How Reddit Went from Empowering Its Community with NFTs to Alienating It with Paid Commercial APIs

The social news-sharing platform is ramping up its revenue channels hot on the heels of Twitter and Meta Platforms’ subscription packages.
Image source: Reddit

Quick take:

  • Thousands of subreddits have gone private over the past few days.
  • The parties behind those accounts are protesting the social news forum’s decision to introduce charges for commercial APIs.
  • Reddit is taking another step in its evolution after a successful foray into the world of NFTs and web3 last year.

Reddit’s decision to introduce charges for commercial APIs has been met with backlash from some of its biggest communities. Thousands of subreddits have gone dark over the last few days to protest the decision.

The social news platform is following in the footsteps of other social media companies Twitter and Facebook which have taken measures to boost their revenue channels.

Twitter and Facebook have both introduced subscription packages that earn subscribers a “verified” status on their profiles. 

Reddit has turned to introduce fees for its commercial APIs as a means to boost its top line. According to Business of Apps, the company’s revenues surpassed $430 million in 2020, from a user base of about 170 million. However, Reddit remains unprofitable to date, something perhaps worth changing.

But in chasing revenues, the social news forum seems to have alienated its community as demonstrated by the ongoing ‘Reddit Blackout’. 

This would seem like a step away from its previous initiatives of empowering its communities. In 2022, the company made its foray into the world of non-fungible tokens (NFTs) and web3 through its digital collectibles avatars. 

The project was so popular that it generated more than $10 million in transaction volume within three months. Since then, the company has gone on to introduce more thematic digital avatars with the number holders exceeding 11 million.

Source: Polygon Analytics/Dune Analytics

As of this writing, there were more than 15 million collectable avatars minted on the Polygon blockchain with a market cap of more than $46.6 million.

However, the days of enjoying social media for free may be coming to an end as demonstrated by all the top social media platforms. Reddit is no different, and the company seems to have identified its strong suite of APIs as the best place to start booking revenues. The company’s application programming interfaces are used by several third parties to power their Reddit-based apps, which are often deemed faster and more feature-rich than Reddit’s own apps. 

Reddit is one of the world’s most popular social news platforms, but its revenues are way below those reported by social media platforms for an equivalent number of users. Given Reddit’s revenue of about $430 million and user base of 170 million in 2020,  the company was making about $2.53 in revenue per user. That’s about a quarter of what Facebook makes per user, while Twitter’s 2020 ARPU (average revenue per user) 2020 is about six times more.

Therefore, Twitter and Facebook both taking measures to boost their top lines, so it is clear why Reddit is taking what looks like drastic measures against the wishes of its community. The company spent the majority of last year empowering its community with digital collectible avatars (NFTs), but now, the focus has changed to the business end.

We tried to contact Reddit for comments about the trade-off of introducing charges for commercial APIs versus the needs of the community, but we did not immediately receive an answer.


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