Doesn't the freemium model completely contradict this assertion? Reddit Gold gives additional features to users who pay for it, and those without Reddit Gold don't seem to be complaining.

Yes and no. Reddit is an interesting example because the features you get with Reddit Gold aren't that special. IIRC, they have added more recently but back when they launched it, you only got access to a secret circlejerk subreddit. Reddit Gold is more like donations with the presentation that you are paying for something extra. They're incredibly loyal community falls more under "you better have a ton of people who love you," rather than a strictly freemium model.

Linkedin is a better example of the freemium model because they have their base site and give a full new set of feature set to those who choose to pay. It also makes a large chunk of money off of company's posting job listings (FYI- it's $300 for a company to post one job.) Linkedin established itself as a necessary tool for networking which is why they can do this. Also, the "value" they provide is more substantial because it is directly linked to your job and your connections. I would not say that Facebook or Twitter is providing me any real value beyond entertainment and socializing.

I guess a good way to look at it is "Why would I pay for a site?" Linkedin promises better networking, better career, etc. I can easily justify a monthly fee if a better career is promised. Facebook could promise what? No ads? Better socializing? Same with Twitter. What value would they have to provide me to justify by paying $x/month? Further, if they had started a freemium model from the beginning, what features wouldn't the base users have? No searching outside your direct network? Only seeing the first 50 of your friends photos? How could this have changed what Facebook has become?

Are you sure you're not mixing up revenue and profits? I'm not an expert in accounting, but I'm pretty sure a company can still operate at full capacity if it receives enough money to pay its employees' salaries and other expenses

Right - but - if revenue covers your expenses, there's no room for the crazy growth websites need. People can run on passion of an insanely long time. But eventually that passion can't keep up with the reality that money is needed to survive. Once you have a successful website with tons of people on it, no one can afford to keep the servers running without external help. And once you can pay for the servers running, you have to keep innovating and developing and upgrading and updating to keep those people on your site. Without innovation your users will move onto the next thing. You also need real money - real profits to keep the highly talented engineers when your competitor offers them a better deal. You will want to hire a new team of people to develop another mobile app. Sure, you could get a fantastic team of people and pay them and hope you keep up in the ever-changing online world. But it's much less likely that you are going to be relevant in a few years if you stay stagnant. There are others chasing billions, working 80 hours a week, and innovating beyond belief. That's what you have to compete with. Those people who don't have a super successful site with hundreds of thousands of dollars in server costs yet. Those people who are fueled by insane passion and the promise of money down the line.

Wikipedia survives because it is providing real value and has established itself as a global provider of every bit of information out there. That is an insane goal and probably why no competitor has appeared. But their layout, their mobile apps, there moderation tactics, their editing platform have all remained the same. Just like it would be interesting to think about what Facebook would look like if it ran off donations, Wikipedia would be infinitely more interesting to look at if it had gone for profits.

My guess is that insom means that there are certain fixed costs to having a social media site. These fixed costs need to be realized before you can see any profit. These fixed costs should include labor. That said, a good and sustainable business plan wouldn't just break even, but they'd turn a profit beyond fixed costs because... well, bad times happen and reserves are needed for such things. But, any person or organization only needs so much to sustain themselves. As they say, "pigs get fat and hogs get slaughtered."

I will say that I no longer visit sites I love, and take them for granted. I realize that most places I go online that are worthwhile have a team of people behind it, laboring intensely and often with little to no compensation. The best things all start off like this, with passion and will as your motivating factors. The concepts that are born with the sole intent to profit don't last long in the social media space imo. -It's easy to spot them, it's transparent and they tend to make me feel like a product while I'm on them. Nothing good comes from profit as a sole motivator. If you want to create something, do it because of the challenge or because you really want it to exist.

(exiting soap box)