The social network Reddit, leader in discussion forums, wants to go public

2024-02-23 07:00:30

In documents available on the SEC website, Reddit mentions having 73 million daily active users on average and more than 267 million weekly users.

Despite its success with the public, the platform with 100,000 forums (on celebrities, video games, social issues or even businesses) has never managed to generate profits.

Like Facebook, Instagram, YouTube or TikTok, its business model is based on advertising, but it has not risen to their level. It achieved more than $666 million in revenue in 2022 and $804 million in 2023. It reduced its net losses from $159 million in 2022 to $91 million last year.

“Being listed allows us to raise capital and provide liquidity to our employees who have worked tirelessly to build Reddit,” commented Steve Huffman, co-founder of the company, in a letter attached to the prospectus filed with the SEC.

Data mining for AI

Reddit plans to reserve around 1.3 million common shares to finance programs allowing its users to “realize their ideas”, or around 1% of the shares issued.

“I have never been more excited about the future of Reddit than I am today,” the boss continued. He notably mentioned growth opportunities through advertising, online commerce on the platform and the marketing of data licenses for groups specializing in artificial intelligence (AI).

“Reddit is made up of one of the largest, constantly updated bodies of authentic human experience,” said Steve Huffman. “The data is constantly growing and regenerating as users chat.” “We hope that our data advantage and intellectual property will continue to be a key part of training future language models,” he concluded.

Language models are at the heart of generative artificial intelligence, which will explode in 2023 with the success of ChatGPT. These mathematical models are fed with mountains of data to then be able to generate text, images, sounds or even computer code, upon simple query in everyday language.

Last June, Reddit raised the prices charged to third-party publishers to use data and conversations posted on the social network, in order to prevent generative AI giants (OpenAI, Google, Microsoft, etc.) from exploiting the content for free. forums.

The decision sparked an outcry as many small developers built apps linked to the platform based on low prices or even free access to its programming interface (API).

GameStop

Reddit showed its power in January 2021, when armies of stock marketers, communicating on the platform, shook Wall Street by betting against the tide on stocks that had gone viral like those of the video store chain GameStop.

Created in 2005 by two students from Virginia (eastern United States), the social network was bought in 2006 by Condé Nast (publisher of Vogue, The New Yorker and Vanity Fair magazines). The company became an independent subsidiary in 2011. It had previously filed for an IPO with the SEC in 2021.

Its arrival on Wall Street will be a major event as the volume of new listings is at its lowest in two years, due to macroeconomic uncertainties and high interest rates.

The thunderous arrival during the 2023 school year of the British microprocessor manufacturer Arm, followed by the shoe brand Birkenstock, had given analysts hope, but the fall in prices in the first weeks had broken the momentum. Both stocks have since rebounded and the market is hoping for the introduction of major groups like the Swiss seed company Syngenta or the fast fashion giant Shein.

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