After much planning, and establishing new foundations for its business efforts, Reddit is reportedly looking to launch its initial public offering (IPO) in March, marking the next stage for the forum-based social app.
As reported by Reuters:
“Reddit has drawn up detailed plans to launch its IPO in March, moving forward with a listing it has been eyeing for more than three years, according to people familiar with the matter.”
Indeed, rumors of a Reddit IPO have been floating around for some time, with more recent insights suggesting that the platform will be seeking a $15 billion valuation to shape its IPO offering.
Which is a crazy high amount.
For comparison, X, which currently claims more than 250 million daily users, and will bring in over $2 billion in revenue for FY 2023, is currently valued at $19 billion. Reddit sees some 70 million daily actives, almost a quarter of X’s audience, and is set to bring in $800 million in ad revenue for the year.
It seems, then, that Reddit is likely worth significantly less than X, while Snapchat, at 406 million daily actives, is currently valued at $27 billion.
The data would suggest that Reddit should be eyeing a far lower valuation, though according to Reuters, the platform was valued at around $10 billion as per its last funding round in 2021.
And given the efforts that it’s gone to since, you can imagine that Reddit would want to think it’s worth significantly more now, though how you quantify that, and its future potential, will play a big part in its prospects.
Over the past few years, Reddit has undergone a massive clean-up, as part of its mission to make it a more appealing proposition for advertisers.
Back in 2020, in the wake of the George Floyd incident, Reddit updated its policies around racism and hate speech, which resulted in thousands of its most controversial communities being shut down entirely. Since then, Reddit has implemented a range of additional rules to clean up its communities, while more recently, it’s also been looking to implement more control, via new processes for moderators, in order to reduce its reliance on volunteer contributors.
Those changes have been controversial, and they have impacted Reddit’s overall usage. But with these new ground rules in place, the platform is now growing again, going from 52 million DAU back in 2021 to 70 million today.
And with ongoing updates to its ad tools, Reddit’s now also looking to facilitate more opportunity for brands to connect with its engaged, knowledgeable userbase.
But in the current market, the actual value of Reddit will be difficult to assess, especially considering where the latest trends are headed.
One of which, of course, is AI, which Reddit also thinks it holds significant value in.
Last year, Reddit also increased the cost of its API access due to many LLMs sourcing their conversational data from Reddit communities.
Could that be another area of opportunity for the app, in monetizing its data for future AI developments? Could Reddit maybe create its own LLM based on the same?
It does seem like Reddit will need to do something more to drive up its value, and an AI play would lean more into emerging market shifts.
But right now, Reddit isn’t worth $15 billion.
We’ll see what valuation Reddit chooses to go with in the next couple of months. Reddit will reportedly seek to sell around 10% of its shares in the initial offering.