Unsure what’s occurring at Reddit HQ, however they apparently see one thing of their platform that others, very logically, don’t.
Final week, Enterprise Insider reported that Reddit’s looking to launch its long-awaited IPO in 2024, at a goal valuation of $15 billion.
To place that into context, X, which has 250 million daily users (versus Reddit’s 70 million DAU), and can usher in over $2 billion in ad revenue in 2023 (versus Reddit’s $800 million) is at present valued at $19 billion.
Snapchat, with 406 million DAU, greater than 5x Reddit’s consumer base, is valued at $27 billion.
Primarily based on the comparisons at hand, there’s seemingly not a lot logic to Reddit’s valuation goal. However then once more, possibly it’s simply that, an bold goal, and Reddit will ultimately must settle at a lower cost.
However the true worth of Reddit is probably going method lower than it’s going to confess.
The troublesome half in assessing Reddit is attempting to measure precisely how properly it’s going, as a result of whereas it has elevated its lively consumer numbers over the previous few years, rising from 52 million DAU in 2021 to 70 million now, it really had much more customers 4 years again.
In 2019, Reddit reported 430 million monthly active users. Which is so much completely different from every day engagement, however primarily based on common platform averages, that might have meant that Reddit did have round 200 million every day actives at one stage.
However again then, Reddit was a much more lawless entity. Reddit was the house of leaked superstar nudes, and horrific gore content material, which, whereas clearly nice for engagement, was not conducive to model security, and subsequent advert spend. With a purpose to tackle this, and transfer in the direction of an IPO, Reddit applied harder moderation necessities, which additionally noticed thousands of the platform’s most offensive subreddits shut down entirely. Reddit’s total viewers shrank, but it surely’s now way more sanitized, way more secure, and in consequence, it’s now bringing in considerably extra advert spend.
However its development continues to be comparatively restricted. For instance, whereas Reddit’s including customers at a charge of 6 million DAU per yr, Snapchat’s including 50 million every year, whereas Fb, which is already shut market saturation, is including 70 million more daily actives each year.
Reddit ought to be including extra if it sees itself as a $15 billion firm, whereas its advert run charge, at $800 million, can be properly behind others within the sector.
Reddit advertisements do present promise in sure niches, and it stays an essential connector to engaged, focused shoppers. Reddit dialog has additionally develop into a useful supply of actual world perception, but it surely’s not a main mover within the digital advert area as but.
Can it develop into one? Personally, I don’t see it including sufficient customers to be an actual focus, however possibly, if it retains shifting on its present path, it could possibly develop into an even bigger consideration for extra manufacturers.
However it’s not but. And whereas Reddit may also argue that its consumer information is hugely beneficial for conversational AI development, I don’t assume that any market analyst goes to see $15 billion in worth in its numbers.
Will Steve Huffman and Co. attempt anyway? Huffman has mentioned that he’s a fan of Elon Musk’s approach, which is all about radically optimistic projections, real looking or not. So possibly he’ll push forward. However I think that 2024 will likely be a yr of disappointment if he does.
