Hacker News Reader

Comment by function_seven | Hacker News Reader

Why fuck around with 20x pricing then? If the ARPU is on the order of $0.12 a month, why attempt to charge $2.50 a month?

View on HN

He comments on that in the post: It's not about the cost of running the servers, it's about the "lost revenue" on that user.

From the post:

> Me: "Because I assume the majority of it isn't server costs. I assume the majority is the opportunity cost per user."

> Reddit: "Exactly.""

Reddit's doesn't care about the $0.12, they care about the ads that doesn't get shown.

...the reason they want to show the ads is so they can get paid for that.

As other's have pointed out, they probably think AI will pay them more than even ads. Or, since they want to IPO and cash out, they are betting, with the current hype around "AI", that public markets will value AI high enough to value "possible" data sources of AI highly.

This is likely an indication of their internal targets for ARPU over the next months as they start aggressively monetizing and push to IPO.

For reference, approximate global ARPU if converted to monthly for other social networks in 2022: Pinterest: ~$0.5, Snap: ~$1, Twitter: ~$1.6, FB: ~$3.3

This says the IPO roadshow will say Reddit has potential somewhere between Twitter and Facebook, which feels like the right sales pitch to me.

I think the $0.12 figure that was calculated on the post may have been too low.

Iirc, the entirety of Reddit’s user base was used for the calculation. My guess is that Apollo’s subset of users are much more active (and probably more lucrative in terms of ads and user data) than probably 99% of all Reddit users.

On the flip side side, if Apollo users are much more active, Reddit will be worse for lurkers if Apollo users disappear.

Yeah, I'd expect a lot of power users on the 3rd party clients are generating a lot of the content and doing free moderation that produces the product they can get the masses to use via the website/ official app.

> Reddit will be worse for lurkers if Apollo users disappear

Within the realm of folks who are willing to pay for a Reddit skin, imagine that very few of them will just give up the site once their skin is gone.

More likely is that someone comes in and makes a similar app and charges more for it. Power users and professional users will pay, and most of them will gladly pay a premium.

Not gonna lie… I think op said he charged $10 a year. I raised my eyebrows… that should probably be the bottom option of a three-tier monthly price matrix.

I think someone should buy this app and just price it properly based on value add. Im not sure what the various user profiles of Apollo are, but my guess is that there are a few profiles that can be profitably monetized even with the new Reddit API charges. Imho, Reddit is being shortsighted, but they do have a unique and large community.

>that should probably be the bottom option of a three-tier monthly price matrix.

I'm so annoyed with three-tier monthly price matrices. It's honestly a red flag for me at this point.

> I'm so annoyed with three-tier monthly price matrices. It's honestly a red flag for me at this point.

On an aesthetic level, I agree with you. For some business, it’s just not needed.

That said…

As someone who has optimized pricing matrixes many times, I will just say that it works incredibly well. Also, for the whatever number people (like you? sort of like me?) who drop out due to “red flags”, there are legions more who allow their behavior to be shaped in an incredibly profitable way.

It was already a calculation with massively generous values — come on, hardware serving easily cache-able data is dirt cheap, especially when quite a lot of that is just text. And there is data from Christian about the average daily API calls an Apollo user makes, so no need to guess.

> If the ARPU is on the order of $0.12 a month

Is that a matter of fact? How do you know it isn't higher? Also consider that it's not just advertising, it is also about funneling users to new products Reddit may want to develop

You can see how that number is derived in the post. It's based on very optimistic projections from data that reddit has previously released about their revenue, and very pessimistic projections of their user growth. If reddit somehow has massively increased the value they can get from each user compared to that I think the burden of proof is on them for that.

From TFA, $0.12 is an optimistic calculation taking better-than-best revenue divided by a pessimistic user count. We can double that again if you're expecting a late-stage product like reddit to launch a new highly monetizable feature soon, and it's still quite far away.

Reply on news.ycombinator.com