I’m a Reddit, Inc. fan. It’s one of only two social media apps that’s earnt front page privileges on my phone – a core procrastination tool! Nearly 20 years old, they’re now filing for IPO but at 281 pages it’s a hefty read so I thought I’d try to summarise. Views are my own and are certainly not intended as investment advice.
– $804m revenue in 2023, up 21% YoY.
– Still loss making $(90)m in 2023, improved from $(159)m in 2022.
– Model still highly dependent (98%) on hashtag#advertising.
– Unaudited accounts do show a small profit in q4.23, but this is likely due to the cyclical nature of the ad market (revenue) whereas costs (R&D, sales, marketing, overheads) are relatively flat throughout the year.
– 73m daily users or 267m weekly.
– Roughly half of daily users are logged in.
– Roughly half of daily and weekly users are in the US. They don’t disclose how many weekly users are logged in (?).
– Users grew in q3 / q4 23, but so did ‘Research and Development’ costs, by c.$80m.
– Quarterly ARPU is currently heavily weighted toward the US ($5.51) vs Int’l ($1.34).
– Growth opportunities stated broadly as 1. Advertising, 2. Data & licensing, 3. User Economy.
So…
– I’d be concerned that after 20 years, I’m still trying to find a way to scale the business.
– At constant metrics, breakeven should be possible at c.100m users, but with US fairly saturated, growth will need to come from Int’l with much lower ARPU and pesky things like local languages and sub-scale advertising markets. Growth always costs too!
– There is an opportunity to enhance US engagement and to improve the efficacy of their ad product.
– They have recently done a $60m (annual) deal with Google (https://lnkd.in/e_eUNVqK), allowing them to train AI models. Interesting given the wealth of detailed online discussion contained in 100k subreddits. Though I find it interesting for a tech company to create value by selling to a 3rd party in this way.
– Opportunities around any User Economy are potentially interesting but aspirational rather than based on anything concrete at this stage. With that many users there should be some potential but how meaningful or scalable it is remains to be seen
In summary.. I remain a Reddit fan and will continue to use it. It’s a great service and decent business, it can certainly be profitable. But it’ll be a grind and I’m not sure I see a route to any exponential growth. It will be interesting to see how this is received and ultimately how it’s valued by the market. 🤞
