Reddit, the popular social media platform known for its online communities and user-driven content, has filed for an initial public offering (IPO). The company plans to expand its advertising efforts, data sales and analytics, and its burgeoning user economy. Founded in 2005, Reddit intends to trade on the New York Stock Exchange under the ticker symbol “RDDT.” The IPO registration statement did not disclose the number of shares to be offered or their potential price. Leading financial institutions like Morgan Stanley, Goldman Sachs, JPMorgan, and BofA Securities will serve as the lead book-running managers.
One unique aspect of Reddit’s IPO is its intention to offer some shares to its users and moderators based on their reputation and contribution to the platform. This move aligns with Reddit’s desire for users to have a sense of ownership in the company. However, participants must be over 18 years old, reside in the US, and have had an account on or before January 1. Co-founder and CEO Steve Huffman expressed excitement about inviting users and moderators to become shareholders alongside traditional investors.
Reddit’s decision to go public comes as it faces competition from larger rivals like Meta Platforms Inc. (formerly Facebook) and TikTok. Additionally, the company acknowledges that user engagement can fluctuate based on significant cultural events, such as the COVID-19 pandemic or geopolitical developments like Russia’s invasion of Ukraine. Reddit also cited the risk of rivals copying its features. Despite these challenges, Reddit experienced a 20.5% increase in sales last year, reaching $804 million. However, it incurred a net loss of $90.8 million in the same period.
The company boasts impressive user statistics, with over 500 million visitors in December alone. In the quarter ending on December 31, Reddit reported an average of 73.1 million daily active uniques. Reddit’s IPO prospectus emphasizes its role as a vast repository for human experience and interaction. Huffman stated that the platform is actively developing more opportunities for users to monetize their presence on Reddit. These initiatives include earning money through creating avatars, offering photo-editing services, selling watches, and commissioning art. The company also plans to provide more developer tools and increase ways for users to recognize and reward content creators with real-world money.
While Reddit aims to diversify its revenue streams beyond advertising, it acknowledges that previous efforts in this regard have not always been successful. The filing mentioned a failed attempt by Hasbro’s Wizards of the Coast segment to introduce royalty payments for higher-earning game developers using the “Dungeons & Dragons” infrastructure. Despite this setback, Reddit remains committed to exploring new revenue streams.
In terms of advertising, Reddit plans to make ads on its site more prominent, AI-driven, and precise. It intends to offer more video ads and expand ad placements to comment threads and search pages. Additionally, Reddit is exploring the possibility of licensing third parties to access, analyze, and display historical and real-time data from its platform. Customers could pay for real-time data feeds of anonymous public discussions on Reddit. The company believes that its vast collection of authentic human-generated experiences can be valuable in an increasingly data-driven world.
Separately, Reddit announced a partnership with Alphabet’s Google. The deal, valued at around $60 million, allows Google to use Reddit posts to train its AI models and enhance Google Search. This collaboration aims to improve the discoverability and accessibility of communities and conversations on Reddit.
Overall, Reddit’s IPO filing highlights its plans to expand its advertising efforts, leverage its user-driven economy, and explore new revenue streams beyond traditional advertising. With a massive user base and a wealth of authentic human experiences, Reddit aims to position itself as a valuable resource in an increasingly data-driven world. As it goes public, the company hopes to create a sense of ownership among its users by offering them the opportunity to become shareholders alongside institutional investors.
