shares in social media platform Reddit
start trading on the New York Stock
Exchange on Thursday in its initial
public offering or IPO and if you’re not
familiar with Reddit it hosts Niche
discussion groups or subreddits around a
100,000 of them on everything from
politics to pets investing and hobbies
in the world of Co in the words of
co-founder and boss Steve Huffman Reddit
topics range from the sublime to the
ridiculous the trivial to the
existential the IC to the serious around
73 million people use it every day so
what’s it worth Reddit has priced its
shares at
$34 giving it a stock market value of
$6.4 billion at the start of trading
that could of course go up or down once
shares start trading but it is well
below the $10 billion valuation given to
Reddit by investors back in 2021 and to
put all that in perspective social media
giant meta which owns Facebook Instagram
and WhatsApp was worth $1.2 trillion at
the market close on Wednesday let’s go
live to Paul condra he’s head of
industry and Technology research at
pitchbook which provides data on the
global Capital markets and he’s in
Seattle Port Reddit may not be as famous
as Facebook Instagram or X but it has
1.2 billion subscribers and an
oversubscribed public listing so it’s
clearly a hot ticket is it scalable
though can it reach the heights of those
bigger
companies uh well yeah I mean thanks for
having me I think if you look at the
daily active user count it’s much lower
than some of those larger properties you
mentioned at about 70 73 million versus
you know up into the billions for a
company like meta and I think it caters
to a much more Niche um type of use case
um and the type of contributors and
moderators that kind of want to run
their subreddits um the way they see fit
and they want to have more control over
it whereas when you look at a you know a
Facebook or an Instagram it’s much more
centrally managed so it’s it’s a
different kind of business model um and
I think it draws people in slowly but it
also draws a lot of people in um that
maybe want to get information quickly
and get out because the kind of
stickiness factors that exist in uh some
of these larger platforms don’t really
exist in Reddit so yeah the opportunity
really is you know how much do they want
to go down that road of trying to use
some of the techniques and models that
some of their larger counterparts are
using to make the platform stickier to
make it a little more of an
entertainment type of platform bring
users in and try to monetize it a bit
more effectively than they have in the
past exactly I mean Paul you mentioned
its business model and the fact that it
needs to monetize it it doesn’t make a
profit it hasn’t made a profit we’ve got
a more competitive advertising Market
it’s signed this $60 million reported
deal with allowing its data for training
Google’s AI models it’s obviously got
very valuable data from these
discussions but I mean how is it going
to raise the bottom
line yeah I mean the the the the model
was never really built to optimize
advertising right it was built to
provide a platform for creators and
contributors and moderators kind of a
decentralized um conversation space
where people can be kind of have free
reign on the things that they want to
talk about and now so there now there’s
a bit of a pivot taking place uh for a
company that wants to go public and
wants to optimize that platform more
effectively um they just raised a lot of
money so that means they’ve got some
Capital uh or they will have once this
IPO is completed um they don’t have any
debt uh and so they’ve got the ability
now to invest in the resources to say
look we’ve got the traffic we’ve got the
platform um but we don’t really have is
an advertising machine that really is
optimized and capitalizes on that on
what we have there so we can put the
people and teams in place to start
investing on that and they probably can
make progress are they going to be able
to grow it faster or take a bigger share
of the market from their bigger
competitors probably not but they can
they can most likely turn that into a
stronger business than what it is now um
and then there’s these secondary revenue
streams that they’re they’ve made some
progress on which is selling the data um
and that’s become obviously very
important in the last couple years with
the rise of generative Ai and they have
a pretty unique um data set a lot of IP
on unique um valuable information across
all these subreddits uh it’s already
proven to be somewhat valuable to Google
who signed kind of a $60 million deal
with them this year that can be an
interesting Revenue stream probably a
much higher margin Revenue stream I
think there’s a lot of questions around
how big that can be but if we’re just
looking in the next couple years I think
there’s a lot of reasons this company
can kind of put the pedal down in terms
of generating more revenue and
increasing the margin profile and and
those are things to get people or at
least get investors excited when you
look at a valuation that’s coming to the
market that’s not terribly expensive um
to say hey this could be a good run for
the next couple years it’s probably not
going to reach the scale of meta um but
could be a good solid business if
they’re able to execute on those plans
right and I guess they’ll be watching
out very closely for whether it affects
the user experience at the same time
Paul condra
