SEI's recent business decisions and concerns about its long-term financial stability and growth

Question

Over the last several months, we've seen a number of events transpire that reflect an aggressive effort by Stack Exchange, Inc (SEI) to monetize its platform.

The removal of Monica as moderator, changes to and stricter enforcement of the Code of Conduct, firing of Community Managers and other staff, increased advertising, aggressive promotion of the Stack Overflow blog, and pushes for the Stack Overflow for Teams product all raise serious concerns about whether SEI considers its community to be an asset to its business and create big question marks as to the profitability or financial stability of SEI.

I realize that:

• Investors may be hesitant to invest in a company that appears to tolerate discrimination, especially against LGBT+ persons, even if this is not actually the case. This also makes it difficult to retract the public statements made against Monica, even if they are false, because doing so may create an unintended impression that SEI tolerates bigotry.
• The Community Team costs money to maintain and may support decisions that are not conducive to generating revenue. For example, CMs may support "community ads" that aim to spread the word about products that are of interest to the community, but take up valuable ad space and generate zero ad revenue for SEI.
• An aggressive push to monetize the platform may be necessary to convince investors that investing in SEI will not be a losing bet. This includes actively promoting Stack Overflow for Teams, as well as ramping up blog posts and podcasts in an effort to gain revenue from increased engagement.

SEI's sudden ramp-up in efforts to court investors at the expense of its community create an impression that it's desperate for revenue. This level of desperation suggests that SEI is financially unstable and could be forced to shut down within the next few years if it cannot make more money.

Hence I'm asking:

• Is SEI financially healthy?
• Are there other ways SEI could monetize its platform without alienating its community?
• Given how far SEI has already progressed down this path, could it feasibly back out and accept suggestions from the community on how to monetize?
• Is there an exit plan to ensure that all user data can be preserved or archived should SEI need to cease operations?

I really want to see SEI be more transparent about its business plans so we can actually help support its growth.

Answer 1

Since I don't have access to the inner workings of SEI, this is largely speculation based upon other technology focused start-ups.

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Is SEI financially healthy?

SEI had Series D funding back in 2015 with $40 million being raised and this funding seems to be tied to investors that are interested in growing the programming and jobs focused sites. As the article states,

Spolsky says that two-thirds of its revenues today come from recruitment services, via its Stack Overflow Careers site, and one-third from advertising.

I suspect that SEI is likely revenue negative (i.e., overhead exceeds income) or at best is barely breaking even as opposed to generating healthy profits. The fact that the jobs site is generating most of the income is a bit surprising and would also explain why there is more focus on StackOverflow for Teams. Practically speaking, there is a limit to how much a site can support itself on ad revenue and most technology professionals (i.e., the target demographic for SEI) are well versed with the use of ad blockers.

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Are there other ways SEI could monetize its platform without alienating its community?

Unlikely if their plan is to focus on the programming, jobs, and teams segments as opposed to the broader network. Recall that prior to Series D the Network was how they planned to increase the user base and ad base. I suspect that was not a very successful strategy and the marginalization of Area 51 via attrition (no moderators as of 2020-01-15) leads me to believe they are not as interested in standing up new Network sites. If that is that is the case, I would expect to see decreasing support for "under-performing" Network sites; which is something we've already seen with Photography.SE.

Assuming that SEI is able to become revenue neutral things might be okay for users in their target demographics, but outside of those demographics I would be pessimistic. Personally, if offered the opperunity to invest in SEI, I would be very hesitent to do so.

Answer 2

It seems that the OP is on to something. Just look at that recent blog post We’re making it easier to try Stack Overflow for Teams.

Now, I can not tell you about the financial health of SE Inc (and to a certain degree, I find it moot to speculate about such things).

But what I can tell you is this: SE Inc. nicely managed to burn its reputation with people that matter. It is not the 1 millionth "do my homework plz" newbie user on stackoverflow.com who will be asked to weigh in on "should our company invest into Stack Overflow for teams?"

The real professionals get asked such questions. The people that (when they are active on this network) fully understand what is going here. So, in all humbleness, people like me. And probably, most of the people reading this question and the answers.

So, no matter how things look today, I am pretty sure that the outlook for any commercial service/product from SE Inc. that is based on "the technical community praising it" ... is pretty much doomed to fail.

I can't do anything to convince SE Inc. to change course. But rest assured: if there is ever an opportunity for me in the future to talk someone out of buying from SE Inc., that is exactly what I will do.

Americans tell an average of 15 people about a poor service experience, versus the 11 people they’ll tell about a good experience.

From here.

And note, double plus worse for you: I am a Swabian German. I rarely talk about good experiences, but I never stop ranting about bad stuff that happened.

Answer 3

I sympathize why you want to know this (I also want to know), but it is entirely unreasonable to expect a straightforward answer.

SE is a privately held company and they've been very reluctant to disclose financials in the past, understandably.

Furthermore, if your theory is correct and their financial situation is indeed bad, then disclosing it could very easily make it worse (They might need to raise funds or obtain credit. In order for that to be successful, they'll need to appear confident and on a good path). It is unreasonable to expect management to potentially jeopardize the future of the company just to sate our curiosity about their financials.

If nothing else, I'm 100% sure that if financials are indeed poor, they won't disclose that.

Answer 4

In order to appear attractive to investors a company typically requires these things:

1. growth
2. profits.

Now it best if you can demonstrate both, but only one is required. As a result, SE has already shown that it wants more users, regardless of the cost to established ones (after all gain 1000 users by losing 900 = growth, and if you ignore the lost users as they don't actually delete their accounts, that's a 1000 user growth!)

For profits, the easiest way to achieve that is to cut everything to the bone. Get rid of anything not 100% required to run the place, and outsource even that if possible. I can easily see more changes for the staff at SE coming in the near future.