Investors upvoted Reddit’s IPO, hoping AI deals could help the 19-year-old biz finally post a profit

The front page of the internet… and, lately, the biz section. The birthplace of many memes, Reddit recently went public on the NYSE (the first social-media IPO since Pinterest’s in 2019). Reddit shares rallied after its listing last month but fell sharply last week, ending below their first-day close price. Despite its big cultural influence, Reddit’s a guppy in the social ocean. It has 73M daily users across its 100K subreddits (community pages like r/funny and r/WallStreetBets). By comparison, Meta’s Facebook has 2B+ daily users and Snap nearly 400M.

• r/aww: Reddit offered 8% of its IPO shares to thousands of its most “extremely online” users. It was an interesting but not unheard-of move (Etsy and Airbnb did it).

• From AITA to EBITDA: Reddit’s not profitable. Its IPO filing said its loss narrowed to $91M last year, while revenue was up 21% from a year earlier.

One does not simply… walk into money. Reddit’s main biz is advertising, but it’s struggled with moderation and a largely ad-unfriendly environment. (NSFW subreddits aside, how many brands are dying to be near r/BreadStapledToTrees?) Investors seem to be hyped over a newer part of Reddit’s biz: licensing access to data from its 1B posts to train AI models. Reddit mentioned “AI” 60+ times in its IPO filing, saying it expected to make $203M from AI data licensing deals over the next three years. 

• Co-op: Reddit struck an AI partnership with Google that’s worth a reported $60M/year. Analysts think an OpenAI deal could be next, partly because CEO Sam Altman owns ~8% of Reddit’s shares.

• Lurker: Last month the FTC started investigating Reddit’s data-licensing biz, which could slow down deals.