Reddit is now a publicly listed company, with its years-long mission towards an I.P.O., which has required significant restructuring of its business and platform, now realised.
After launching at $34 per share, Reddit shares jumped 67% in early trading, with investors clearly excited about the platform’s opportunities, despite it still being unprofitable, and seeing limited comparative growth in recent years.
Reddit currently has over 73 million daily active users, up from 60 million at the start of last year. So it is seeing steady expansion, though it remains far behind the other major social apps.
Reddit also generated generated $804 million in revenue in 2023, an increase of 21% year-over-year. Which is not enough to cover its costs, but clearly, investors see potential in its expanded opportunities, including its deals with AI companies to feed them Reddit data for their LLMs.
Indeed, Reddit has already sold over $203 million worth of contracts to AI companies, including a $60 million pact with Google, which could provide expanded revenue potential for the platform. It remains to be seen exactly how Reddit will continue to monetize this, and how the Google deal could help boost the platform’s profile more broadly, but it does seem like this is the key opportunity that the market currently sees for the app.
Though as noted by Yahoo News, the FTC has also opened an inquiry into Reddit's data licensing deals, and how it’s looking to onsell people’s information.
That could lead to more challenges for the company, but right now at least, it’s riding high on its initial launch, and looking forward to a new chapter for the app.
Reddit was once considered a more lawless corner of the internet, home to the most controversial content that you could find. Reddit allowed such because it didn’t want to restrict what people could share, but that all changed a few years back, as the company looked to get more serious about its advertiser potential.
Back in 2020, in the wake of the murder of George Floyd, a group representing hundreds of Reddit moderators, published an open letter that called for Reddit to take more action against racism and hate speech in the app. Reddit responded by outlining a range of updates to its content policies, which saw the immediate expulsion of more than 2,000 subreddits as a result.
That was the first significant step in reforming the app, and making it a more sanitized version of what it once was, which responded to user demand, but would also create a safer environment for ad partners.
Reddit has since seen an influx of brand interest, which has increased even more in recent years, as people go looking for real, human reviews of products, which Reddit’s niche communities can provide.
It’s that element that’s made it an especially appealing proposition for AI creators, with Reddit’s highly informed, highly active subreddit communities providing valuable, human insight that can power LLMs.
Maybe that has more value than Reddit as a platform, though it’ll be interesting to see how Reddit maintains this aspect, and grows the platform from here.
Either way, it’s a good debut for the company, and if Reddit’s deal with Google increases the presence of Reddit results in Search, there may indeed be a lot more traffic coming its way.
