I agree with your main point but your math is off by an order of magnitude:
(14,300,000 x $0.05 x 0.5)/1000 = $357.50/day
I still think Reddit could easily pay their costs by running ads, not sure why they are not doing so.
(14,300,000 x $0.05 x 0.5)/1000 = $357.50/day
I still think Reddit could easily pay their costs by running ads, not sure why they are not doing so.
If they dropped in AdSense units, there would be an uproar for about a week, then people would adapt and life would go on with a significantly bolstered revenue stream. Worst that happens is that more users would still be adblocking, but given their page view volume compared to their expenses, I can't imagine that even that would be a net loss.
Uh... therefore reddit gold. That's the point.
The key to this is user retention, and if reddit users are loyal to reddit (which they seem to be, especially those willing to pull their credit cards) I wouldn't be surprised to see retentions on the order of 6 months or more.
What do you base the 2% on ?
For Reddit, yes you'll get a number of die-hard fans who want to subscribe. But I don't believe that there is a big enough value proposition for the userbase to do that en-masse. They may as well just set up their own reddit since the code is open source (And wouldn't be that hard to recreate if it wasn't).
It might be different if:
A). Reddit wasn't spending crazy money on servers
B). Reddit wasn't owned by a multinational corporation
C). Reddit hadn't pandered to, and cultivated a staunchly
anti advertising userbase.
Also from their latest blog post, it looks like they're just spending the 'reddit gold' money on more hardware! Instead of fixing the underlying issues.
The 'news' angle is a silly one, but they could definitely think up features that people would pay for that are not available right now in the free product.
The real issue with reddit making money from advertising (aside from the ad blocking) is that the CPMs that are quoted here (between 2 and 9$) are not realistic for their number of pageviews. By the time all the unsold inventory is taken out you probably end with $0.05 ECPM or maybe 10 cts per click (and that would be pretty good).
I'm really interested in how much they were paying before for their bandwidth and hosting if going to EC2 actually lowered their costs, they must have had the worst deal on the net for that to be true.
Right now, $30K / month buys you 20 (very) fat servers and 20 Gbps flat rate, managed hosting.
I'd really like to see someone make the case they can get that kind of performance out of EC2 for a similar cost.
And hiring a designer! Because, you know, that'll fix their load issues.
(The point stands, though, that "basic" doesn't mean "light").
Whitelisting on adblock will let through a tiny bit of CPM based revenue, but people won't click in the numbers that 'normal' people do.
The only way I can think of to cultivate an anti-ad userbase is to not have ads, but Reddit has had advertising for a long time. For a while it was even a bit obnoxious.
Still though, I agree. At something like a $2 CPM (which is NOT that hard to get for someone their size) they'd still be pulling in insane money for just one ad unit.
No on seems to be mentioning other revenue streams, user stats, customised reddits, merchandise sales, ...?
What's digg getting? A bit of googling shows that most people who get front-paged see ECPM of <$1...
Why do you think that reddit would be so much higher?
(I agree, they should be showing more ads)
The users now have an option to not see ads (ie. buy a gold subscription), so they can't really complain about having a single ad slot on the page for non-gold users.
To go further, they could not show the ad slot at all if there isn't a campaign running on the site (ie. don't show 'backfill') which would further increase the value of the slot.
$100k+ a month from that ad slot would be very very easy to achieve, and with minimal sales work (they could outsource it to Doubleclick or another network). Sites like Techcrunch and Gawker make millions from ad revenue with a fraction of the traffic - reddit could hit 6 figures a month with a single unit that isn't even displayed all the time.
It would be a perfect balance of retaining the style of the site along with bringing in revenue
TBH, when CN bought reddit, this is what I thought they would do
That'll cover the servers, easy, but what about salaries?
I have no idea what constitutes normal ad rates for a site because all the projects I've worked on have been pathological cases in either direction.
What would some realistic numbers for something like Reddit be?