Corporate Reddit Is Here, But Can It Convince Investors That It’s Cooler and More Relevant Than Ever? – The Average Joe
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    Corporate Reddit Is Here, But Can It Convince Investors That It’s Cooler and More Relevant Than Ever?

    Noah Weidner

    February 22, 2024

    Avid social media users can agree on one thing: Reddit is in a league of its own. While other platforms come and go, Reddit remains a staple on our screens despite angering its community time and again. CGP Grey once said, “Reddit makes you feel more like a citizen of the internet than a citizen of your own country.” But what happens when Reddit goes corporate?

    Reddit or not, here it comes: Yesterday, Reddit filed for its long-awaited IPO, kicking off the process of bringing the social media giant to the New York Stock Exchange (NYSE) under the ticker $RDDT. Last year, the company’s sales jumped 21% to $804M, active users grew by 27%, and net losses fell 43% to $91M.

    • With over 73M daily active users and 100K active communities, Reddit is expected to go public in early March, which could fetch a valuation surpassing $5B.
    • That’s significantly lower than its $10B valuation in 2021 — and a far cry from Meta (NASDAQ:META), whose market cap would be 248x larger than Reddit’s.

    Reddit rolled into 2024 with $1.2B+ in cash, more than a fifth of its proposed valuation — thanks in part to last summer’s decision to lay off 5% of its workforce, which helped narrow its losses. Despite its widespread popularity, Reddit has struggled to build a concrete business model but found new life during the pandemic as online communities blossomed (shout-out to r/wallstreetbets).

    Reddit Gone Corporate

    While Reddit stands apart from its competitors in many ways, its revenue streams aren’t so different. Despite positioning itself as a community-driven alternative to social giants, it has remained an afterthought for advertisers — below Meta, TikTok, and even Twitter/X. To catch up, the company is exploring options to boost its revenue:

    • This week, Reddit started selling user data to help Google (NASDAQ:GOOG) train its AI, a decision that Founder and CEO Steve Huffman defended as “best for Reddit’s survival.”
    • Last year, it also raised prices on its API, which developers use to access the platform for building related tools — leading to a temporary blackout of over 7K subreddits.

    Throw a bone: In a concession to its users, the company offered 75K of its most engaged users access to shares at its IPO price. But sometimes, being an early bird doesn’t pay off. Users of another retail crowd favorite, Robinhood (NASDAQ:HOOD), were given similar access during its 2021 IPO. Since then, $HOOD has plummeted nearly 60%. And while the market landscape is different today, buying into companies right when they go public often spells trouble for investors.

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