Here's how reddit's business model probably works: you have power users which create or submit the content and write the witty comments and then you have the lurkers which just browse. what reddit is trying to monetize is the interaction with the latter user group: comments provide little space to promote ads, so most of them are hidden by default. instead they promote lots of posts with images interspersed with ads. the power users on the other hand use dedicated apps and have a custom interface anyway. they are (so far) not really bothered by the changes and continue to create and submit content.
You left out the moderators. Some of what they do is useful tending of communities, but some of what they do is provide free labor that addresses a hard problem.
Indeed, content moderation is the single hardest problem on the internet right now, and every big tech company is struggling with it. From Youtube to Twitch to Twitter to Facebook, etc. Reddit, while not perfect, has done relatively well, but as you mention it's all on the back of volunteer unpaid moderators. I'm surprised they haven't yet setup any sort of revenue sharing with large popular subs.
As a moderator of a decently sized sub (215k+ or so): we're suffering. I feel like its a lot of work and not a lot of support. We're not allowed to make any money off of it and the users just throw shit at us at every oportunity.
Reddit bought Dubsmash last year, too. I imagine the app will eventually operate almost similar to TikTok: funny picture, advertisement, cat video, person live-streaming.
Whether or not they can attract more of these power users to use the official app to upload short videos and livestream remains to be seen. I don’t think they’re able to on third-party apps. I’m not able to on Apollo, at least.
Lurkers will always outnumber posters on any forum I think, but I have to believe Reddit has a worse ratio than most because the echo chambers are so strong and anything outside of them is downvoted to oblivion.
And it's easy to feel engaged by just reading threads mindlessly upvoting or downvoting endlessly.
