Reddit, the social media giant known for its diverse and often unruly user base, is set to make its Wall Street debut this week in one of the most highly anticipated initial public offerings (IPO) of the year. However, as the company seeks to raise up to $748 million and achieve a valuation of around $6.4 billion, it faces skepticism and resistance from some of its most dedicated users and moderators.
The company has set aside 8% of the shares in its offering for certain users, moderators, and insiders, a move that has been employed by other companies like Airbnb and Rivian to reward power users. Despite this gesture, many of Reddit's most active users remain hesitant to participate in the IPO, citing concerns about the company's financial situation and its rocky relationship with the site's moderators and dedicated users, known as Redditors.
Sarah Gilbert, a moderator of the r/AskHistorians subreddit with 2 million members, expressed her reservations about investing in the company. "It doesn't really feel like Reddit is necessarily giving back, so much as it feels like maybe it's asking for even more," she said, referring to the company's recent conflicts with moderators over policy changes and the perception that Reddit is not adequately recognizing the efforts of its most dedicated users.
Reddit's IPO comes at a challenging time for the tech industry, with tumbling valuations, reduced investment, and a shift in focus from growth to profitability. The company recorded a net loss of $90.8 million last year and faces intense competition for advertising dollars from the likes of Google, Facebook, and TikTok. This financial uncertainty has led some moderators, like BuckRowdy, to pass on the IPO opportunity, noting that the general sentiment among their peers is largely negative.
The company's pursuit of profitability has also raised concerns among its user base, as recent moves to monetize the platform have been met with significant backlash. Reddit's decision to charge third-party developers for access to its API last year led to a massive user protest, with thousands of volunteer moderators shutting down their subreddits. CEO Steve Huffman's comparison of site moderators to "landed gentry" during this conflict further strained the relationship between the company and its users.
As Reddit prepares for its IPO, it must strike a delicate balance between appeasing investors and maintaining the loyalty of its core user base. The company's plans to offer more targeted advertising opportunities and its recent data licensing deal with Google, reportedly valued at $60 million a year, have the potential to boost revenue. However, these moves risk undermining the egalitarian and relatively unmoderated nature of the platform that has been a key factor in its success.
The reaction to the upcoming IPO on the infamous r/wallstreetbets subreddit, known for its role in the 2021 meme stock frenzy, has been overwhelmingly negative. Users have expressed their intention to short the stock and their belief that it will quickly plummet in value. This sentiment highlights the challenge Reddit faces in convincing its users that they will benefit from the changes necessary to make the company attractive to investors.
Despite the reservations of its power users and moderators, Reddit's IPO is expected to generate significant interest from investors, particularly given the recent AI boom and the company's potential to capitalize on its vast user-generated content. However, the long-term success of the company will depend on its ability to navigate the delicate balance between profitability and user satisfaction, ensuring that the unique qualities that have made Reddit a thriving online community are not sacrificed in the pursuit of financial gain.
