Reddit is a very risky venture. It relies on enormous amounts of free work and they are not keen on the website being further monetised. The mods are regularly at odds with the site ownership and without them it looses value quite fast, the moderation is what makes the site work. While last years protests against the API shutdown didn't take reddit down the scars of that action and the protests by users are visible on a lot of searches of the site now. Many users deleted the contents of their accounts alongside the account and you find deleted posts all over the historical posts now. Its reduced the value of the site quite considerably for answering weird questions via another search engine.
This incident caused Lemmy to become a stable and permanent competitor that is gradually growing and competing with Reddit. Its still tiny but unlike a year ago it works a lot better its not hastily been thrown together. Reddit enacting another war with its users and there is now a clear alternative that people can go to. The trust wont be there in Reddit as a company for a lot of users and they wont need as big a push as last year.
Its a risky investment because its nothing without those mods and if they protest or leave the user base will quickly dissipate as the site descends. Its been harder to moderate since a lot of the tools were lost with the APIs. The quality of Reddit has clearly dropped in a lot of subs. Reddit does not have many cat lives left. They still haven't made any money and the entire project seems to be unstable.
Everything you said is accurate and can be summed up as “investors should have no faith in Huffman at the helm”, which is enough to tank a growth stock like Reddit is supposed to be.
Quite honestly, as someone who has done deep value investment analysis for fifteen years, I’ve never seen a company purposely do anything as self destructive as what Reddit did, particularly before going public as part of it’s IPO roadshow phase. These guys are amateurs and it shows.
- their software stack was relatively simple and easy to maintain
- their moderators were volunteers who worked for free & loved their job (as opposed to FB who are hiring them for 30/hour)
- their expenditures were very low for a company of that scale.
- third-party developers built great apps for free and boosted the site, and this was when Reddit team didn't have the resources to build a proper app of their own (they ended up acquiring Alien Blue, one of the favorite apps of that time and adopted it as their mobile client)
They had a huge presence for minimal expenditure, and they let it all go with more & more short-sighted decisions. Quite sad to see something just decay like this.
Hi, out of curiosity: could you share some of that deep value investment analysis - even if it is outdated - or even better, perhaps some of the methodology or heuristics?
It's possible to write a bear perspective on any company of any size. I remember reading the ones about how Facebook would never make money around the time of Facebook's IPO. Those turned out to be wrong, to put it lightly.
Calling Reddit mods "retards" is a disservice to the mentally handicapped. They are, in the aggregate, in no way a benefit to the site or to human civilization. Anyone who has actually used the site for any length of time, and ever ventures out of the likes of /r/politics and /r/worldnews, knows this.
None of this takes away from the fact that Reddit is, in the aggregate, (as others have said) the single largest collection of discussions on Earth. Bigger than 50 years of every mailserv combined, 45 years of Usenet, 20 years of Facebook comments, or 15 years of Stack Exchange. Expecting Lemmy or Mastadon to supplant it is futile.
> “If the prospects are so bright, why are insiders selling?” Silverman added.
Concentration risk is a pretty simple explanation. If you had $50 million in cash you surely wouldn’t drop every last dime into a company that hasn’t posted a profit (both nominally or by any reasonable accounting measure) in nearly 20 years?
The game all along was to dump as much as possible, as fast as possible. I’m impressed they finally pulled it off.
I remember when Facebook IPO'd, it immediately dropped from its IPO price ($38/share) and eventually bottomed out somewhere in the teens. There was a lot of doom and gloom around that time.
Not saying Reddit is Facebook and you're probably better off putting the money in a more proven stock but a post-IPO price slump doesn't seem all that unusual depending on how it was priced.
Facebook created the Feed and then figured out how to run ads on it in a way that didn't annoy users too much, combined with the laser targeting available thanks to detailed profiles and likes/follows.
Reddit does not have this, and despite years of trying new stuff, can't seem to create anything equivalent. The best they've come up with is selling users' creations for LLM training, and that has limited range with how many equal sources there are. Many of which are free.
At this point, it's being a massive repository of (ostensibly) human perspectives that can be used to train LLMs and perform search. Google [1] appears to think so. For all its faults as a platform that relies on volunteer (read: unpaid) moderators, the website is structured in a way that makes it very useful for continually curating human knowledge of the world. It's unclear whether Reddit can deliver long-term value like this, though, especially depending on one's perspective about to what degree generative AI is a bubble.
If aliens come to Earth and look at Reddit posts to decide whether we're worth establishing friendly contact with, or destroying to build a hyperspace bypass, we're doomed.
It definitely comprises a fair share, but I think it is a stretch to say Reddit fosters continuous curation of world knowledge. It offers a space for some very particular niches and memetic content, but a lot of human world knowledge is encoded elsewhere, e.g. internal communication channels, personal correspondence, working notes, journals, wiki's, QA-sites or may not even be encoded at all.
World knowledge would also require broader demographics and more non-English language content, as well as other means of communication beyond text-based interactions.
The $60 million a year that Google is paying amounts to 7% of 2023 revenue. Perhaps they could get 3 or 4 more customers at that rate. There's just not enough juice there.
It opened at 6-7x revenue and a ton of the yearly loss is that the C-suite is paid a stupid, double digit, percentage of that revenue. All it will take is a few right decisions and you have a profitable company trading at a low value for a tech stock. Meta, for instance, is 10x revenue.
Any indication that the board(?) will do this? Reddit seems to be a finish product so there's massive room for cost cutting in management and developers.
I recently overhauled my credit card strategy, and reddit was a tremendous help. Pretty much every search result in Google is riddled with recommendations based on affiliate marketing, but /r/CreditCards had a lot of really good information. It's where I learned that Bank of America has the best cashback credit cards if you can park $100k at Merrill Lynch. I also learned a trick on how to get multiple copies of one of their category-cards.
Reddit certainly helped me get $1,000 more in cashback than I was getting.
So there's a tremendous amount of value in there, I just don't know how they unlock it.
Traffic. It's top 3 visited site in the US, that's worth a lot of money. It's easier to increase revenue of each user than it is to build a new social network. Someone will figure out how to increase revenue per user.
Reddit users are notoriously hard to monetize from ads. The most successful marketing is astroturfing and guerrilla marketing which does not you to pay Reddit itself.
I feel like that is an old trope from many many years ago. The site has added millions of users since then. It seems like the second post on any page is an ad now. They must be filling their inventory.
Nothing. That's why we saw pg extolling the virtues of reddit and its scumbag CEO last week: gotta drum up interest to have someone else holding the bags when the dust settles.
That is obvious, isn't it? Reddit is a bad investment (based on their execution) and if the IPO original price was not well estimated it has a pump and dump effect [1]. A similar pattern is repeated with a successful stocks like FB/META [2] but if I remember well it was discussed at that time that the IPO price was wrong, they have excellent network effects and they have a lot of room to innovate (e.g. ads) while Reddit has tried already the "innovations" but they don't are well implemented (e.g. also ads).
It should be noted that most IPOs are not a good investment (unless you can get in pre-debut and sell on the first day). For some background on the topic, this is a good episode to watch/hear:
> We’ve previously compared IPOs to lotteries that are prone to inflated valuations and low returns. Today we welcome “Mr. IPO,” Professor Jay Ritter onto the show for a deeper dive into IPO performance, for his insights into SPACs, and to hear his research into why economic growth doesn’t correlate with stock returns. Early in the episode, Jay unpacks how long-term IPO returns perform against first-day trading. While exploring the role that venture capital plays in tech IPOs, Jay talks about why negative earnings don’t affect tech IPOs in the short-term before sharing how skewness factors tend to impact young companies. Reflecting on how IPOs are usually underpriced, Jay discusses how the interests of companies are not aligned with the interests of IPO underwriters. After looking into IPO allocation, Jay compares the 2020 ‘hot IPO market’ with the internet bubble of the late 90s. Later, we ask Jay about what special-purpose acquisition companies (SPACs) are and why they’ve exploded in recent years. His answers highlight their investing benefits, risks, and why SPACs might be a better option for companies than IPOs. We examine how SPACs have historically performed and then jump into our next topic; why economic growth isn’t a good indicator that a country is worth investing in. He touches on why returns don’t correlate with economic growth, the place of capital gains and dividend yields when investing abroad, and how innovations in an industry can lead to higher stock returns. We wrap up our conversation by asking Jay for his take on whether the stock market is efficient before hearing how he defines success in his life. Tune in to hear our incredible and informative talk with Jay Ritter.
> Since 1996, Jay R. Ritter has served as the Joseph B. Cordell Eminent Scholar in the Department of Finance at the University of Florida's Warrington College of Business. Prof Ritter is known as “Mr. IPO” for his work on initial public offerings. During 2014-15, he served as president of the Financial Management Association. Prof. Ritter has been a trustee of a mutual fund, and a consultant for companies on valuation and financing decisions. He has also worked as an expert witness for government agencies and law firms, and is frequently quoted in the financial press.
Prediction: after the first month, it will rise more and more as it becomes part of the funds people blindly put money into each month via 401k. Stock prices are set by supply and demand, and we have a rather large demand these days.
It’s controversial I know, but I think that passive investing should be banned. Funds are just blindly dumping money in companies regardless of performance (after the company gets to whatever threshold), it’s distorting the market.
The CEO and COO cashing out 500,000 shares each sounds like some kind of prisoners dilemma. What do you do with your shares if you’re an employee at this point? I’d dump half I guess and cross my fingers.
Employees and everyone else are bag holders. This was just a way for executives to get paid. I give it 2 years before Reddit is acquired by Microsoft or someone who wants to use it as a repository of training data.
Employees should always sell their shares as soon as they are able. Not a dilemma at all. There's no point in concentrating your risk in a company you already rely on for your regular pay.
I'm a big believer in Reddit, but NOT its current CEO, Steve Huffman, who has shown some horrible leadership. (See: how he handled third party apps.) He has to go.
For the 3rd most popular website filled with user generated content it's not that unrealistic. Even if the company is currently unprofitable there's reasonable odds it could become so or just get taken private by someone interested in owning a major media brand.
This incident caused Lemmy to become a stable and permanent competitor that is gradually growing and competing with Reddit. Its still tiny but unlike a year ago it works a lot better its not hastily been thrown together. Reddit enacting another war with its users and there is now a clear alternative that people can go to. The trust wont be there in Reddit as a company for a lot of users and they wont need as big a push as last year.
Its a risky investment because its nothing without those mods and if they protest or leave the user base will quickly dissipate as the site descends. Its been harder to moderate since a lot of the tools were lost with the APIs. The quality of Reddit has clearly dropped in a lot of subs. Reddit does not have many cat lives left. They still haven't made any money and the entire project seems to be unstable.