Reddit Up 48% On Stock Market Debut — Where Does It Go From Here?
The Home of Meme Stock Traders is now worth almost $10bn
Reddit, the 19 year old social media platform is finally a publicly traded company after listing on the New York Stock Exchange on 21st March 2024.
The IPO was a huge success after the share price closed 48% higher on its opening day.
Enough of the boring stuff, why is this IPO significant?
Besides being the biggest social media platform to go public since Snapchat (SNAP) in 2017, what is interesting is that Reddit has never been profitable in its almost 20 year history.
Despite being the 8th most visited site globally as of February 2024, Reddit has not been able to effectively monetize all that user engagement.
Reddit is after all free to use for everyone but it does beg the question of why a company that couldn’t turn a profit in almost 20 years is worth billions.
The answer lies with the power of AI, investors are betting big that advancements in AI will lead to Reddit becoming profitable.
Companies such as OpenAI are willing to pay big bucks for data of those random conversations found on Reddit.
According to the BBC, “ Google is believed to have paid Reddit $60m for the right to scan almost two decades of discussions to make its AI more human-like — and Reddit has said it has agreed licensing deals worth more than $200m over the next two to three years.”
Last month, Reddit confirmed that it made losses of $90.8m in 2023 so by selling its data to these large AI companies battling to reach Artificial General Intelligence (AGI) first, a path to profitability is more visible than ever before.
Selling user data for AI models will surely alert the US Federal Trade Commission (FTC) which will be keen to know how Reddit is licensing its data to these AI companies.
We are yet to see how this will play out but who would have thought those random conversations on Reddit, often with foul language can be so valuable; I guess them being human conversations makes all the difference in this day and age.
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