What's frustrating about all this is the resources wasted on growing businesses that were fundamentally unsustainable. I think a tougher economic climate would have been better for innovation long-term.

Honestly outside of the Youtube/Imgur I don't think these companies are unsustainable. The problem is the VCs are aiming for huge returns. Instead of focusing on their niche and running a lean but profitable business they are forced to chase trends and exponential growth.

Who on Reddit wanted chat or live streams. Why is Facebook spending so much money on videos. does Uber really make any money off hellocopters rides. These aren't what people came to these platforms for and are just costing them a huge amount of money.

Most of these companies seemingly were in a good place, and then started doing stupid pivots to try and make even more money than they already were.

Reddit was doing fine as a text-only forum supported by advertising and Reddit Gold. Then they went a billion dollars in debt building the redesign which is widely disliked by power users (who are responsible for most of Reddit’s actual activity thanks to volunteer moderation combined with the Pareto principle), and at the same time decided to add native image and video hosting and take on all the costs associated with that. Everything since then has really been chasing whatever’s popular. After Twitch got big, they added livestreams, which didn’t go anywhere. After Discord got big, they added chat, which didn’t go anywhere. During the NFT boom, they invested big in those, which wasted a lot of money and didn’t go anywhere. Now AI is the new hotness, and they’re following Elon’s lead by treating the site as a static text repository which more value being sold to people training AIs than any value that could be gained from just...running the site. This boom will end, either by way of hitting the peak of what’s currently possible, updates to copyright law or other regulations, or just by the AI companies remembering they can just download the Common Crawl database for free and get the exact same content without paying Twitter or Reddit (or even specific dumps of Twitter or Reddit content if that’s what they really want; those are widely available in places like the Internet Archive).

Imgur was never going to be sustainable on its own, since it’s basically impossible to monetize an image hotlinking service by definition. However, they brilliantly decided to pivot the site to being its own image sharing community (with all of the monetization opportunities that allows), while still supporting the original use case as a sort of “unintended” feature (while actually being the whole reason the site was originally made in the first place). Then they suddenly forgot that was the plan, probably after several managerial/executive swaps, and started shutting down everything that wasn’t part of the “community” system, even though the “community” was really created just to subsidize everything else.

Facebook’s adventures with video are probably the single most damaging thing to ever happen to the Internet. Basically, they saw that video ads were wildly more profitable than anything else they were doing, proceeded to inflate their video stats by counting anyone scrolling past an autoplaying video as a “view”, told the entire web that text was dead and video was the future (causing hundreds of major sites to shut down their writing departments in favor of mainly producing videos), used all of these manufactured stats to get massive investment in video ads, and then just kind of shrugged when everything eventually collapsed.

YouTube has been in a good place consistently since the mid-2010s, and just really likes pretending that they aren’t. Like I said with Facebook, video ads are really profitable when done right, and YouTube operates at a big enough scale that the bandwidth and storage costs of hosting all of humanity’s video content is offset by the number of people watching Mr. Beast eight seconds after he posts a new video. The problem is that they’re always trying to optimize for more revenue, leading to massive pushes for family-friendliness to keep advertisers happy, pushing whatever the latest “format” is (at the moment, Shorts) because that’s what advertisers are most interested in since it gets the most views, and just generally trying to hyper-optimize every aspect of the website to further improve their margins.

All of these sites could have simply continued with their original business models and maintained small but lean businesses, and they’d probably be able to even keep getting moderate growth thanks to network effects. But they wanted all the money and they wanted it right now, leading to extreme overextension into whatever else is currently popular, and it only ever leads to the core business collapsing because the people who were maintaining it are off selling NFTs or trying to build a video player.

> After Twitch got big, they added livestreams, which didn’t go anywhere. After Discord got big, they added chat

I never heard of twitch as a non-streaming site and discord as a non-chat website.

Yes. Overly cheap money has negative externalities, that’s been the lesson of the post-9/11 financial order, and one of those is that overly cheap money causes fart.app to crowd out economically productive activity. A lot of things were done that shouldn’t have been done at all and fundamentally sucked up money that could have been used for actual productive stuff.

Another is that it incentivized companies to try for the Uber strategy of burning investor cash to become a monopolist player rather than targeting a sustainable growth plan. Low-key this has led to long term consolidation to a greater level than otherwise would have occurred.

> I think a tougher economic climate would have been better for innovation long-term.

I am convinced that the overuse of cloud computing has largely been a byproduct of the money firehose of excessive funding. If money was tighter, massively overpaying for compute and bandwidth should be less attractive.

As someone who is deeply interested about performance, efficiency and scalability, I'm hoping there is a partial industry reversal to caring about these things again.

Yep somewhere along the way we forgot that you can't become profitable on volume when marginal revenue is negative. This is first-year business undergrad stuff.

I don't think they forgot that, the general plan has been successive rounds of funding so you can say "valued at" at increasingly high values, then an IPO or a sneaky exit through secondary market share sales. Then some dummies who aren't you are left holding the bag.

Yep. That’s the worst part — all these startups and people’s time and effort are just a ploy by rich people to get richer.

It's possible to make money on them. But not if you have tens of thousands of employees.

They fail because they need to become billion dollar behemoths to support the VC funding they've gotten. But plenty (not all though) of them could be profitable if they were ran as a "lifestyle" business.

If you actually looked at the balance sheet of twitter before Elon took it over it was quite possible to make it profitable. It would have needed to cut cost and probably try and to boost its ad platform a bit more but well within the realm of possibilities.

With the debt that Elon has saddled them with I doubt they will ever be profitable again without declaring bankruptcy.

> it was quite possible to make it profitable

Without the $760M settlement, they'd have made about $270M in 2021[1].

[1] "2021 operating loss of $493 million, or an operating margin of -10%, includes a one-time litigation-related net charge of $766 million" - https://www.prnewswire.com/news-releases/twitter-announces-f...

At the absolute pinnacle of ZIRP era, there were just barely able to get into the black (ex their legal settlement). That’s not an extremely healthy business. They were going to crash in 22/23 regardless of ownership.

Crash as in what? Get delisted from the Nasdaq and go bankrupt or just have a bad bearish couple years or something? Their cashflow had pretty consistently improved since their IPO, they would've maybe had a couple bearish years, would've laid off employees like most other tech companies and most likely would have roughly followed the overall Nasdaq trajectory in the market. But that's a normal business cycle, the stock market is full of companies in much worse shape (look at Amazon for its first decade) that can survive any storm as long as their DSCR ratio isn't crazy...like Twitter's is now.

Twitter never had a health P/E (Price/earning) ratio. 270M is great on a 2B company but terrible on a +40B company.

In general yes, but Twitter was borderline profitable before Musk took over and saddled them with insurmountable debt payments and decisions alienating advertisers and users.

Twitters current issues are entirely the creation of Elon Musk.

Blue sales ultimately can't hope to come close to what big brand ads used to give.

And ironically enough, blue currently works as a crappy version of advertising thanks to the reply ranking. The promises of prioritizing "high-quality content" never came true; all we see are mid takes and, if you speak Mandarin, AI-powered sex scambots.

Well, worse for us plebs. Not sure if it's worse for the buyers.

> Blue sales ultimately can't hope to come close to what big brand ads used to give.

I don't know, I think the hope is there. With these rate limits and some Fermi estimates, we can guess what Twitter's hoped-for revenue per user might be.

Suppose that this move is designed to move regular users over to Twitter Blue, and a regular user might ordinarily see 2000 tweets per day. Suppose further that Twitter would show 1 ad per 10 tweets, and ad sells for 3$CPM on average, and a Blue user sees 33% fewer ads.

An ordinary user would then expect to give Twitter 200 ad impressions per day, at $0.60/day of ad revenue or $18. By seeing 1/3 fewer ads, that ad revenue drops to $12, but Twitter picks up $8/month in Blue subscription fees, increasing the gross revenue to $20.

That feels about right, and the math gets better in the short term for Twitter if it's having a hard time filling its ad spots — a proportionally greater share of its revenue would then come from the pushed-for Blue.

Likewise, if Twitter is having a hard time filling its advertising spots, kicking non-Blue viewers off the platform is not a short-term revenue loss: the marginal eyeball is unmonetized. In the medium to long term, of course, Twitter is strangling the very content that attracts those eyeballs, and this is still a bone-headed business decision.

We’re already well into the medium term. Content has been leaving since November, and a lot of people are already primed to exit if the site becomes unusable for more than a weekend.

Nope. Blue users aren't going to see ads at all.

Wrong, they see half the ads of regular users, and only on certain spots of the site

"Half ads: See approximately 50% fewer ads in the For You and Following timelines. As you scroll, you will see approximately twice as many organic or non-promoted Tweets placed in between promoted Tweets or ads. There may be times when there are more or fewer non-promoted Tweets between promoted Tweets. The half ads feature does not apply to promoted content elsewhere on Twitter, including but not limited to ads on profiles, ads in Tweet replies, promoted events in Explore, promoted trends, and promoted accounts to follow. Blue subscribers will have access to this feature after their account has been reviewed for eligibility and the blue checkmark has been applied."

https://help.twitter.com/en/using-twitter/twitter-blue

I think this analysis might work in a vacuum (but see sibling comments about the assumptions of how many ads are served to Blue users), but the biggest problem is the tremendous debt that the Musk takeover has saddled Twitter with. Perhaps you could run a social network sustainably at reasonable cost and profits.

Twitter has over 12 billion USD in debt though, and with rising interest rate the interest payments are going to be an absolute drag on financial performance. Those payments MUST be met, otherwise Musk will not own Twitter at all. Scaling down user numbers is unlikely to help. Even 3% interest rate on 10b is 300 million per year.

>> Suppose that this move is designed to move regular users over to Twitter Blue

I hope you don't work in marketing. Why would a non-paying user watch Twitter arbitrarily limit the number of Tweets a _paying user_ can view per day, and think "yeah, I'll pay for that".

> I hope you don't work in marketing.

Hell no, but also don't mistake me for thinking that this was a good idea.

However, particularly when I don't understand a subject well, I try to take all reasonable-sounding claims seriously at first and give them some back-of-the-envelope analysis. It seemed to me that the original claim was that Blue sales couldn't replace ads, but it seems like the numbers are close under some reasonable approximation.

I do agree that this move is likely to drive many users away from Twitter entirely, but a short-sighted company could still think that an acceptable tradeoff if they're having trouble selling all available advertising space.

Twitter replies used to occasionally have some funny content or (even more rarely) discussion.

Now the top level comments are all some variation of " lmao"

I think this is going to be known as "the Millennial subsidized lifestyle era." Not that it was exclusively used by Millennials, but it's largely what they grew up with.

AirBnb was maybe the worst of the bunch, because it has such a dramatic negative externality on housing markets. Entire areas of Barcelona have essentially no real residents because even those who didn't sell to AirBnb investors found it unlivable with drunk tourists screaming around the apartment buildings at 3 am. I stopped using AirBnb because it was making it enjoyable to visit other cities, but destroying my own. It's also a lot more expensive for fewer amenities.

Spotify hasn't made any money yet. I wonder if they're going to start charging $30/month. Time for the return of CDs, vinyl, MP3s?

Try bandcamp

How does Spotify lose money? Audio isn't nearly as big as video files. Likely they are just going to make the free tier absolutely suck.

Are they still paying exorbitantly for podcaster exclusivity?

Oh yeah, podcasts. I honestly don't know why they're so desperate on attracting people for podcasts. Podcasts are much more unprofitable compared to normal music

Probably harder to cut a good deal negotiating with the legal team of capital records vs a random podcaster.

Estimated $200M for Rogan. I mean... did that really move the needle for them? Who thought, yes, they have practically every piece of music I want to listen to, but it's the Joe Rogan thing that made me finally sign up.

The graph of subscribers shows really no change in the rate of subscribers:

https://www.statista.com/statistics/244995/number-of-paying-...

Probably just more stock-pumping ZIRP big exit nonsense.

They pay the record companies a lot of money to have their music on their platform.

Were these apps made possible with VC money, or just made monopolizable? In a different world, I could see most of these areas spawning smaller companies—on a slower timeline, sure—if VC-backed companies couldn't use massive up-front capital to suck the air out of the room. We could certainly have app-based taxis and restaurant delivery without Uber or DoorDash; hardware and bandwidth have gotten cheap enough that we could have more Vimeos and Floatplanes instead of one big YouTube; Slashdots and Diggs and HNs without Reddit... etc.

I'm hoping for a return of smaller communities and forums that were (more) common before facebook and reddit.

Absolutely, it really was pouring gasoline on fire rather than the sole cause of the ideas. All the functions they provide would have turned up but on a smaller more sustainable scale, more like the older traditional companies of the past.

They wouldn't have been able to support consumer scale without the up front capital. Otherwise they would need private betas and stuff but this would have not created the value of the same network effects and robust marketplaces.

A larger number of smaller firms each supporting the consumer scale they can sustainably and profitably support instead of selling below cost to capture the entire market then turning into hell when the bill comes due.

> we were putting everything on a credit card and not worrying about the bill that eventually had to be paid

We (consumers) didn't put anything on a CC. VCs did.

And I count that for the blessing it was. I ordered tons of subsidized food on DoorDash, cheap rides on Uber, etc.

Now that golden era is over, and I will not be ordering any more of that stuff at the now exorbitant prices.

Thank you based VCs, for comping a bunch of stuff for me the last 10 years.

Except a lot of the formers ways of doing things / getting things have been pushed out of the market with all the capital influx. So there aren’t any small stores anymore, small restaurants don’t do delivery anymore, etc etc.

Small restaurants doing delivery doesn’t make sense as an example.

The only structures that were torn down were things that required capital and upkeep. So for example, once you starve the beast of the taxi industry, then the fleet decays and they can’t compete without new capital investment.

For a small restaurant delivery, they can at any point hire another person to run orders just as they always could, with no loss. The reason this is not viable is because the whole economy got disrupted by covid and now it’s not actually feasible for someone to earn a living just moving parcels of food around locally. Like literally the unit economics don’t resolve positively because CA minimum wage is $15 an hour and you need even more than that to have a decent life.

Are you living in the same world as me? When I go into town there's a ton of small shops. Small restaurants are absolutely everywhere, either to eat in or to get delivery from using one of several delivery apps. I cannot relate to your comment at all.

Thank you, Boomer pension fund managers, for giving nonboomers like me some of that pension fund money!

Uber and doordash yes, they operate a physical business with large costs per customer transaction. Twitter and reddit? No, I disagree. Those businesses should be relatively cheap to host (compared to ad revenue) with focused management and engineering. The only thing about them that could cost a lot is moderation, and twitter should have followed reddit’s lead to leave that to a volunteer brigade. If twitter and reddit lost money, it is because they were not being run efficiently, and they weren’t being run efficiently because the way to show investors they were creating value is launching a bunch of hyped but mostly pointless features and by having a high burn rate.

New reddit launched 5 years ago, and many people still prefer using old reddit. Twitter also did not add any feature in the past 5 years the majority of its users cared about losing. If most of your users are fine with giving up everything you’ve built in the past 5 years, and you have a large staff of engineers, then you’ve not been running the business effectively.

With all of these companies outspending their revenue by so much, cash getting 5% more expensive or so seems like a drop in the bucket.