The Reddit Blackout: A Cautionary Tale About Making Money With Data
Pricing strategy for data products is poorly understood, and businesses leave millions of dollars on the table as a result. Data products are almost always priced like digital products. That mistake causes product failure because digital and data products follow two different monetization paradigms.
In this article, I will use Reddit’s API pricing strategy to show how devastating pricing mistakes can be. I’ll begin by providing some background on what’s happening at Reddit and how business leaders approach data product pricing strategy.
In the next section, I explain the disconnect between Reddit (and most other businesses that are bringing data products to market), its customers, and data’s monetization paradigm. I will explain why digital pricing strategies fail.
Finally, I explain pricing frameworks I have succeeded with and how it addresses Reddit’s current pricing strategy’s shortcomings. As a bonus, I’ll explain the difference between owning access to data and owning data-generating processes. A seemingly small differentiation has outsized impacts on data product strategy.
What’s Going On At Reddit Is A Case Study In Pricing Strategy Failure
The CEO of Reddit wants to take the company public and faces a significant barrier. In the current economic and IPO climate, unprofitable businesses aren’t attracting any interest. Reddit needs a path to profitability. Like most startups, leadership is looking to data for a shortcut.
The data monetization challenges Reddit faces apply to almost every company. Business leaders haven’t come to terms with those challenges because this is new territory for most people, even those in our field. That won’t change even after the Reddit saga plays out. Business and product leaders don’t see the connection between data product pricing strategy and what’s happening.
Connecting the dots is high-value context that presents you with the opportunity to become a strategic partner for C-level leaders. Google data monetization strategy or data product pricing strategy. Scan the results and links. You’ll quickly realize that this is uncharted territory.
Data is an asset that isn’t monetized like other types of technology. Without a solid understanding of the new monetization paradigm, business leaders hand over all their data’s value and get pennies in return. Or data sits in a lakehouse or warehouse, running up the CIO’s cloud storage bill and doing nothing for the bottom line.
Data should be a recurring revenue stream for almost every business. Give me 4 hours with your data, and I’ll show your business leaders opportunities to develop a 7- to 9-figure revenue stream. To achieve that potential, data must be productized and commercialized to preserve its value. Data products must be built to deliver ROI or value creation that aligns with customers’ business or operating models.
The top minds of Reddit and LinkedIn lunatics don’t have a clue how to do that. Elon Musk flopped, and Spez, Reddit’s CEO’s username on the platform, followed the same data monetization strategy off the same cliff. Both hiked the price for access to the company’s data API and faced a backlash for it.
The Data Product -> Pricing -> Customer Alignment Challenge
Twitter and Reddit will struggle to find the flaw in this data pricing model because it’s supported by a long history of digital product success. The problems stem from pricing not aligning with data consumers’ business models. Data’s new monetization paradigm adds a layer of complexity to pricing.