Can Reddit catch X and Meta?

Investors’ appetite for initial public offerings (IPOs) of “promising yet loss-making companies could be returning”, says Kari Paul in The Guardian. Shares in social-media platform Reddit soared by nearly half when they listed last Thursday, implying a market value of $9bn.

At one stage, the stock was 70% above the initial offer price. Still, Reddit’s current valuation marks a decline from 2021, when it was valued at $10bn in a private funding round. What’s more, while it has become “one of the cornerstones of social-media culture”, the company has “failed to replicate the success of its bigger rivals” such as Meta’s Facebook and Elon Musk’s X, and investors will be scrutinising its “roadmap to profitability”.

Reddit faces many of the same dilemmas as X or Facebook, especially over moderation, says Lex in the Financial Times. While CEO Steve Huffman has previously “squirmed” at the idea of policing the more extreme communities hosted on the platform, he recently had to “tidy up the darker underbelly of the platform” for advertisers.

But some parts of the site “have been resistant to any changes”. More broadly, attempts to monetise content may challenge “the very nature and fabric” of Reddit, which is rooted in it being “a very communitybased, non-commercial space”. Users may flee if it pushes too hard.

Given the challenges that come with boosting advertising revenue, no wonder Reddit has put great emphasis on potential riches from licensing “users’ data to builders of large language models”, says Edward Ludlow on Bloomberg.

This could work, as these artificial intelligence (AI) models are trained using “massive amounts of text and data”, something that Reddit has in abundance. Reddit says its huge “corpus” is “particularly valuable in a world where more and more AI-generated content is shared on socialmedia platforms”. Still, the plan is risky: the US Federal Trade Commission is already “investigating its deals licensing users’ data to AI firms”.