The Reddit Crisis & Why Community Startups Are Different

Typically these Saturday deep dives are about a question that a subscriber asks me — now the news. But, right now Reddit is at legitimate risk of making an irreversible mistake and losing user trust forever.

I’ve built a venture-backed community company, and have seen crisis situations first-hand. So, excuse the switch from our normal deep dives while I break down:

• What happened so far

• Why Reddit’s in this situation

• Where things will likely go from here

The Fall of Reddit?

What Happened TLDR

Despite somewhat ominously announcing in April that changes to their previously free API’s pricing were coming, Reddit never got to roll them out on their terms.

Instead, 8 days ago, the founder of the popular third-party Reddit client Apollo revealed the new pricing in a lengthy post announcing he was shutting the service down due to it.

The new pricing meant Apollo would have owed $2 million per month and didn’t see a path to generating that much additional revenue so quickly, so they announced the shut down.

Once the cat was out of the bag, chaos broke loose.

First, many previously-public subreddits were taken private by their moderators (and many still are).

Reddit’s co-founder and current CEO, Steve Huffman, responded by going on a press tour “lashing out” (TechCrunch’s words, not mine) at the moderators, which caused many of them to vow to keep their communities private indefinitely.

Huffman’s response has been to continue the press tour, defending the changes as a strategic decision to combat AI companies from freely using data on Reddit to train LLMs.

Why Is This Happening?

Let’s acknowledge the big mistake Reddit made:

They didn’t control the narrative at the start.

When the founder of Apollo shared the new pricing structure, in a post he wrote and filled with his perspective on the situation, Reddit instantly lost control of what I’m sure they knew would be a delicate situation.

Once that happened, Huffman fell into a trap that happens when startups (or even bigger companies, like Reddit arguably is now even though they aren’t public) enter a crisis situation:

He’s listening to the voices around him, not his users.

It sounds odd but, in a crisis, founders have everyone trying to tell them what to do — not the other way around. The hardest part of managing a crisis is keeping hold of your mental sovereignty as the leader of the company.

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