STEEM is a Reddit-esque social media platform. What is Reddit's problem?
http://www.recode.net/2014/3/3/11624114/still-in-the-red-reddit-to-donate-one-tenth-of-ad-revenue-to-charity
Reddit's problem is that even with a massive userbase their costs are too high and their revenues are too low.
After ten years Reddit is still a loss making business model despite being the 14th most visited site in the US & 36th in the world in 2015. https://en.wikipedia.org/wiki/Reddit
As of 2015, Reddit had 542 million monthly visitors (234 million unique users), ranking 14th most visited web-site in US and 36th in the world.[6] Across 2015, Reddit saw 82.54 billion pageviews, 73.15 million submissions, 725.85 million comments, and 6.89 billion upvotes from its users.[7]
So for STEEM to be an improvement on a Reddit-esque platform they would have to find a way to drastically increase the revenue and/or reduce the costs of that business model. STEEM have done the opposite...
Reddit hypothesized that its platform would be improved if everyone who contributed to reddit.com by posting stories, adding comments or voting were rewarded with a fair share in Reddit, Inc1. Steem aims to support social media and online communities by returning much of its value to the people who provide valuable contributions
By paying users for popular content and even for comments/voting they've drastically increased the costs of that business model. Reddit earned <$10 million in 2014, which wasn't even enough to cover expenses. (Crunch some numbers using the wiki to see why it's not worthwhile paying for content on this type of platform and/or how much you'd have to increase revenue by to justify it.)
STEEM also reduces potential revenue per user as their initial user-base will be even less likely to give up personal info, allow targeted advertising or the censoring of board content to make it more advertiser friendly & I won't even go into the differences in the PR approaches.
In practical terms this means STEEM's burn rate (monthly expenses) will presumably be extremely high (paying to acquire users and for their content) but it will achieve no/low revenue and no meaningful longer term valuation from serious investors because the potential value per user, is if anything likely negative, so it will likely run into financial issues very rapidly.
(It also deliberately went against all the crypto-currency community's cultural regulations, which is fine, but means as a result it's unlikely to be popular/adopted as a crypto-currency in it's own right.)
This is just a personal opinon, feel free to disagree and or make counter arguments especially those more familiar with the business model and future plans but I don't see a Steem merger being an issue as I don't see it being around for long.
(Other than keeping an inflated value for long enough to justify a high percentage stake in some sort of merger I can't see the point.)
I wonder why Reddit doesn't have more advertising. Are they afraid of a negative reaction? That place has almost no ads. I guess maybe there are some in the far right column ?
In general though Steem should be able to run far cheaper than reddit. Although if it scaled up who knows, but it will never have administrative/management staff overhead. Only the cost of machines.
I just can't see the 'get paid to post' working in the longrun or being sustainable. Also, having large stakeholders be able to up/downvote will be distasteful to a lot of people.
Then there are all the other games being played with vesting and so on so it'll "go to the moon".
Yes Reddit historically hasn't had more advertising and censorship due to fear of negative user reaction.
A well known case study was apparently Digg, a Reddit predecessor which went from a $200 million valuation in 2008 to being sold in 2012 for $500 000 after a negative reaction to an advertiser friendly redesign and censorship.
https://en.wikipedia.org/wiki/DiggProtesting at the removal of the upcoming news page, the default setting of "My News", deleted favourites, the apparent front page domination of a handful of publishers, and the removal of the "bury" button (for voting down stories), Digg users flooded the front page with links to rival aggregators and pleaded with chief executive Kevin Rose to turn back the clock.
https://www.theguardian.com/technology/pda/2010/aug/31/digg-redesign-revoltSince 2015 Reddit has introduced a lot more censorship to make their site more advertiser friendly, more prominent advertising and a much larger advertising team but this has resulted in negative reactions that have driven traffic to competitors.
https://en.wikipedia.org/wiki/VoatIn February, 2015, following accusations of censorship on Reddit, a surge of Reddit users created accounts on Voat.[18]
In early June, 2015, after Reddit banned five of its subreddits for harassment—the largest of which had around 150,000 subscribers[19][20]—many users of Reddit began to create accounts on Voat.[21] The influx of new participants temporarily overloaded the site, causing downtime.
Even with recent changes I think Reddit are only projected to make $20 million in revenue in 2016 and may still be in the red and given that the highest valuation they've raised funds at is $500 million it's hard to justify Steem's $30 million valuation imo especially as they have a no/low revenue model and have additional costs of paying content curators, creators and sometimes voters. Plus they're also paying to acquire users at the moment. So I personally think their users might have a low/no/even negative value in terms of how serious investors will value them.
There's a similar product based on Ethereum coming soon which I haven't looked into much...
https://bitcoinmagazine.com/articles/censorship-free-social-network-akasha-aims-to-tackle-internet-censorship-with-blockchain-technology-1464810249the project gradually evolved into something more interconnected and social that could be compared to a decentralized Medium or Reddit.
They plan for users to earn ETH from content creation.
http://akasha.world/Moreover, the votes are bundled with ETH micro transactions so if your content is good you’ll make ETH from it – in a way, mining with your mind.
I have a feeling being based on ETH and being launched in a more transparent and crypto-currency community perceived fair way they've definitely got a good shot at gaining some initial traction & I'll be interested in looking at the business model regards how revenue for content creators etc. is created.