Exactly one year ago Reddit launched a subscription revenue stream called “Reddit Gold”. You can pay $3.99/mo for extra features and a special trophy next to your username.
Some Background
Reddit is a thriving community site where users can vote up (and vote down) news articles, images, and videos. The homepage consists of the top links found around the web that is changing constantly based on users votes.
Reddit was struggling a year ago
They were one of the biggest sites on the internet (top 500) and they weren’t able to keep their site up – they needed cash for servers and engineering talent badly!
Reddit Gold was Born
Instead of blasting their users with take-over advertisements they charged their community money (a la Reddit Gold) for extra perks on the site! This turned out to be a major success by bringing in much needed cash.
Here is a great quote from one of the Reddit team members:
Today we know that the reddit gold program turned out to be a huge success. We used the cash infusion to buy a raft of new servers, which (by great, dumb luck) came online just in time for the Digg implosion. The new capacity allowed us to ride this tidal wave instead of getting crushed by it. – Raldi
Checkout their explanation of why you should subscribe to Reddit Gold:
What do I get for joining?
We plan to continually add features over time. Right now we’re offering:
- A trophy on your userpage
- The ability to turn off sidebar ads, sponsored links, both, or neither
- The option of seeing twice as many comments at once without having to click “load more comments”
- New comment highlighting: see what’s been posted since the last time you visited a thread
- Friends with Benefits™ — you can add notes to your friends to help you keep track of them all
- Access to a super-secret members-only community that may or may not exist
- A thank-you note
Notice how it’s nothing fancy just a few extra feature additions.
Proof: Don’t Be Afraid to Charge
If your users love your site, a very small fraction of them will pay you and it might turn out to be much more significant than your advertising revenue.
What do you think of this move? Do you know of any community based sites that should launch a subscription option? Please let me know in the comments below.
I think MySpace should have done this. They could have been iTunes + Ping on steroids.
1. Sell music and take a cut
2. Charge bands a subscription to sell music and pimp their page
3. Charge fans a subscription for exclusive access
Hey Steve. Myspace should definitely have tried out something with subscriptions.
Launching a business in music isn’t as cut and dry as what Reddit did. You have to pay a ton of royalties. So I’m not sure it would have worked out for them if they went the music angle.
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See http://gigaom.com/2007/04/02/hot-or-not-goes-free/ for Hot or Not abandoning the subscriptions. And then abandoning the free model. http://techcrunch.com/2007/09/18/hot-or-not-abandons-free-model/
Interesting.
JAW – What an awesome article proving that subscriptions are the way to go! Thanks for linking to the article.
Thinking about HotOrNot is bringing back a lot of dorm college memories.
Awesome post! What I love about Reddit’s ‘Reddit Gold’ success is that instead of limiting the features that made Reddit successful, they heaped even more awesome on top of an already successful site. Instead of forcing new members to sign up for the site their friends were talking about, they made it an even better experience for their community.
Great example of getting more awesome!
Yeah! one of the coolest features was being able to gift other members “Reddit Gold” – so if someone had interesting comment or great post you could easily gift them.
Or… you can not pay and get AdBlock? FTW!
Alex – you are missing the point. A large majority of their users don’t pay (and probably use AdBlock). However, that small fraction that does pay makes a HUGE part of their overall revenue.
Do you have any Reddit stats? I think what you’re alluding to in this post is the “Freemium” model in quality sites, where <10% of users account for almost all the revenue (ie, Zynga, Skype, New York Times, Wall Street Journal, and most likely Reddit). The public still sees ads in some of these sites but you can pay to remove them.
Hi Alex – I don’t have any Reddit stats, unfortunately. Do you think most Reddit Gold members subscribed to remove ads or for the other features?
I love this move. Continuity income is awesome. And the $3.99/m price point is interesting. I bet people stay on forever.
I dare say… EVERY community site should test a paid model on top. Why not?
Generally speaking, whenever you’re selling something, a decent percentage of customers (sometimes as many as 30%) will opt for a “premium” version (e.g. an upsell). Since members of a free community site (or a blog) aren’t buying anything, I imagine the upsell/ascension numbers would be lower, but still it adds up… especially when it’s continuity income.
You can decrease some risk by surveying your members ahead of time (or your email list, or your blog following, etc) to see what they’d be most interested in and at what price points.
However, you can’t take surveys as gospel, because what really matters is what people do (e.g. what they’ll buy, not what they say they’d buy). I’ve run surveys where people said they’d only pay $X but split-testing showed they’d really pay $XX. I’ve also run surveys where people said they were interested in something, but then the launch bombed. So you just have to test it.
What’s the worst thing that happens? The test flops? No big deal. Totally worth testing.
Pete
Pete – I really like what you said about surveys and how they sometimes throw you off. I fell into this trap a few years back. I surveyed all Flying Cart customers 4 years back when we were all free (no paid packages) and almost all customers said they would leave. The result was 80 upgrades! Which kept the business alive – we were almost out of money at that point.
Would you advise most of your clients to A|B test first and completely avoid the survey route?
Really awesome comment by the way! Thanks.
Hmm… Great question.
I think it’s money/price part of the survey (would you pay, how much) that’s most likely to be unreliable. But I’d recommend running a survey that asks open-ended questions to get insights into what features people might be interested in.
Then, when you’re introducing the new product to your customers/prospects, you make the product development and pre-launch process into a dialog, where you basically say “Here’s what you asked for, and I’ve created it for you!” And they may be more likely to sign up because of the consistency/commitment principle.
Plus, if you have that dialog in more of an open forum, you may get some social proof working in your favor. For example, you could post the survey results on your blog and you’ll hopefully get customers/prospects posting comments about how excited they are for the new features, etc.
But you’re totally right – what matters most is the test.
Pete
Pete – Thanks for explaining that out.
In summary:
Survey for Features to Launch
A|B Test for Pricing changes
I wonder if Netflix did this with their latest price changes.
Comic: http://fc01.deviantart.net/fs71/f/2011/201/0/2/netflix_problems_by_findchaos-d412xl3.png
I also think that charging a small fee for “upgrades” on community based websites is a way to support a product / platform you really love. How else would you be able to donate / financially support Reddit if not through this avenue? Plus, I wouldn’t feel like as much of a mooch for using their product…