Social media platform Reddit missed the red-hot IPO market of 2021, and efforts to go public this year have taken a knock after Fidelity, the lead investor in Reddit’s most recent round of funding, slashed its own valuation of the company by 41%.
On top of that, Reddit is trying to manage a growing backlash to recent changes to the company’s API access and data. The rise of generative AI models uncovered the fact that Reddit’s billions of posts and comments have been a rich source of training data for models like ChatGPT. Reddit decided that it would start charging for access to more of its data — something Twitter has also started doing — much to the chagrin of smaller developers. One such Reddit app, Apollo, reported that at its current usage, access to Reddit’s API would cost ~$20m a year at the suggested new prices.
The (gentle) rise of Reddit
Reddit remains an unusual shape in the social media puzzle, with its groups of communities, known as subreddits, similar to the earliest versions of internet forums. These are places where people gather to discuss everything from movies to memes, tennis to tattoos, gardening to ghosts, investing to interior design and all of the wackiest topics in between.
With an emphasis on anonymity, strict posting rules and little reward for building a “following” or becoming an “influencer”, the platform has grown slower than peers. Two of its biggest default subreddits “r/funny” and “r/askreddit” are imperfect but reasonable proxies for how the platform is growing — both of those have grown steadily over the last decade, reaching ~50m and ~41m members respectively. For various reasons, the company has struggled to replicate the hyper-targeted advertising machine of Facebook and Instagram, despite conveniently having its users organized by interests and topic. Navigating how to get paid by massive AI models, without alienating smaller developers, will be a difficult tightrope to walk — but it could generate potential new sources of revenue for Reddit.
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