Today’s News
Image Source: The Drum
Reddit revealed a narrowed net loss of USD 90.8 million and approximately 21% revenue growth in 2023 as it unveiled its IPO filing ahead of the highly anticipated U.S. stock market debut in March. This marks a significant test for the platform, which has yet to achieve the commercial success of social media giants like Facebook and Twitter (now known as X) since its launch almost two decades ago.
In the three months ending December 31, 2023, Reddit reported an average of 73.1 million daily active users and 267.5 million weekly active users, with over 100,000 active communities and 1 billion cumulative posts on its platform. The IPO filing disclosed a reduced net loss of USD 90.8 million for the year ending December 31 and an increase in revenue to USD 804 million from USD 666.7 million the previous year.
Reports on Wednesday indicated that Reddit, based in San Francisco, has entered into a deal with Alphabet’s Google (GOOGL.O) to provide its content for training Google’s AI models, with an estimated annual contract value of USD 60 million.
Having been valued at USD 10 billion in a 2021 funding round, Reddit’s targeted valuation for its share sale in the upcoming weeks remains uncertain. The company is anticipated to sell nearly 10% of its shares in the IPO, according to previous reports.
The IPO filing highlighted that CEO Steven Huffman holds Class B common stock tied to a vesting condition – achieving a USD 5-billion market capitalization valuation post-offering. The social media firm is expected to achieve this valuation target from the outset.
Despite being launched around the same time as social media pioneers like Meta (operating Facebook) and Twitter, Reddit’s user base is notably smaller, and its growth figures trail behind larger social media peers. Monetization challenges over the years and concerns about content moderation have posed obstacles for the company, competing fiercely with TikTok and Facebook for advertising revenue.
While facing questions and challenges, Reddit has cultivated a devoted user base, instrumental in “meme-stock” rallies, particularly in 2021 with GameStop (GME.N) and AMC Entertainment Holdings (AMC.N).
Established in 2005 by web developer Steve Huffman and entrepreneur Alexis Ohanian, Reddit has garnered support from prominent investors, including Andreessen Horowitz and Tencent Holdings (0700.HK). Snoop Dogg is also an investor. Following its 2011 spin-off from Conde Nast, Reddit gained recognition for niche discussion groups and user voting. Recent efforts to engage younger users include the 2020 acquisition of TikTok competitor Dubsmash.
While primarily reliant on advertising revenue and offering premium access for a monthly fee, Reddit has yet to turn a profit, as mentioned by Huffman in a Reddit post last June. The company confidentially filed for the U.S. IPO in late 2021, delaying the offering due to challenging economic conditions and the underperformance of listed technology stocks. Morgan Stanley and Goldman Sachs lead the IPO, joined by over a dozen other banks.
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