The Perils of Monetizing Free Sites – Reddit Convinces Users to Go Gold

reddit goldWhen a service starts out free, then tries to monetize, you can pretty much count on a negative reaction from the user base. It’s an incredibly delicate tightrope to walk. A company needs to make money, but it can’t push to fast lest it turn off its fans. Companies like Facebook and Twitter have been dealing with their evolving markets for years now, but neither has entirely locked their solutions for making money. Traditionally, the first steps towards monetization usually involve serving ads off to the side, and then incorporating ads into the content people interact with. Recently Instagram announced it too would start serving ads into users photo timelines. Responses for the most part were less than positive.

This makes Reddit’s latest turn really interesting. Sure Reddit serves ads in a sidebar, and the top position post is usually a sponsored post, but according to a recent Q&A session, Reddit still found itself often in the red. This galvanized the Reddit faithful, and the site saw an explosion in its premium service subscriptions.

Dubbed ‘Reddit Gold’, it’s a monthly or yearly subscription which unlocks premium content filtering, and provides discounts and extras at a number of partner sites including iFixIt, UPS, and car service Uber. To encourage community participation, users can also gift Gold to other members to reward interactions on the site. It’s an interesting way to push more money through a service without resorting to more aggressive advertising or trafficking in user data.

Well Reddit noticed the increased Gold sales, and now they’re communicating more with their users. Now on their sidebar is a daily Gold goal. Reddit is already somewhat addictive, as there’s a gamification element to submitting news stories. People vote on good stories and users get points to show how effective their participation has been. Now, users can see daily if there are enough Gold sales to help keep Reddit in the black. As the program is fairly new, and a direct response to the Reddit community’s activity, users have been extremely active in buying and gifting gold, easily besting the daily goal.

And that’s all cash in Reddit’s coffers.

(via Reddit Blog)

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