I’m reasonably certain it’s because venture capitalists are tightening their grip and demanding to see return on their investments now that interest rates are up. That’s why it’s all at the same time, because the same VCs invested in all of the big tech companies, and are demaninding all of them at once pay up.
The problem is that the way our economy works is fundamentally incompatible with the way most people want the internet to work. Most people want the internet to be full of free websites they can access whenever they want, with minimal advertisement.
But our economy requires companies make money. The people who own and work at those companies need money to pay their bills. And the easiest way for companies in the late 2000s and early 2010s to get the money they needed to run long-term was to get money given to them by venture capitalists. It was either that, or change to a subscription model, and they rightly assumed that most of their users wouldn’t be willing to pay for Facebook, or Twitter, or Google. So they took loans from venture capitalists, and the VCs were happy to give them out with the promise of future returns.
Interest rates were low for the last decade, so it was easy for these big tech companies to pay their VC daddies and also make enough money to keep the lights on and make a little profit. But the pandemic caused interest rates to finally increase (they should have a long time ago) and now those VC daddies need more money to stay happy, and all of these companies at once need to produce it. Suddenly, the fact that none of them are actually profitable is a serious issue.
Online services like YouTube or Reddit basically have 3 ways to make money. They can charge a subscription, they can have advertisers pay them for space, and they can sell user data. Right now there is an insane glut of user data, so option 3 makes the least money because there’s too much supply. These services do offer subscriptions, but they have been free for over a decade- they know that users will leave en masse if they demand they all subscribe for monthly payments. Companies like Netflix and Hulu started as subscription services, so increasing their prices stings less than implementing them in the first place.
For reddit and YouTube, that really leaves advertisement as the main revenue stream, and that requires a LOT of advertisement. Advertisers used to get 2-4 minute ad breaks on cable television that they could strictly control- they want to be able to control where their ads appear now, too, and also want longer slots. But users are used to short ads. Immediately adding 2 minute ad breaks for every 8-10 minutes of content will also make users leave in droves. So they have to maximize advertisement revenue without increasing the length or frequency of ads too dramatically.
Tl;Dr venture capitalist daddies are demanding to get paid and none of these companies are actually profitable enough to do it.
I’m reasonably certain it’s because venture capitalists are tightening their grip and demanding to see return on their investments now that interest rates are up. That’s why it’s all at the same time, because the same VCs invested in all of the big tech companies, and are demaninding all of them at once pay up.
The problem is that the way our economy works is fundamentally incompatible with the way most people want the internet to work. Most people want the internet to be full of free websites they can access whenever they want, with minimal advertisement.
But our economy requires companies make money. The people who own and work at those companies need money to pay their bills. And the easiest way for companies in the late 2000s and early 2010s to get the money they needed to run long-term was to get money given to them by venture capitalists. It was either that, or change to a subscription model, and they rightly assumed that most of their users wouldn’t be willing to pay for Facebook, or Twitter, or Google. So they took loans from venture capitalists, and the VCs were happy to give them out with the promise of future returns.
Interest rates were low for the last decade, so it was easy for these big tech companies to pay their VC daddies and also make enough money to keep the lights on and make a little profit. But the pandemic caused interest rates to finally increase (they should have a long time ago) and now those VC daddies need more money to stay happy, and all of these companies at once need to produce it. Suddenly, the fact that none of them are actually profitable is a serious issue.
Online services like YouTube or Reddit basically have 3 ways to make money. They can charge a subscription, they can have advertisers pay them for space, and they can sell user data. Right now there is an insane glut of user data, so option 3 makes the least money because there’s too much supply. These services do offer subscriptions, but they have been free for over a decade- they know that users will leave en masse if they demand they all subscribe for monthly payments. Companies like Netflix and Hulu started as subscription services, so increasing their prices stings less than implementing them in the first place.
For reddit and YouTube, that really leaves advertisement as the main revenue stream, and that requires a LOT of advertisement. Advertisers used to get 2-4 minute ad breaks on cable television that they could strictly control- they want to be able to control where their ads appear now, too, and also want longer slots. But users are used to short ads. Immediately adding 2 minute ad breaks for every 8-10 minutes of content will also make users leave in droves. So they have to maximize advertisement revenue without increasing the length or frequency of ads too dramatically.
Tl;Dr venture capitalist daddies are demanding to get paid and none of these companies are actually profitable enough to do it.