It’s honestly really sad what’s been happening recently. Reddit with the API pricing on 3rd party apps, Discord with the new username change, Twitter with the rate limits, and Twitch with their new advertising rules (although that has been reverted because of backlash). Why does it seem like every company is collectively on a common mission of destroying themselves in the past few months?
I know the common answer is something around the lines of “because companies only care about making money”, but I still don’t get why it seems like all these social media companies have suddenly agreed to screw themselves during pretty much the period of March-June. One that sticks out to me especially is Reddit CEO, Huffman’s comment (u/spez), “We’ll continue to be profit-driven until profits arrive”. Like reading this literally pisses me off on so many levels. I wouldn’t even have to understand the context behind his comment to say, “I am DONE with you, and I am leaving your site”.
Why is it like this? Does everyone feel the same way? I’m not sure if it’s just me but everything seems to be going downhill these days. I really do hope there is a solution out of this mess.
Lemme add a bit more to my above comment.
Social media companies are especially doing this whiplash switch from aiming for growing the userbase to making money. And for them, there is another factor that makes it even more important to use money for growth when it is available – network effect. Basically, for certain services, the role of the service is to facilitate communication between their users. While it’s not quite true that all users are equally-likely to communicate with each other – an elderly user who only speaks Italian and a schoolboy in Kansas who only speaks English might not have a lot of desire to communicate – in general, users of the service get their value from the service by communicating with each other and each additional user is one more person with whom a user can communicate. This means that it’s much more-desirable to use a service with a large userbase than one with a small one, because you can communicate with others. The value of the service as a whole, if everyone were equally likely to communicate with everyone else, rises roughly as the square of the number of users. That’s because the value to each user is proportional to the number of users that they can talk to, and that is true for every user – multiply one by the other, and the value of the service as a whole is proportional to the square of the userbase size.
Social media work by connecting members of their userbase. So for them, they have a huge incentive to use money for growth whenever they can get a hold of it as far as they can.
The services that are especially likely to respond to capital being cheaply available are companies that have a business model that does this, even moreso than a typical dot-com. And sure enough – Twitter, Reddit, and YouTube derive their value from connecting members of their userbase, rely on network effect as well as economies of scale. And just as they dive really deeply into spending cheap money to grow when they could, when money ceases to be really cheaply available, so they will have further to swim out when it ceases to be.