Reddit Should Drop Everything to Work on Search
In the era of big tech, trust is monetizable
Google search is dying.
If you want to find something worthwhile on Google, append the word "Reddit" to your query.
If you're doing this already, you know that it's because:
- You don't want to be sold to by blogs that have mastered the search engine gaming system, or search engine optimization (SEO).
- You want to hear from other people, not companies.
- You'd rather just get the recipe, not the life story.
And you're not alone.
Michael Seibel from Twitch and Y Combinator tweeted:
A recent small medical issue has highlighted how much someone needs to disrupt Google Search. Google is no longer producing high quality search results in a significant number of important categories.
On HackerNews, a commenter wrote, “Why are people searching Reddit specifically? The short answer is that Google search results are clearly dying. The long answer is that most of the web has become too inauthentic to trust.”
Paul Graham thinks that the increase in Google searches related to Reddit is because enough people are using Google for its Reddit content-scraping algorithm.
A poll of 3,000 Android power users found that 68% of them either sometimes or always include "Reddit" or "site:reddit.com" in their Google searches, with 14% saying they always do. A Hacker News post lambasting Google search is now the 11th most upvoted post from the programmer forum of all time.
While it's not yet apparent in Google's year-over-year revenue or their search statistics—and Google doesn't share daily search volume metrics—Google search is dying in the eyes of the tech-forward niches that brought it from nascency. There is a lack of trust that the results provided by the search engine are the best results for the user, instead of for the highest bidder or trickiest gamifier. The search engine's goals are no longer aligned—if they ever were—with the querier’s. Users are turning towards Reddit because it's easier to trust.
Why is it easier to trust Reddit than other places on the internet? One key reason is the hostility of both the platform and its community members to corporate engagement. Reddit is for Redditors, not companies who want to sell to Redditors. And we like it that way, of course.
Reddit is hard for corporations in a way that it just isn't for them on Twitter, TikTok, Instagram and Facebook. Corporations are not invited to participate in Reddit's public discourse. Astroturfing—the act of a company pretending to be a normal user while promoting their product online—as well as ads do exist there, but it’s hard to do consistently well. You’ll get downvoted for sounding like a "shill," reported and publicly lambasted in comments for trying to push traffic towards a non-Reddit link, and banned from a subreddit by its mods for doing this 1-3 times. Try to get around the policy more than three or so times and you'll get banned from Reddit itself. Building a community from the ground up the "legal" way—through your own subreddit—is not aided by discoverability algorithms in any way close to what corporations enjoy outside of Reddit.
The site also builds trust with users through its millions of niche communities. I ask Reddit users for "best Mac to buy" or "best Mexican food in NYC" because I can find these enthusiasts easier there (r/AppleWhatShouldIBuy, r/askNYC) than by searching for these questions on Twitter, or by asking Google to look through the world of Mac recommendations and New York City dwellers to find me something I might like. Subreddits are easily searchable marketplaces for both enthusiasts and novices. The exponential growth of “ask enthusiasts” subreddits (r/AppleWhatShouldIBuy has grown 4x in the last five years, r/askNYC 10x) tells us that Reddit is one of the destinations that some people trust—and many more people are beginning to trust—more than anywhere else on the internet. And as Google and Facebook have demonstrated, trust is monetizable.
How is Reddit capitalizing on users’ trust?
From a few conversations I've had with Reddit engineers, the answer is not at all (maybe even worse: they just launched an NFT platform).
Reddit is following the tried-and-tested Facebook model. Get users to use your platform, ideally every day, then show them ads in posts and videos. Ostensibly, you know some information about the users on your platform and are able to show them ads that they're likely to click on and otherwise engage with positively. Facebook makes it hard for users to create anonymous accounts, so it’s excellent at connecting real-world people with real-world data points and preferences. So good, in fact, that entire companies have been created to exploit this—like Clearview AI, a facial recognition company that initially scraped Facebook for names and profile pictures to create likenesses for law enforcement databases. If you're on Facebook, you're probably on it.
Reddit does the opposite. It makes it easy to make anonymous accounts; in fact, you don't even need a valid email address to be a prolific Reddit user. It's an amazing gateway to the Internet as a user, but as a company trying to copy Facebook's business model, it doesn't work well. Facebook ads work so well because their value proposition to advertisers is targeting. In addition to the site's users being almost always non-anonymous, the social graph of how users are connected to each other is easy to mine. Reddit, on the other hand, can't tell its advertisers nearly as much about its users. I've advertised on both platforms before. Even though I know that more concentrated groups of my users live on Reddit (because I've interacted with them), running similar demographic targeting on Facebook and Reddit yields better cost-per-click on Facebook by an order of magnitude.
Reddit is giving its core value prop—trust—away for free. This is great if you're a nonprofit organization like Wikipedia, or an otherwise non-money-making venture. Wikipedia—the world's free crowd-sourced encyclopedia—creates a lot of value. But it doesn't capture this value with ads or other kinds of revenue because it's not trying to: it's a 501(c)3 organization. On the other hand, Reddit is clearly a business. The company potentially set to IPO this year is in the business of creating value, but ostensibly not in creating value of which a portion cannot be captured.
Reddit has two main income streams:
Ad revenue constitutes the largest portion. Ninety percent of its revenue in 2020, or about $170 million, came from this stream. Compared to other social media companies, this number is paltry. Despite Reddit having as many users as Twitter and far higher engagement, the bird company has more than five times the revenue. Reddit hasn't even turned a profit on this revenue segment yet.
A more interesting, if smaller portion, is user-bought social media "enhancers" - users purchase Reddit "gold, or "awards” for posts and comments that they enjoyed so much, they want to show their appreciation. These awards are displayed on the post and are a marker of social proof. While this is a small portion of Reddit's revenue, it's unique to Reddit because it showcases the monetizability of users’ sense of community and trust with each other. They're not paying to buy a product—as they might on Instagram or Facebook or Tik Tok—or to get exclusive content—as they might on Twitter or OnlyFans—but rather to display appreciation.
(A bonus third revenue segment: something to do with crypto?)
Should Reddit continue to compete in content ad revenue with Facebook, then? Should it allow corporations on the site in the same way businesses have reign over their own Facebook pages? Or invite them on as zany personalities the way Twitter has cultivated corporate participation? They could, and they'd probably make a lot of money. But it would remove the unique cultural identity Reddit has forged as a solution to the problem of making an ungated internet (i.e., public subreddits) feel like a collection of niche communities.
More importantly, Reddit has more money to make from competing with Google on search.
From the business theory angle, the value prop Reddit holds for clients (the advertisers, not the users) is that users trust it, not that it can target users. This puts it more in line with Google, whose value prop to advertisers is that because users trust the search engine to deliver what they ask of it, they'll tell Google exactly what they want. Less targeting required.
From a metrics angle, search—which is dominated by a giant so large that it lends its name to the category (you Google, you don't search)—continues to be the market leader in the ad revenue space, at 41% of the $189 billion revenue market in 2021, with display content ads coming in at 30%, divided as they are among multiple social media destinations. A Reddit that enters this competitive space certainly has room to grow and monetize its incredibly engaged and actively growing user base.
I've spoken to a number of Reddit engineers about this topic. There are many who understand this, but I wonder if this is something that the executive team generally accepts.
When a user initiates a search by Googling [query] + "reddit,"Google gets him to that content, and then Reddit serves that content and the surrounding discussion. Reddit serves around half the value in this search transaction, but while Google captures the value in its half of the deal through effective search ads (that are related to the intent of the search term), Reddit captures almost none of it. The goal for Reddit should be to capture that entire transaction, as it’s already known that people want to search Reddit. Reddit already has a captive audience, especially when people are looking to the site for recommendations from experts and enthusiasts. In this case, Reddit has cornered a "recommendations" space that even Facebook and Amazon haven't: subdividing experts into communities that they like hanging out in for non-commercial reasons—communities where non-experts know they can find them.
I probably append "reddit" to 40% of the questions I ask Google, because I'm not looking to be sold by blogs, or I'm asking a question that's only answerable by a community, which offers first-hand experience. I'd be an early adopter for a Reddit search engine I could hook up to Safari. Even if the business case for a Reddit search engine is sound, the engineering process is complicated, and the marketing prospect to revert the cultural consensus around Reddit's search bar—from being absolutely horrible to being a Google competitor—is a Dark Souls-level challenge.
But overall, I'm excited to see search evolve. If I understand correctly, Google has its roots in automating individually and community-curated internet boards, solving the scale problem for search while dehumanizing the curation process. Reddit seems to have made curation scalable with the network effects of subreddits, but it hasn't devoted a decent effort to making that curation searchable. I'd really like to see that—a decent effort. Because if you're coming at the king...
Som Mohapatra is the founder at QuantBase, the dedicated brokerage for aggressive investing.