What you should know about Reddit’s upcoming IPO

Reddit’s monthly active users (MAUs) exploded in 2019, resulting in 30.3 % increase compared to the previous year.
Since 2020, Reddit change the way they report their user data, and switched to daily active users (DAU’s).
In 2020, Reddit had around 36 million daily active users, in 2021 that number is around 52 million DAU’s , which is mind blowing 44 % increase in a year.

What you should know about Reddit's upcoming IPO

In a year 2021, Reddit added 558,799 new subreddits, that means 62,089 per month.

Reddit doesn’t have a lot of employees, in fact it has only around 1823 (LinkedIn data), compared to Twitter with 6k and Facebook with over 60k , they run a tight ship.

Reddit is 16 years old. Older then some of you bagholders of WISH.

Last funding round has put company at $9.6 billion dollars /Series F, August 2021

Reddit is 20th most visited page in the world, in front of Tiktok/Discord/Twitch (based on Similar Web)

What you should know about Reddit's upcoming IPO

User metrics

What you should know about Reddit's upcoming IPO

When we talk about the value that individual user brings to the platform, it is important to note where the user comes from. As you can see, 70% of Reddit user base is located in countries where users are more valuable, then the other ones (based on YouTube/Google ads metrics)

Now that we got this out of the way, let’s get down to real things.

Reddit sucks at making money

Reddit revenue so far :

  • 2018 – $ 76.9 million
  • 2019 – $119 million
  • 2020 – $170 million
  • 2021- (Q1+Q2 -100 million) projected $350 million

Lets compare it to other companies in similar space(miss me with that bullshit that Reddit can’t be compared)

So, in descending order: ARPU- average revenue per user, this was calculated solely from their revenue divided with their number of users for the current financial year. Although its not the most accurate, it’s the best way. And it matches the data that I found online.

  • Facebook: $29
  • Twitter: ~$9/10
  • Snap: $8
  • Pinterest: ~$3.8
  • Reddit: ~$0.3

For written example, Pinterest with its 416 million users, brings in 1.6. Billion dollars in revenue.

With potential 500 million users (we don’t know the right number, since they keep it a secret), and only 170 million of revenue Reddit is not even close to meaning anything. In fact if they do make 350 million dollars in revenue that they claim to make in 2021, that would give them a 0.098% share of the U.S. digital ad market.

How does, Reddit make money?

**1.**Reddit Premium (Paid Subscription)

Reddit Premium is a paid subscription service on the Reddit platform that charges users monthly for additional perks regular members don’t have.

Some of those perks Premium members enjoy are an ad-free experience, full access to the r/lounge, 700 free monthly coins, among other things.We don’t know how many paid subscription users are there.

Reddit Premium Cost:

  • $5.99 per month
  • $49.99 per year (30% off)

2.Reddit Coins are virtual goods that Reddit users can purchase in bundles and gift to other Reddit users for posts or comments for their contributions and good content.Other benefits to users holding Reddit Coins include access to the, r/lounge which is a ghost town and it doesn’t have any value.

Coin bundles cost between $1.99 to $199.99

3. Advertising.

So, this is a special one.

I shit you not this is real. First link is official Reddit advertising policy, that is based on USA Sanctions Programs and Country Information.

https://advertising.reddithelp.com/en/categories/reddit-advertising-policy/reddit-advertising-policy-prohibited-advertisements#N1

What you should know about Reddit's upcoming IPO

What is Sanctions program? It’s a program that USA government implements on a specific country for whatever reason https://home.treasury.gov/policy-issues/financial-sanctions/sanctions-programs-and-country-information So, what does that have to do with advertising? Well, if you are from example; Albania, you can’t use it. Based on Executive order from George Bush, from fucking June 27, 2001. Yea, that old. There is a list above, knock yourself out(Ukraine/Russia etc). Just to be clear, nobody else does this(no social media company). If you want to run a political ad for your own countries audience, you click „politics „ ad category, then you have to click the the mandatory disclaimer that I
“intend to use this platform to place advertisements that 1) refer to a clearly identified candidate for US federal office and 2) are targeted for distribution to a US audience within 60 days prior to a US general election or 30 days prior to a primary election to US federal office” .
It doesn’t matter that it has no fucking connection to US. I’ll get back to this later.

There are also other issues.You know that the whole point of Reddit is anonymity right? Well, if you want to create an Reddit-ad they require you to submit your ID card and bio-metric photo?

You can’t block a (specific)ads from keep coming up. Like you can on YouTube.There is no report ad ( scams are going wild)

There is a problem that I keep seeing on r/ Redditads . People can’t target specific communities?

https://www.reddit.com/r/redditads/comments/rv73ge/why_cant_i_target_conservatives_but_can_target/ Politics or something else?

There is a limit of how much ads there can be on one topic(for example NFT). That is not necessarily bad , but it still sucks if something is hot topic and people want to push their product.

With advertising as their main source of income, Reddit has a long way to go.

Censorship after the IPO:

To quote a fellow retard @ StrangeSatellite

“Monetization is the antithesis of authenticity. When you start trying to make money off something, you fundamentally take away its authenticity. Look at the news media for a good example…its continued push toward monetization has corrupted it on a deeper level than most ever thought possible.”

When you read Advertisement text above, Reddit is not that free as you might think, or is it?

Feb 11, 2019 Tencent invested $150 million in Series D, that valued the company at $2.7 billion.Redditors reacted, because they were worried that it might affect censorship. China banned Reddit in 2018.

Feb 8, 2020, Tencent invested with Vy Capital $367.9 million, that valued the company at $ 6 billion.

As you can see, a lot of China money went to Reddit, and as far as we can see nothing happened. There is an r/ China where people openly talk about using VPN for accessing Reddit, they shit talk government etc.There is no guarantee that this won’t change in the future, just like YouTube change, but for now, it’s not that bad. With the IPO dropping and new investors pouring in demanding results, something will happen. Maybe Reddit takes a stand and says, this is how things are on our platform, take it or leave it. There are subs where things are moderated to the extend that kids would be ok with it, and there are subs that aren’t. Maybe they will cave under the pressure like Twitter, YouTube etc. When we get to that, we will get to that.

Truth be told in the era of woke culture, 90% of posts on this sub would be banned on every other platform.

You think this shit would fly anywhere else?

Who stands behind Reddit? Majority shareholders of Reddit are Advance Publications, Inc. Same people that own Vogue, The New Yorker and Wired ,1010data, Turnitin, The Ironman Group, Advance Local, ACBJ, Stage Entertainment, Leaders Group, GQ, Glamour, Architectural Digest, Vanity Fair, Pitchfork, etc.

It’s a fucking empire, and Reddit is only a small % of it. If you think that they will use Reddit to effect peoples opinions or censor somebody, they already have the power to do that.

What you should know about Reddit's upcoming IPO

Majority shareholder of Reddit Donald “The Big Man” Newhouse

What Reddit does great

  1. As mentioned before, Reddit has only around 1823 employees. But that is not true.Reddit has minimum + 560k more. See, what makes Reddit a great investment is moderators. Mods are the perfect employees. People do the job, are proud of it, they get “payed” in internet points, they don’t call in sick days, they cover for each other, and spend hours and hours of their free time doing the work. People in Facebook/Twitter are getting paid big money ( real money) to monitor certain groups, accounts, help new users etc. This is a genius business model that never has shortage of employees.
  2. Reddit Talks/Community Talks- (WSB has them every working day, join us 8:30am – 9:30am EST)

This was the greatest addition to Reddit in a long time. If upgraded to where it would have some functionalities like Google Meets (presentation) it would be a game changer. There is enormous potential in this particular area.

3. Reddit Live streams

Although I am not the biggest fan of the way they did it, it really is great addition. Its only a matter of time before people start to stream games etc. Just imagine streaming a game to the dedicated subreddit group. It works great. Below is the research supporting that idea.

https://connect.redditinc.com/hubfs/pdfs/research/Newzoo-Reddit-Gaming-Case-Study.pdf

4. Getting in to the NFT’s /Metaverse

The play for Reddit is building on its foundation. Reddit needs to add new features to keep the engagement of its users, and offer services that other sites provide. Average time user uses Reddit is 10 minutes and 23 seconds, compared to FB’s 32 minutes in a day. That needs to change, and the only way to do it is upgrade.

The other thing that Reddit should think about is paying their creators. Twitch, YouTube , they all experienced rapid growth when they started to pay their content creators. Does this mean you should get paid if your meme makes it to popular, maybe. You are making content. At least start with Live streams.I am not going to do a product development, since they are not paying me to do so( $ the mods) , but there are ways that would make Reddit more attractive to bigger content making group. Sometimes fake Internet points is not the way.

Conclusion

To this day, Reddit didn’t file its papers, so we can see the financials in detail, but they will. For now, with the everything that I have listed above, Reddit is a buy FOR ME (NOT A FINANCIAL ADVICE). With how unorganized things are behind the scenes, it still continues to grow like crazy. In time, things are gone be updated, automated(a lot of things are still done manually), and up to standard. For now, I just hope the IPO valuation matches the current mess (that is not going to happen).
Maybe I update this DD when the financials come up, tell me what you think in the comments.

This article was written by u/Simplevice.

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