I mean there’s Reddit ofc, as well as Twitter in its entirety, Discord is implementing some dumb updates, there are issues with Tumblr as well as everything to do with Meta, and I’m sure there are plenty more (and I haven’t even touched other digital media, for example the Sims). Why is it all happening in the span of about a couple months?
Capital only looks out for itself. Online communities are a product to be exploited in the eyes of investors. The purse strings are getting tighter with rising interest rates, and investments that relied on potential are suddenly less exciting when the price to service goes up. Profit is king at the end of the day. It sucks, but that’s capitalism.
But the good news is, tech is a highly disruptable industry. Barrier to entry is accessible for regular people.
And that’s why we’re here.
Reddit doesn’t die because we left. They die in a few years when the Fediverse just works better than Reddit. And we fund that.
Speaking of, how do I kick in a few bucks to help out various Lemmy servers? Anyone know?
I was able to donate to Ernest who runs kbin. I can’t find the link at the moment but it is floating around here somewhere.
its the little heart at the top of at least lemmy.world
Yep. The rising interest rates is an enormous part of it, and it’s not really getting discussed that much. Basically, the 2010s were a period of historically extreme low interest rates. When you can borrow for cheap as you could during the 2010s, you could easily fund growth via borrowed capital. Money was flowing everywhere. Tech companies in particular could get funding from places like Silicon Valley Bank, so profitability was a secondary concern, with growth as the primary concern. No need to be profitable if you can fund your day-to-day operations with cheaply borrowed money.
In the current environment, things are very different. Cost of capital is much higher now, so borrowing to fund the day-to-day isn’t as feasible anymore. Those rising interest rates ultimately led to Silicon Valley Bank’s collapse in March: They held a lot of long term US Treasuries on their balance sheet, so they were forced to show huge unrealized losses with rising interest rates because of mark-to-market accounting. That collapse cut off a huge source of funding for Reddit and other tech companies.
The result is predictable: Reddit needs to turn to profitability, and they have to do it fast. It absolutely sucks for long time users, but they no longer have access to the same funding source that kept the place afloat in the 2010s.
Reddit isn’t unique in this. Other tech companies show a similar pivot to profitability after funding growth with cheap money in the low interest rate environment of the 2010s. Uber is a good example: Borrow money for cheap to fund operations at a loss for a few years, and all of a sudden, you’ve gained huge market share because you’ve undercut the cost that taxis charge. After that money dries up though, you have to raise costs to pivot to profitability. Today, Ubers are often more expensive than the Yellow Cab you may hail from the street, but people are so used to using Uber that they don’t compare prices anymore.
I agree. I think interest rates are driving more of this than people realize. The Fed is still planning two more rate hikes before the end of the year to try and get inflation under control.
Silicon Valley Bank was also a victim of a changing environment. Runs on a bank used to be something that could take days. Now they can happen in hours with panic spreading via social media and withdrawals happening from an app. It didn’t help that they were a niche bank serving a niche customer base.