Ellen Pao Quits, and Reddit Stays the Course
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Ellen Pao Quits, and Reddit Stays the Course

How much larger does the site need to be in order to work?
July 11, 2015, 12:14am

Perennially besieged Reddit interim CEO Ellen Pao resigned today after massive uproar from the site's users over her leadership and general existence. But while she sounds relieved, her resignation and the user response to it signals just how much control the site's two most powerful factions—the unpaid moderators that make the site work, and the incredibly vocal outrage machine that influence its politics—have.

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The end result seems simple: Should there be a showdown between the site's mods and leadership when Reddit makes stronger moves towards building its business, a showdown that's virtually guaranteed if history is any indicator, the site's leadership won't have the advantage.

Reddit needs to figure out how to make money because one day investors everywhere are going to wake up and realize that having lots of users doesn't make a viable business plan, especially on a site whose users are so unabashedly, vocally vitriolic towards the idea. But so far, that's not happened: In 2013, at 70 million monthly users, the site lost money; in 2014, at 114 million monthly users, the situation hadn't changed.

As the NYT's Mike Isaac noted then, Pao was hired specifically to develop a business strategy for the massive site. Following the departure of CEO Yishan Wong (and the company's slow, confused response to The Fappening and the resulting uproar), Pao stepped up as chief. The intent was obvious: She'd take a site that made just $8.3 million in ad revenue last year (10 percent of which it donated), and actually take advantage of some of its potential.

As a step towards that, Pao made one of the most obvious moves in the history of obvious moves: Announce a new harassment policy consistent with the banning of some notably shitty subreddits.

The best description of Reddit ever was written by Metafilter's Andy BaioJuly 10, 2015

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It was a very simple and reasonable step towards making the site more usable for new users, who face a minefield of addictive pap, wonderful commentary, and outright filth everywhere they browse. It also was a gesture towards making the site more palatable to advertisers, who would rather not have the carefully-curated mystique of their razor or shampoo brand associated with a site that can go from zero to racist faster than a Ferrari. (Full disclosure: A couple years ago Motherboard tried marketing a couple of our videos through one of Reddit's marketing tools, and it wasn't very successful.)

I can't claim to know enough of Reddit's internal working to know how competent of a CEO Pao was, but it's immaterial because the perception of Reddit carries far more weight than the reality.

On one hand, Pao was setting Reddit down the path to becoming something more than a clubhouse home to a disproportionate amount of vicious, self-righteous and entitled users, which is necessary for it to ever become as successful of a business as is expected of a site that's run for years on the promise of having 100+ million monthly visitors. (163.9 million, at last count.)

On the other, the company's ability to take its massive free labor force of moderators for granted is either due to arrogance or ignorance, but either way it's not sustainable. The site's mods have outsized power over the site, and know it. The very ugly and very public exit of Pao only reaffirms that power. In simple terms, the Reddit leadership have even less control over their site now.

How much larger does the site need to be in order to work?

The mods are the site, at least as long as the site remains in a growth phase. Mods have more control over growing that 163 million uniques than any single person who's actually on the Reddit payroll, and the Reddit leadership does not seem willing to change that, or even take further steps towards becoming respectable, such as banning racist shitholes on the site.

Reddit can't expect to stroll down its same path and one day end up in Viability Land, but perhaps it does. Its leadership's bizarre hands-off policy when it comes to dealing with problems early, as well as its apparent willingness to throw its CEOs under the bus—it seems the firing of Victoria Taylor, which set off the latest shitstorm, was due to co-founder Alexis Ohanian's decisions, despite Pao apparently receiving death threats for it; Wong blamed outright exhaustion for leaving the company, which was less due to the stress of running a business with no immediate target for profitability and more due to The Fappening chaos and a disagreement over finding a new office—suggests the site's board is terrified of tinkering with the recipe that's gotten them this far. (Which, again, is an enormous website that is losing respect from the outside and control of its most powerful users internally.)

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It's telling that, speaking of Reddit's focus on growth, Pao told Recode's Kara Swisher that Reddit's board "had a more aggressive view than I did." New CEO Steve Huffman, a Reddit co-founder and original CEO, told Swisher that becoming a viable business "not a huge priority, enabling Reddit to grow is." How much larger does the site need to be in order to work?

A site or app remaining committed to user growth is often just Internet Business Speak for "we hope we get acquired before we figure out how to make money." And for a small startup, that's probably fair. But that rings markedly hollow for a site that's 10 years old, has 163 million users; one that's already been acquired by Condé Nast; spun off as its own subsidiary of Advance, which also owns Condé Nast; and then spun off again as its own entity in the hopes of figuring its business out.

Reddit has yet to do that, and upon his return, its CEO says there are no plans to do so. Its latest $50 million round should give it plenty of leeway to do so, but the site's going to have to make a move eventually. At this point, Reddit has reaffirmed again the truism about the customer always being right. The only problem is that, instead of creating a product that those customers can buy, Reddit needs to figure out how to convince users to keep creating products for free—or imaginary internet points, at least—so it can one day try to sell those products right back to them.

Instead of acknowledging that and ripping off a bandaid made of hate—sure, losing some users to alleged "censorship" on a privately-owned forum would hurt in the near term, but would be valuable in the long, and only gets more painful to do as the site grows—the site has just lost another CEO and a lot of ground in the coming power struggle for control of the soul of the site.

And that ground is significant. There's no doubt that when that struggle happens, which will likely come whenever the site actually gets pressure to become a business, the mods will either win or leave. Whether Reddit can survive that change is its most existential question, but right now it's just the same as ever.