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Here is how platforms die: first, they are good to their users; then they abuse their users to make things better for their business customers; finally, they abuse those business customers to claw back all the value for themselves. Then, they die.
from Cory Doctorow's article on 'enshittification', which has become mandatory reading.
Just to add, the concept of a bait and switch, where you lure a party in with something and then swap it out once they are committed, is not a new idea in the slightest. This is just a modernized, refined tech version.
Uber and Lyft are good examples. Drive out most of the competition with an aggressive early phase where you spend most of your capital to shore up a massively negative balance sheet. You are baiting the customers to you with very low prices.
Then once the competition is eliminated, you raise your prices on the captive consumers that rely on the service to recoup your costs and start making money.
If you, in a video game, have ever lured something in with ranged attacks and then switched to melee to kill it, by plan, you executed this same strategy.
Every single discounted trial period for a subscription is employing a riff on the same concept, where they hope you're too lazy to cancel.
Fools been falling for the bait and switch since ... oh dawn of civilization maybe? Awareness of it defeats it, people don't take bait when they know it's bait. It is not complicated though, and does not require complex understanding to grasp.
IIRC, it's in the article, but what makes enshitification so prevalent in tech is that it mostly involves networks, wherein part of the value of using the application comes from the presence and concentration of other users and providers on it (network effect). Even Amazon, Netflix, and Uber, are subject to that effect because they capture providers, not just users you will interact with. It's a somewhat uniq trait that really exacerbates the problem. This trend will probably continue untill interoperability is legislated.
Your metaphor reminded me of killing vampires in Skyrim and it made me smile as I also feel a deep sorrow from the fact all major companies now are racing to the bottom while leaving their skidmarks on everything I used to love.
This can't be true, Reddit said they cared about community /s
That was a good read, the thing is that it seems that all of a sudden a lot of tech companies are getting more and more anti-consumer. I mean it’s not only the whole Reddit and Twitter thing, now Youtube is getting more aggressive with adblocking, Stackoverflow and their mod protest, Google dropping support for the open source diaper and messaging apps on Android…
Many companies are getting more aggressive against their customers, and in the end it feels like the internet as it used to be is really dying, and we might end up with the whole “dead internet theory” becoming reality. I don’t know it just feels very depressing.
If you haven't already, I suggest reading Stop Talking to Each Other and Start Buying Things: Three Decades of Survival in the Desert of Social Media, a blog post by Catherynne M. Valent. (It's actually referenced in the article above.)
It's long, funny, and angry and damn, did it strike a chord with me. It was written in December, '22 so pre-Reddit meltdown but still very relevant to it.
Some highlights include:
Stop talking to each other and start buying things. Stop providing content for free and start paying us for the privilege. Stop shining sunlight on horrors and start advocating for more of them. Stop making communities and start weaponizing misinformation to benefit your betters... It’s the same. It’s always been the same. Stop benefitting from the internet, it’s not for you to enjoy, it’s for us to use to extract money from you. Stop finding beauty and connection in the world, loneliness is more profitable and easier to control.
Over and over again ... I’ve joined online communities, found so much to love there, made friends and created unique spaces that truly felt special, felt like places worth protecting. And they’ve all, eventually, died. For the same reasons and through the same means, though machinations came from a parade of different bad actors. It never really mattered who exactly killed and ate these little worlds. The details. It’s all the same cycle, the same beasts, the same dark hungers.
All ... gone. Dismantled for parts and sold off with zero understanding that the only thing of any value the site ever offered was the community, its content, its connection, its possibilities, its knowledge. And that can’t be sold with the office space and the codebase. These sites exist because of what we do there. But at any moment they can be sold out from under us, to no benefit or profit to the workers—yes, workers, goddammit—who built it into something other than a dot com address and a dusty login screen, yet to the great benefit and profit of those who, more often than not, use the money to make it more difficult for people to connect to and accept each other positively in the future.
It does end on a hopeful note, though.
Don’t ever stop talking to each other. It’s what the internet is really and truly for. Talk to each other and listen to each other. But don’t ever stop connecting. Be a prodigy of the new world. Stand up for the truth no matter how often they take our voices away and try to replace the idea of reality with fucking insane Lovecraftian shit. Don’t give up, don’t let them have this world.
Don’t get cynical. Don’t lose joy. Be us. Because us is what keeps the light on when the night comes closing in. Us doesn’t have a web address. We are wherever we gather. Mastodon, Substack, Patreon, Dreamwidth, AO3, Tumblr, Discord, even the ruins of Twitter, even Facebook and Instagram and Tiktok, god help us all. Even Diaryland.
It doesn’t matter. They’re just names. It doesn’t matter who owns them. Because we own ourselves and our words and the minute the jackals arrive is the same minute we put down the first new chairs in the next oasis. We make our place when we’re together. We make our magic when we connect, typing hands to typing hands.
Hello, world. Come in from the cold. This will be a good place. For awhile. And then we’ll make another one.
Stop buying things and start talking to each other. They’ve always known that was how they lose.
Interest rates. Money isn't free anymore. It's still not super expensive but it's 5x more expensive than what it used to be since 2008.
This is the answer. The age of free money is over and now we are seeing the effect; rampant inflation and high interest rates. The chickens come home to roost, always.
As a result, the burn rate and runway is starting to be factors in all businesses that aren’t making a profit.
2022-'23 really has been the year of enshitification
But I think it all started with Tumblr
A few companies open the floodgates and takes a lot of the blame, flak, and focus (see: Netflix, Twitter). Other companies can seize the moment and ride the wave to potentially increase profits with less blowback than they might otherwise receive.
I had just copied the link to post this.
Read this for an actual answer.
Capitalism. Monetise everything no matter the cost to the users
To expand on this, it's not just capitalism - it's greed.
Potato potato
Capitalism. The incentive for any large, profit-motivated firm will always be to get the most people to pay as much as possible for as little as possible.
A tale as old as time
In the tech world I've heard it called enshitification. Basically what you layed out but with a little nuanced difference.
The growth of online advertising revenue slowed in 2022 for the first time since 2009.It still grew, just slower.
Interest rates went up.
With the collapse of crypto and Silicon Valley Bank (which was overleveraged in crypto), VC money isn't as free flowing. There really wasn't that much institutional money in crypto, but it's still a destablizing force and has had a ripple effect.
AI is making more people aware of bots. This is related to point #1. A huge, unknown percentage of of FAANG revenue is selling online ads to bots instead of real eyeballs and once the word gets out, ad revenue will slow even more for any service depending on online ads (eg reddit).
Enshittification and the raising of interest rates.
The interest rate hike in the USA by the federal government caused this. The companies can't borrow money for nearly free any more. All the entities who would have been offering these loans are now able to buy government bonds with a much more guaranteed return on investment. This means the corporations must squeeze more profit out of their products to pay back loans. There are an enormous amount of large money transactions like this used to run a large business. They do not operate on cash reserves all the time. They have assets and are always evolving to stay relevant. Most businesses have enormous asset holdings but limited liquidity.
This best answers the OPs question. We know why it happens in general, but this is why everything is doing it in overdrive right now.
I also think Spez is trying to rush into an IPO before the bottom truly drops out and the company folds.
Probably enshitification!
Look it up.
Dr. Capitalism, or How I listened to stop worrying and love the dollar.
Regarding Twitter, Elon seems to like trial and error, right? That's how SpaceX developed their rockets - by trying new things and testing them frequently, to see if they work.
So with Twitter I think he's just trying to see what he can get away with. And if he can't get away with something then he'll just roll it back.
As for Reddit, I guess they saw Twitter trying to squeeze more money from their platform and thought "let's try that too".
Twitter had experimented and had a fair system in place through previous trial and error. Elon thought it wasn't good enough and then ran into the wall face-first thinking he was smarter than the average guy. Spoiler: he wasn't.
In short: money.
Long story is that a lot of these tech companies started as startups funded by VCs.
Borrowing money was cheap so they got dumped buckets of money onto them to burn in an effort to try to get a foothold and/or kill off competition by undercutting them.
Now that they've gained a foothold and in some cases have a near monopoly or duopoly and now that borrowing money isn't cheap anymore, they need to start cutting cost if not outright turn a profit.
And so the enshittification begins.
Specifically for Twitter, Musk needs to cut cost because he bought Twitter at a severe premium and has made it less valuable by the minute ever since he took over. This to the point that he is leaving bills unpaid.
Specifically for Reddit, they've burned through all that VC money and have been eying a juicy exit in the form of an IPO. An IPO would be a payday for everyone who initially invested into Reddit because now they can sell their shares for more than what they invested (or at least that's their hope). In order to get a good price once they go public they want to cut cost and increase revenue to seem as valuable as possible.
Specifically for YouTube, the ad game has been generating less and less revenue over time and advertisers have been burned in the past by having their ads placed next to objectionable content.
So the knee-jerk reaction is to severely tighten the rules for content, lest they be demonetized.
This however made creators realize that their livelihood in the form of the pittance that's called AdSense payout is very fragile, so they started moving to doing sponsorships, soliciting Patreon donations and partnering with Nebula.
Now YouTube is missing out on those revenue streams and often ad revenue as well as creators often turn off ads on their video when they have sponsor deals etc. So what does YouTube do? They started monetizing videos of creators who are not eligible for their partner program (i.e. place ads on videos and not share it with creators) and not give those creators the option to turn off ads, they started severely increasing the amount of ads on videos that do run ads, they started severely pushing YouTube Premium and now they're cracking down on adblockers.
Twitter had experimented and had a fair system in place through previous trial and error. Elon thought it wasn't good enough and then ran into the wall face-first thinking he was smarter than the average guy. Spoiler: he wasn't.
Check out Cory Doctorow's post on a term he coined called enshittification. Good primer to some of the same patterns we are seeing.
They want money. Capitalism strives to constantly grow.
When a company goes public it becomes something that needs to “appeal to the public”. It’s like when a movie wants to appeal to everyone. By doing so it ends up appealing to no one in particular and it’s a successful meh movie.
Going public then you have a committee of board members making decisions. And who’s going to be on a board? Bunch of rich people who only care about making it the best company for the public. Effectively ditching everything that makes a company risky or unique.
Going public can also be good cos you’ll have public money to invest in new and better tech or systems or acquisitions. So the future they have in mind seem to not include a lot of us. It’s a direction that’ll strip anything unique about reddit and become a successful meh platform
It's a more direct path: going public means they want money. Money, profit, and as much as they can get. That means ads, subscriptions, ads, tracking, ads, data gathering, ads, and the best: get back to work you unpaid ~~peasants~~ mods.
As always, $$$
Can't fight the class war if they have us either fighting the culture war, or not talking to each other intelligently.
The tech markets have tightened.
To take Reddit’s case: so far, they could raise money at increasing valuation, and that’s how they’d fund their operations without having to have solid monetization. Now that all valuations are down including theirs, they can’t raise anything anymore, leaving them with four (non-exclusive) choices: running out of money soon and closing shop, exiting as fast as possible to get capital injection that way, letting go of most of their staff quickly in order to get leaner, or finding aggressive ways to monetize shortly.
I think Reddit’s monetization situation was grim enough that they’re making precipitated moves towards all the last 3 options, in order not to pick option 1 and die soon. For having been a part of it, a startup looking to exit will choose some very specific metrics that they’re choosing to market their exit on, and then they’ll make all their subsequent moves based on ruthlessly optimizing for those metrics alone. Since those metrics can be way different from the ones the company was using to raise money so far, that by itself can turn a company’s ethos on its head.
I think that’s what we’re seeing across the board in tech companies; except Twitter, which was a rare case of being driven by political calendar, and one person’s political goals. The acquisition agreement was signed just before the markets tightened, and in fact, Musk tried hard to wiggle himself out of it when the market started tightening, because that kind of wasteful ownership doesn’t make sense in the new climate. But this is really specific, and I believe the timing is a coincidence; unlike all the other ones.
These are old era internet companies from when it was considered fiscally fine to be unprofitable as long as you were growing. Those days of the internet are over and the last few companies clinging to that model now have to plan their shift toward either profitability or being sold off for parts.
They are trying to squeeze as much money out of their platforms as possible, regardless of the fact that it's at the expense of users and will downgrade users experiences.
Honestly they do it so consistently that i'm starting to wonder if they have a choice.
A common way to do things for tech startups is that they get venture capital funds, use them to run the business at a loss hoping to acquire market dominance, and then use market dominance to turn a profit. I think a lot of tech startups that we know are currently in phase 2, meaning they've thrown money out the window for years and are now trying to recoup their investments.
Also, Reddit wants to go public and Twitter already is. This is relevant because investors are animals, all they see is short-term profit, and they use their voting power to make the company behave that way.
There's a common thread between both my theories: it's shareholder capitalism. I say this as a lifelong shareholder myself, shareholders ruin everything.
The user bubble has popped now that investors started questioning why the fuck they’ve been investing huge amounts of money into companies that make no money just because they have lots of users. With that investment money drying up, these tech companies are desperate to start making a profit so they can survive and grow their value still.
TLDR: investment in unprofitable tech companies is drying up and companies that aren’t profitable are scrambling to make money.
Inflation , and late stage capitalism.
My idea is that they didn't/don't havse a choice but to try something.
They are probably running out of money and no one is giving it to them in this econimical climate.
Maybe profitability, or at least drastic measures, is the request by investors (similary how IMF is "blackmailing" countries when they give them loan).
It might also be an experiment, planned or accidental to male profit of social networks after 20 years of investing.
It is a gamble, but cut has to be made at some point.
Both Reddit and Twitter are losing a lot money. They want to squeeze their users for profit.
The companies want to make more money, and they have (what they think) a captive audience that will put up with the increase in costs. Pull off the bandaid all at once to maximize the probability that everyone will shrug and take it.
Because they realize they can get away with pretty much anything.