It’s a disastrous situation at Reddit. Things are going haywire. Reddit CEO and founder Steve Huffman’s proposed changes to the platform’s API have come under fire. First, there was a site-wide 2-day subreddit blackout, orchestrated to bring attention to how Reddit was killing third-party apps. Moreover, he is also facing internal strife, as company politics and layoffs rip through the soon-to-IPO social media giant. 

Undeterred by these circumstances, it seems Huffman has a mad vision that will change the face of the company in this new AI age. Taking cues from Elon Musk, Huffman is looking to make Reddit the secret sauce for all LLMs going forward. By monetising on Reddit’s treasure chest of content, Huffman is looking to pave the way for the company’s successful IPO. 

The AI market is currently valued at $94 billion, with analysts predicting explosive growth in the coming years. To complement this, Reddit is sitting on terabytes upon terabytes of real, human conversations across the platform, making it the prime fuel for building the LLMs of tomorrow. This presents a unique monetisation opportunity for the long-struggling company, but Huffman and company executives will have to overcome their internal struggles first. 

Reddit is rife with toxic culture

In a series of posts on employee review platform Blind, employees at the social media giant shed light on some of the issues plaguing the company. Reportedly, the company is suffering from manager culture after taking on a huge number of executive roles from FAANG companies. They went on to state,

“When I was there, I had so much work to do and such a huge backlog, but I was completely bottlenecked at every turn because I had managers upon VPs and more managers trying to micromanage every single Slack message sent.”

They went on to elaborate that these new managers were trying to fight over territory, concluding that the board needs to get rid of CEO Steve Huffman because “he’s an idiot”. The sentiment was echoed by others on the same thread, with even more employees expressing similar concerns. Another employee stated,

“The CEO said they were super well-financed and didn’t need to do layoffs but they did regardless. Steve Huffman will eventually get shown the door, he can’t lead, he’s a jerk and plays favouritism.”

Interestingly, this echoes some of the management strategies executed by newly appointed Chief Twit Elon Musk. Coincidentally, Huffman has been vocal in his support of Musk’s management style, stating, 

“I think one of the non obvious things that Elon Musk showed is what I was hoping would be true, which is: You can run a company with that many users in the ads business and break even with a lot fewer people.”

As Reddit begins to become a more prominent part of Internet culture, it seems that Huffman is looking to replicate Twitter’s recent “success” before the upcoming IPO. However, for a platform built on communities and not social media engagement, Reddit executives might be playing a dangerous game.

Killing the golden goose?

Reddit’s moderator team has been going after community moderators after they voted to continue the black out on various top subreddits. Moderators reported receiving messages that stated that the subreddits could not remain closed, with those wishing to ‘reopen the community’ able to retain their mod privileges while protestors would be stripped of their rank. 

Now, it seems that the protest issue has gotten out of hand for Reddit’s communications team, as they have stopped speaking to the press. Tim Rathschmidt, a Reddit spokesperson, stated, 

“We’ll no longer comment on hearsay, unsubstantiated claims, or baseless accusations from The Verge. We’ll be in touch as corrections are needed.”

They have also gone on the offensive, stating that moderators marking posts as NSFW in protest goes against the platform’s Code of Conduct and Terms of Service. 

However, this is nothing more than a move to preserve the communities that make up the platform, as holding fast to the proposed API changes might hold the key to Reddit’s future profitability. A protest for third-party applications that are used by less than 10% of Reddit’s userbase seems baseless from a moderator’s standpoint, but not so much from Reddit’s.

The main reason for the API lockdown is to preserve Reddit’s value as a dataset for LLMs. In an interview speaking about Reddit’s dataset, Huffman stated, 

“The Reddit corpus of data is really valuable, but we don’t need to give all of that value to some of the largest companies in the world for free. Crawling Reddit, generating value and not returning any of that value to our users is something we have a problem with,”

A situation where the API is freely available for third-party apps but not for companies, which have to pay, would have cannibalised this future market for Reddit. Instead of paying Reddit, customers could simply harvest data from third-party applications instead of the API. 

Passing clouds

In hindsight, it seems that asking employees to lay low and wait for the blackout to simply ‘pass’ might not have been the best move for Reddit. However, as they slowly constrict their grip on the platform, it becomes more obvious that the strategy is going in the right path. 

After a small dip at the beginning of the protests, users have come back to the platform, with traffic now returning to near-normal levels. This, combined with the relatively low user base of third-party applications, has effectively made the API protests a non-issue for Reddit management. 

The company is aiming for an IPO in the second half of 2023, and is reportedly waiting for market conditions to improve before they hit the open market. Getting a potential API monetisation route in hand might help Reddit’s case, especially considering their lacklustre monetisation routes in the past.

While many would see this as using community moderators as a stepping stone to a good valuation, there is a case to be made that Reddit might replace the biggest subreddits’ moderators with internal employees. This would not only keep the communities at their prime, but also ensure that a protest of this scale does not occur again. 

Combined with widespread layoffs, which have already begun, Reddit is uniquely positioned to make the most of the LLM wave. Moreover, VCs are all for funding any company even remotely related to AI, which means this would be an even bigger opportunity for a blockbuster IPO.