In a bold move that underscores the dynamic nature of the tech industry, Reddit, the influential message board platform, has filed for an initial public offering (IPO), aiming to become the first major social media company to go public since Snapchat’s debut in 2017. Despite not having turned a profit in its nearly two decades of existence, Reddit is pushing forward with plans that could reshape its relationship with its userbase and potentially rejuvenate the IPO market.
Reddit’s decision to go public is accompanied by an unconventional twist: the company has announced it will reserve shares for its top users, based on their ‘karma’ scores—a unique metric on the platform that gauges user contributions and reputation. This move is a nod to the platform’s community-driven ethos, as co-founder and CEO Steve Huffman expressed in a letter, ‘Our users have a deep sense of ownership over the communities they create on Reddit. We want this sense of ownership to be reflected in real ownership — for our users to be our owners.’
The San Francisco-based company, which has chosen the ticker symbol ‘RDDT’ for its New York Stock Exchange listing, is navigating a challenging IPO market. However, the potential for a blockbuster listing offers a glimmer of hope for Wall Street dealmakers. Reddit’s journey to this point has been marked by significant milestones, including the hiring of its first chief financial officer nearly three years ago and public discussions by executives, including Huffman, about the possibility of an IPO to elevate the company’s profile.
Despite its lack of profitability, Reddit is pursuing growth through various avenues, including advertising, e-commerce, and the licensing of its data to train artificial intelligence models. Huffman has emphasized the company’s commitment to improving the platform’s usability and governance, which he believes will drive growth now and in the future.
The company’s history dates back to 2005, when it was founded by college roommates Huffman and Alexis Ohanian. Over the years, Reddit has experienced significant growth, occasional controversy, and even moments that have shifted market dynamics, such as the WallStreetBets phenomenon in 2021. The platform’s influence was further highlighted by a mass user protest earlier this year, which brought attention to the power of its communities.
Reddit’s business strategy, as revealed in the IPO filing, aims to expand beyond the traditional ad-supported model. With over 73 million daily active users and more than 100,000 active communities as of the end of 2023, the company’s sales reached $804 million, marking a 21% increase from the previous year. However, it also reported a net loss of $90.8 million, albeit narrower than the loss in 2022.
The company’s future plans include selling data to AI firms and focusing on the ‘user economy,’ with initiatives like the Reddit Contributor Program and Reddit Collectible Avatars Creators Programs. These programs are designed to enhance user earnings and e-commerce on the site, with Reddit taking a share of the monetary gifts and rewards.
In a strategic move, Reddit has also announced an expanded partnership with Google, granting access to its data for training Google’s AI models and improving the display of Reddit content across Google platforms.
As Reddit prepares to enter the public market, it faces the challenge of achieving profitability—a goal that has eluded the company thus far. The IPO filing candidly acknowledges this, stating, ‘We have a history of net losses and we may not be able to achieve or maintain profitability in the future.’ Nonetheless, the company’s ambitious plans and the potential for user ownership signal a new chapter for the ‘front page of the internet,’ as it seeks to capitalize on its vast and engaged userbase.
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