REDDIT’S IPO: An Overview

Reddit’s IPO Buzz

There is a possibility of Reddit’s IPO going public. For releasing the IPO, the company said that it had filed paperwork with the US’s Securities and Exchange Commission(SEC). With users more than 50 million as of January 2021, their financials claimed it to be rising more than $400 million from Fidelity Investment Inc. Reddit said that it had a valuation of $10 Billion for August 2021. As per sources, it had been at a $6.5 billion valuation in February. However, there is no confirmation regarding the pricing of shares and the number of shares the company offers. 

Customer Satisfaction is the primary criterion for Reddit

Internet was released three decades earlier and has led to a massive outbreak of the industrial revolution. The result of it is exceptional. The content from Youtube, Reddit, and Twitter gained enormous popularity. The content created engagement by people and also filled a market gap. The internet has undoubtedly made the world an interactive place of content to start and engage independently. It will not stop companies like Reddit from growing even more to become increasingly capital intensive. 

Reddit is, however, an underutilized social media marketing platform but has a promising exponential growth with a base of happy, satisfied customers used as means of advertising. Reddit does not exploit user data and makes customers its main focus for development.

It accounts for a solid customer relationship model for Reddit, unlike other social media companies seeking corporate profits by exploiting its users. 

Reddit’s growth in recent years

Reddit has gained exponential growth because of its word-of-mouth information strategy, both simple and effective. There is no censorship to free speech in Reddit, which has made itself a platform that appeals to users. Unlike other social media platforms, it supports a stream of user-generated content not limited by any means to raise voice regarding any concern.

Reddit’s Investors

The company’s investors are Andreessen Horowitz, Sequoia Capital, Fidelity Investments Ltd., and Tencent Holding Ltd., a Chinese tech conglomerate, and many more. 

  • The Andressen Horowitz companies are- Devoted Health, Rappi, Databricks, Lyft, Airbnb, Robinhood, Instacart, Magic Leap, Stripe, Zenefits. 
  • The Bracket capital companies include- JUUL, Bird, Reddit, Clutter, eToro, PAX Labs.
  • The Coatue Management companies include- Lyft, Box, Airtable, Chime, DoorDash, Quickr, Databricks, UiPath, Reddit, checker.
  • Collaborative Fund companies include- Good Eggs, Tala, Earnest, Lyft, Scopely, Getaround, Reddit, WHOOP, Procure Technologies, Upstart.
  • Fidelity Investment companies include- Uber, Snap, Alibaba, Magic Leap, JUUL, WeWork, SpaceX, Jet, Spotify, Airbnb.
  • Sequoia Capital companies include- Instacart, Airbnb, Market Kurly, DoorDash, Robinhood, Stripe, UiPath, Rappi, Moderna Therapeutics.
  • The SV Angel Companies include- Opendoor, interest, Zenefits, Stripe, Snap, Instacart, DoorDash, Faire, Slack, jawbone.
  • The Tencent Holdings companies include- Epic Games, Hike, Flipkart, Swiggy, Nubank, Discord, Airwallex, SoundHound Inc., Minisco, and Reddit.
  • The Y combinator companies include- Brex, Faire, Zenefits, Stripe, Rappi, Airbnb, Instacart, Ginkgo Bioworks, Flexport, DoorDash.

Reddit’s Expansion

Reddit’s expansion plan stated that the company would take steps to expand concerning consumer products and video content creation. The good news is that the company did not have to face a clash from the Government regulatory authorities similar to other social media platforms such as Facebook, which led to violence and attacks. 

Regarding expansions in other sectors there than becoming a social networking giant, it can also see a future Cryptocurrency sector. Social media is better not to be considered just for sending and receiving messages. 

The good news as of Dec 16, 2021, Reddit acquired Dubsmash, a video content creation platform like TikTok, therefore stating to improve the company’s revenue stream by offering video content creation products to its users. 

Reddit’s Revenue

The trend of Reddit’s revenue has been surging good. With around $8 million for the year 2014, $15 million for the year 2015, $25 million for 2016, $50 million for 2017, $80 million for 2018, $120 million for 2019 and $170 million for 2020.

Reddit’s profitability projects growth by 2022 as it is investing in it heavily for surge and not profitability, according to the recent funding rounds of 2017 and 2019. The primary revenue stream of Reddit is the advertising revenue. It does not track the user’s data. The users don’t have to provide Reddit with their email addresses. This way, the company keeps its customers happy while letting go of a considerable amount of profits to satisfy their customers. An exciting feature of Reddit is the auto-ad option disabled in the platform. It makes Reddit whitelisted from many ad-blockers and keeps customers happy. On another way, Reddit earns its gold subscription for the users. Reddit gold is a monthly subscription that allows the user to create content with extra facilities for editing and allows the users to unlock ad-free browsing. The brands can profit off of this feature by getting exposure. However, this feature is not compatible to bring more income than the traditional advertising model would. It initially puts the customer as the asset for the company as the best form of advertising emphasizing customer satisfaction as primary. 

Monthly views gained by the company

The monthly views of Reddit show that for 2018, it had 14 billion views, 2019 had 21 billion, and 30 billion for 2020 with over 1 million individual communities on the platform.

Financial performance of Reddit before the IPO launch-

In 2021, Reddit saw its profits rise to $100 million for its second quarter. It was three times more than its previous year’s revenue. The yield of 2020 for Reddit was $141.8 million. 

Potential Market for Reddit

By 2022, the company predicts the revenue to reach $289.9 million. The users are also increasing gradually. An estimate is made regarding the number of users by the end of 2025. It would be around 53 million in the United States. For 2020, the users were approximately 37.9 million and 43.3 million for 2021. 

Reddit focuses on monetizing its users and creating an environment where anyone can discuss anything creating a potential market for an upcoming user base and strategic growth.