and enforcement mechanisms to foster trust and integrity within their platforms.
Enable Personalization and Customization:
Example Industry: E-commerce Platforms (e.g., Amazon, Shopify, Alibaba)
Personalization is key in e-commerce, where product recommendations and tailored experiences can significantly impact user engagement and sales. Product leaders can emulate Reddit's focus on personalization by leveraging user data to deliver relevant product suggestions, curated collections, and personalized shopping experiences.
Invest in Community Management:
Example Industry: Online Forums and Support Communities (e.g., Stack Overflow, Reddit's own communities)
Online forums and support communities rely on effective community management to foster collaboration, resolve issues, and maintain a positive atmosphere. Product leaders in this space can learn from Reddit's investment in community management resources to ensure a welcoming and supportive environment for users.
Scale Responsibly:
Example Industry: Cloud Computing and Infrastructure Services (e.g., Amazon Web Services, Microsoft Azure, Google Cloud Platform)
Providers of cloud computing and infrastructure services face the challenge of scaling their platforms to meet growing demand while maintaining reliability and performance. Product leaders can glean insights from Reddit's experience with scalability by investing in robust infrastructure, implementing efficient scaling strategies, and continuously monitoring and optimizing performance.
Very insightful information. Thank you for this and keep up the great work
Great analysis! It's fascinating to consider how Reddit's IPO might affect its community dynamics and overall growth. I'm curious about how they plan to handle moderation in light of these changes. How do you think Reddit will balance user growth with the push for monetization? Do you believe they can maintain their unique culture and appeal to long-time users while scaling up?