Why Reddit's IPO is not enticing its users
Reddit's recent IPO filing with the US Securities and Exchange Commission has generated mixed feelings among its users as the social media platform may prioritize profit over its community. Many Reddit users are skeptical of the IPO, fearing that it could lead to changes that negatively impact the platform's culture and values. They expressed concerns about increased advertising, data collection, and potential censorship. Some users also worry that the IPO could benefit early investors and executives more than everyday Redditors.
Skepticism and concerns among users
Skepticism about Reddit's IPO is evident among users on r/WallStreetBets and r/technology. One user stated, "Short the s**t out of it. They have not proven that this user base or data set can be monetized." Another remarked, "The beginning of the end," while others speculated on possible actions management might take to boost profitability, like banning subreddits or increasing ad load. Reddit will allow 75,000 loyal users to buy stock in the IPO but some have labeled it a "scam."
Directed share program for power users
Reddit's directed share program enables qualified users with sufficient karma or moderation experience to pre-register for early stock purchases. After three weeks, eligible users will receive further instructions. Some view this as a "nice thank you" from Reddit, while others see it as a gimmick. One user noted that the shares aren't free, and participants could potentially lose money on their investment.
Reddit has never been profitable
With 40,000 words, Reddit's risk factor section in its IPO is lengthier than X and Facebook's combined. Since in debut in 2005, the platform has never been profitable and its community moderation model makes it more susceptible to user revolts. Reddit depends on 60,000 unpaid moderators who understand their communities and run them on a day to day basis. Offering shares to power users might be an effort to reduce this risk by aligning their interests with the company's growth.
Doubts about Reddit's monetization potential
Despite having an engaged user base, Reddit has had difficulty effectively monetizing its platform. The majority of its revenue comes from advertising, but targeting is more difficult due to passive users and inconsistent engagement patterns. One user likened Reddit's situation to Tumblr, stating, "Executives look at a highly engaged community and think 'there's gotta be a way to squeeze money out of this.' But maybe there just isn't."
Reddit is monetizing content
Many Redditors fear that more ads will be served going forward. However, because users are not always logged in, it will be difficult for the platform to target them with ads. Reddit's inability to generate profit is also attributed to a liberal approach to moderation of content. Recently, it has inked a $60 million per year deal with Google, allowing the tech giant to utilize Reddit's content for training its artificial intelligence models.
Issues surrounding Reddit CEO Steve Huffman
Since last year, Reddit has been marred with issues due to the changes introduced in its API pricing. This led to the shutdown of many third-party applications. Despite repeated criticism by its avid users, CEO Steve Huffman refused to retract his decision. "I don't really see any good that can come from Reddit going public," one user said. "Not to sound dramatic but it kinda feels like the final nail in Reddit's coffin after years of degrading quality."
