Reddit’s IPO is almost here, with the company filing its S-1 registration with the SEC today, which outlines its current finances and strategic goals, ahead of the pending listing.
And there are some interesting notes in the data provided.
First off, Reddit, which will soon be listed on the New York Stock Exchange under the symbol “RDDT”, claims that it has over 73 million daily active users, and 500 million monthly visitors.
Which is a highly unusual split of daily to monthly active usage.
In general, most social platforms see a 1:1.8 ratio of daily/monthly users, with some variance. Facebook, for example, has 2.11b DAU and 3.07b MAU (x1.45), while Snapchat has 414m DAU/800m MAU (x1.9).
Reddit claims to have a variation of x6.8 DAU to MAU, which is way out of proportion for those averages.
Could that be correct? Could Reddit be seeing a heap more visitors who don’t come back to the site daily?
I mean, I guess, when you factor in people who might be using Reddit to supplement their Google searches, so may visit infrequently. But it’s not exactly a great endorsement of the magnetism of its product if the vast majority of people who look at the app are not interested in coming back regularly.
Reddit reported reaching 430 million monthly actives back in 2019, then switched to sharing daily active user counts from 2020 onwards (it had 52m DAU then). My assumption was that Reddit made this switch because it lost users as a result of changes to its rules, which led to the expulsion of thousands of its most controversial communities. But Reddit’s data here suggests that it hasn’t necessarily lost ground, it just opted for an alternative reporting method. Though it does seem odd.
The documentation also provides a narrative overview of the platform, which it refers to as “a digital city”.
As per Reddit’s S-1:
“Reddit is a global, digital city where anyone in the world can join a community to learn from one another, engage in authentic conversations, explore passions, research new hobbies, exchange goods and services, create new communities and experiences, share a few laughs, and find belonging. People are diverse and have multiple interests. Just like in a city, where citizens are part of multiple subcommunities, on Reddit, users often belong to multiple communities.”
“Exchange goods and services”? Not sure what that refers to exactly, but…
Reddit also refers to its “constantly evolving human archive of information”, which it recently sold to Google for $60 million per year.
Which is also interesting when you consider this listing:
OpenAI CEO Sam Altman owns 8.7% of the current Reddit shares, which gives him significant sway in the company’s decisions, and it’d be interesting to know what Altman thinks about Reddit selling its user data to Google for use in its competing AI applications.
Presumably he’s okay with it. Which seems unusual in itself.
On specific subreddit usage, Reddit says that:
- Over 500 subreddits have at least a million subscribers
- The average active minutes for logged-in users on Reddit is around 20 minutes per day, though that increases to over 35 minutes a day for those who’ve been active on the platform for over five years, and up to 45 minutes a day for those who’ve been active for over seven years.
- 85% of Redditors say that the platform is “where they learn about the topics they love the most”, while 83% say that conversations on Reddit are more on-topic than any other social media platform
In terms of revenue, Reddit says that it generated $804 million in revenue in 2023, an increase of 21% year-over-year.
Reddit believes that it has significant opportunity to increase its intake in the coming years, particularly due to its current revenue split, which shows that it’s heavily reliant on US users.
Here’s Reddit’s current Average Revenue Per User charts:
Reddit’s audience is split almost 50/50 between the U.S. and everywhere else, and as Reddit expands its ad business, that should facilitate more monetization opportunities in other regions.
Reddit also says that it’s exploring new technological developments to enable more ways for customers to invest to grow their business.
Then there’s the Google data-sharing deal:
“We are also in the early stages of monetizing our emerging opportunity in data licensing by allowing third parties to access, search, and analyze data on our platform. In January 2024, we entered into certain data licensing arrangements with an aggregate contract value of $203.0 million and terms ranging from two to three years. We expect a minimum of $66.4 million of revenue to be recognized during the year ending December 31, 2024.”
So Reddit does have some additional avenues of monetization, and it’ll be interesting to see how the Google partnership plays out, and whether that helps to expand Reddit’s exposure and traffic as a result.
Reddit hasn’t provided an overview of the number of shares that it’s looking to offer at this stage, though it has included a plan to offer shares to its power users within its S-1 listing:
“We will invite users and moderators to participate in the directed share program in six phased priority tiers. We will assign each eligible participant to a tier based on that participant’s contributions to Reddit. User contributions will be measured in karma (a user’s reputation score that reflects their community contributions). Moderator contributions will be measured by membership and moderator actions on our platform. Tier 1 will include certain users and moderators identified by us who have meaningfully contributed to Reddit community programs. Tier 2 will include users who hold at least 200,000 karma and moderators who have performed at least 5,000 moderator actions. Tier 3 will include users who hold at least 100,000 karma and moderators who have performed at least 2,500 moderator actions. Tier 4 will include users who hold at least 50,000 karma and moderators who have performed at least 1,000 moderator actions. Tier 5 will include users who hold at least 25,000 karma and moderators who have performed at least 500 moderator actions. Tier 6 will include all other eligible users and moderators.”
That’s an interesting approach to get more user buy-in, and for a platform that is still reliant on volunteer labor for its moderation and management, that could be a critical assurance move.
Reddit does note that it’s seeking a $5 billion market capitalization valuation, dependent on various factors, with more details to come closer to the listing.
Which is a high price tag for an app with questionable value, but it’s not beyond the realm of possibility, and it could be where Reddit ends up when the next stage is announced.
Reddit’s initial public offering be launched after the SEC completes its review process, which is now well in motion, and set for next month.
