Reddit: Return Of The Junk Stock IPO

When I look at those numbers I think “Apollo was made by 1 dude with some occasional help from another person. Reddit is throwing half its budget and 200+ bodies at its app and site, and it’s a fucking disaster.”

Different goals. The goal of Apollo was to make a good app. The goal of the official reddit app is to show you ads and siphon money off you.

I guarantee you a good chunk of that R&D money is for making ads more profitable and other monetization.
- To be fair, the point of Apollo was to also make money. But it was to make money by selling you things that made a nice experience nicer. Reddit makes money by selling you stuff that makes a shitty experience slightly less shitty.
- The goal of Apollo was to make a good app. The goal of the official reddit app is to show you ads and siphon money off you.
  
  Spot fucking on.
  
  Ever have a good app? Something you like using but it's by a corporation but that's ok, because it's a good app and does what you want? And then they start adding more features to it, and it slows down, and it's more annoying and it keeps offering services you don't want, and it changes and it morphs and it becomes a shit app.
  
  Hell I've watched Whisk become something I liked using to something worthless now it's Samsung food... Switched to using CopyMeThat which actually also gets me recipes from sites that you can't just read the recipes from, and that's ALL it does (well recipe book/shopping cart/meal planning, which is what it's designed for.)
  
  I'm just sick of "How do we make more money" instead of just being an app that does what it says. Gaming is going down the same hole, sadly.
- I get your point and you’re not wrong, technically . Technically that is what Reddit is trying to do but you need to remember that this is Reddit. They fucking suuuuuck at everything.
  
  I remember years ago a disaffected ex employee wrote something about what it’s like to work the and in just remember thinking to myself: “Imagine going in to work and they call an important meeting, all hands, to discuss “brigading” and then, without an ounce of irony they proceed to sternly discuss this important topic.”
  
  Just imagine those little snot nosed shots puffed up with so much self importance discussing how these “brigades” are destroying their “bastion of free speech”.
  
  I thought I was going to pule in my own mouth again just typing this.
We just have to look at how much the CEO and COO paid themselves last year to know the whole thing is just a huge grift.
The comparison is even more apt when you remember that the official Reddit app also used to be the most popular and great 3rd-party app called AlienBlue, which was purchased from 1 guy and rebranded a decade ago.

It's pretty clear that the reason why the official Reddit app isn't good is because a good experience for their users isn't their goal.
- The fact that the app is still so bad after so much time has gone by indicates that it is the desired product that the company wants to offer. And after realizing that they were still losing users to better competitors, their solution was to destroy the ability to compete in the first place rather than improve the product.
  
  They like the app as-is, with all of the terrible performance and UX that goes along with it. The reason behind that is because they're getting user engagement metrics and other telemetry data, more control over ad delivery and the content users see (including astroturfed sponsored Reddit content), and more monetization.
  
  Third party apps, like Apollo and AlienBlue before it, cared about providing a good user experience. It just happens that users typically prefer experiences that aren't trying to capitalize their every interaction, and companies take that personally.
- Alien Blue wasn’t rebranded. They bought it, called it the official app (with the name Alien Blue) for a little while, then launched their own app and stopped supporting AB.
- Yeah I paid for alien blue pro or whatever it was called. Then they killed the app and gave me a year of Reddit premium (my memory is shit, idk the proper name). After a month or so I switched to Apollo, Reddit’s app was just so shit. I left when Apollo died and now only use dystopia (an app designed for blind users) for the infrequent times I visit Reddit. No adds. It’s almost read only. But it’s ideal for visiting niche subs that aren’t on lemmy without giving Reddit clicks/seeing ads.
- You can also see this with the old website being much better than the new one and apparently there's an even newer one that people who like the old new one generally hate.
- a good experience for their users isn’t their goal
  
  They are in tension with the more pressing goal of extracting revenue. But how do you extract revenue from a site that's mostly just "user content" + "ads" in an era when ad revenue is plummeting?
  
  Maybe if they increase the prices on Reddit Gold?
Another difference was I was willing to pay for Apollo, whereas I don’t want to spend a dime on Reddit.
2000

Reddit has over 2000 employees.
- This is one of those things where, I totally feel for all the big tech employees who’ve been laid off, and it is ultimately the fault of the companies, but like, that’s just too much.
- And so many unpaid moderators... Which is an acceptable trade when the site isn't cashing in on your work.
- Wtf are they even doing.
- At least until they can automate them
Seriously. Reddit is a glorified link sharing service with comments looking for a 6+ billion valuation. Christian and a couple backend devs could recreate it all in a weekend.

Reddit is hopeful that AI training is their golden ticket but in all reality they’ll only ever have one large buyer. OpenAI, Anthropic, Mistral, etc, don’t want something that Gemini already bought.

With all that out of the way, I don’t see very many companies lining up to license a far left-leaning dataset that had all non-echo chamber discussion banned. I mean, look at how much trouble Google got in with an objectively racist Gemini that forced them to turn off human image generation.
- Depends on the sub. The news, technology, and politics subs are 99% link sharing. The subs around DIY stuff, health, etc are often people sharing personal experience and advice. The latter is likely the most valuable thing for AI to crawl.
Apollo… the wound that never heals.

This is one of those rare cases where what is being said is less interesting than who says it.

What: Reddit stock is junk, the IPO will fail hard, and anyone investing on it is begging to lose money. I believe that most people discussing this in Lemmy already know that, so the info isn't new here.

Who: Forbes. Forbes' target audience is investors; greedy vulture capitalists love it. So if Forbes says "it'll sink!", investors are less eager to buy stock, and that sinks the stonks even further. So what Forbes says is often a self-fulfilling prophecy.

I'm glad that Forbes is doing it. I want to see Reddit die.

EDIT: as other posters are correctly highlighting, I derped - the article is from a "contributor", and it has basically no impact or visibility.

Damn - now I want Forbes shitting on the IPO!

Note that this is a "contributor" post, which is essentially their sneaky wording for editorial. It isn't a real Forbes article and anyone that knows the Forbes website won't pay any attention to the article.
- Very important distinction! Even I've written "contributor" posts on behalf is a company when I was moon lighting for a block chain startup. They're not quite ads, but you very much can buy your way into that.
- Good catch - I didn't pay attention to the fact that it's a contributor post. Even then, I believe it to be still exposing the "Reddit is junk stock" (implied: "don't buy it!") discourse to potential investors. The title alone already does it, for those who skip past the article.
- It will still have made the rounds, since it trended on HN: https://news.ycombinator.com/item?id=39667026
- Yeah, too often Forbes will publish any old trash.
  
  But it's hard to argue with maths.
- Great piece of marketing to have someone write the article, have people talk about it mistakenly as an actual Forbes article and drive interest in the stock that will make many clueless individuals suddenly have an interest in Reddit Stock.
  
  News is news .... any news whether good or bad, especially if it is controversial and agitates people, is good news for the company pushing their name.
  
  Chances are .... it was Reddit company marketers that set up this article to be featured on the Forbes website to drive attention to their company and their upcoming IPO.
"Forbes" is not the Forbes you are referring to. It's a blogging platform that shows the forbes name and claims they're "Contributors" but isn't actually "Forbes Magazine" which is what investors actually trust.

Basically this is just some shitbag pretending to be classy by hiding behind someone who sold him that space. There's a ton of shit Video Game "Articles" on the site too, same story(masquerade), same value (low) , same respectability (none)
- Don't talk shit about Paul Tassi, he's the best thing they have going on that part of the site (when he's not going off about Dedstiny 2)
One of the most convincing points is ...

competition has had many years to acquire Reddit prior to this IPO and have chosen not too. Acquiring Reddit now wouldn’t create all that much value for a competing social platform.
- I sure as hell wouldn't acquire a company for a product that has a near identical, free, open-source alternative that's in active use.
But you should also take into consideration that this article did not get a huge attention. It is almost a week old and has a few thousand viewers.
Yes it's a bit confusing with that "Forbes" name?
But the article is good IMO, and has many 100% valid points.

I think the company may never monetize its platform without angering its users and the entire premise of Reddit is user-generated content.

Yep.

Also - reddit spends 55% of it's budget on R&D?! WTAF!?!

A decent search tool is right around the corner.
- Unironically, yes. As part of Reddit's deal with Google, they're supposed to get access to some of Google's search tools.
So, they are likely very poorly managed but, R&D is a common slushfund to keep your profit negative so you don't have to pay taxes.
- which makes sense if the r&d gives return on investment.
  
  otherwise you'd be better off paying tax and taking the profits anyway.
It's expensive to research and develop Spez's apocalypse bunker.

Or as I like to call it: Super Weenie Hut Jr.
Delivering ads to people who are armed up to the teeth with adblockers requires quite some research effort.
Shouldn’t most of a midsize tech company’s budget be that?

That said, they’re terrible at it. And having worked with some of the folks they hired, I’m not totally surprised.
- Hundreds of millions of dollars each year and in 20 years all they did is two redesigns, both of which sucked worse than what they had originally.
  
  Oof.
Nowadays it's llm powered bots all the way down.
What else do you think they should spend their money on?

Serious question, they're a social media site, their whole goal is to sell ads to consumers, which is all R&D cost and server cost. User acquisition at this point is minimal, Sales is basically "We have a lot of users, want to talk to them." The goal is to create ways that sales can sell to consumers to make money.

Doesn't help the consumer base is actively hostile to advertisements.

Their pre order ipo is wanting and planning on like $31 to $34 a share. I'm thinking no.

0.031 sounds more realistic
- It's not quite that bad, the author buries this near the end:
  
  There’s 97%+ Downside if Growth Matches 2023
  
  Which if I read that correctly means he thinks a fair valuation of the stock is about 90 cents.
- 0.00000031 more like
Stocks are basically a percentage of ownership. The share price as a dollar amount is meaningless because it could be 1% of a company or 0.000000001%. The relevant number here is that Reddit is IPOing at a valuation of $5 billion (that stock buys a ¹⁄₁₅₀₀₀₀₀₀₀ interest), which all I can reply with is hahahahahahahaha
- I am aware. It's valuation was in the article.
- Well, either two values give the third. All one's gotta know is two of: valuation, price per share, number of shares.
$6.5B valuation (assuming a standard 20x EPS model) should imply in the neighborhood of $325M/year in revenue from a company that makes about a third of that.

Either Reddit plans on tripling its revenues in the near future or this is an unrealistic target.
- It's a sham, imo. I was on reddit for 15 years. It has peaked already. They won't be able to get more for ads and I don't believe their data for AI will go higher than what they've gotten for it this year. The only way they'll be worth more is to cut overhead.

What could have been done to increase the valuation higher and maintain goodwill with the community:

Cut CEO pay by 90%
Pay mods as employees, think of the GM/guide structure of early mmos where you start as a volunteer for a free sub but can work your way up
Subscriptions to remove ads
Push ads in API for third party apps to host your ads, remove for subscribed users
Profit sharing from ads and subs with top content creators

It baffles me they didn't take the obvious approach of offering apps/API access for Premium users, only turning it into a billable thing for LLMs. They're not going to pay for the API, they will scrape the site. Your users will! That's a great source of revenue that can last as long as reddit does.

But no, they wanted that LLM money.
- They're just looking to cash out and run. They don't care about anything to do with the actual service anymore.
The refusal to seriously explore cross API marketing is absolutely nuts to me. That's reddit's billion dollar innovation and it was right there. Everything was in place, and it would have legitimately set reddit apart from every other shitty social media marketing paradigm, and would have been an actual game changing innovation.

All they needed was to put some actual engineering effort into it. Which I guess explains why they didn't even fucking try.
Just imagine having a website that makes no money, and you get paid so much to run it that if you got a 90% pay cut and quit after a year you’d still be set for life.
- Capitalism.
  
  Basically entities flush with wealth do not make their decisions out of a sense of economic survival.
  
  Capitalism is all about brutal survival for the lower classes and for the upstarts without any background.
  
  At the same time capitalism is all about a decision making process that is leisurely, capricious, and forgiving for the aristocratic upper classes.
  
  If the company is sufficiently large (don't know if reddit qualifies, but my past employers have, so speaking from experience here), their own upper management is robbing the company on the inside every day when they make deals with contractors by taking kickbacks as opposed to what benefits the company. Make no mistake, all the upper management that is sufficiently aristocratic are looking out for their personal interests instead of the company's. In other words the same mentality of personal gain at all costs that supposedly drives the creation of some of the companies is also their undoing. "Greed is good" capitalism eats itself. Large ultra consolidated/merged corps are every bit as bureaucratic and internally Machiavellian as any government can hope to be. Their very existence is a tax we all pay and we don't get a vote about how these corporate fiefdoms run both themselves and us.
  
  Reddit at this point is a very important and well backed propaganda tool, the backers can afford to pay their CEO and there is no hurry to make profits, and they have plenty of time and resources for every manner of business mistake.
Mods could be paid on a bounty system with salary or clocked hourly higher-tier mods to oversee moderation to prevent scamming. The higher tier mods would be paid more based on traffic with that ad profit sharing model.
- Or maintain a flat general rate across the board for all mods ... make it a liveable wage so that it is worth it to everyone.
  
  This way, moderating can't be monetized or gamed to drive nonsense content just to drive up the income of a small group of people. If you award moderation with even more money .... then the whole system eventually becomes generating whatever content, bots and artificial popularity just to make money ... rather than in just maintaining an equal well paid workforce that all work to maintain the service as it is and let the users develop the content based on actual interests and popularity.
  
  But what do I know .... the world is just set up to make money and no amount of common sense will ever be implemented if the whole system is perpetually set up to just award those that can make as much money as possible no matter what.
Revert to the source code of about 10 years ago and get rid of most programmers. The only positive change in the last 10 years is the ability of users to ban people from harassing you.

Allow all subs to identify other subs they are similar too, and link all that information together so that users who don't like how sub is moderated can find an official list of alternative subs.

Allow only temporary bans, not permanent bans from mods. Admins can still give permanent bans for bad faith or dishonest actors and should do so for foreign governments trying to influence other countries.

Allow subs to optionally require flair identifying citizenships and if you are found to be dishonest you can get site ban.

Get rid of certain pieces of automod functionality that subtract value for the users of the site.

Oh just Forbes totally destroying Reddit.

Dude does NOT like reddit. I wonder which app he liked?
- Capitalist isn't human, he has stock in Facebook and Twitter so he doesn't want Reddit competition

More specifically, Reddit notes in its S-1 that, as an emerging growth company, it will:

present only two years of audited financial statements in the S-1,

not be required to obtain an auditor’s attestation report on the company’s internal controls over financial reporting requirements of the Sarbanes-Oxley Act,

provide less extensive disclosure about executive compensation arrangements, and

will not require stockholder non-binding advisory votes on executive compensation or golden parachute arrangements,

That sure sounds like a solid investment

Also, the two classes of shares (new shares get 1 vote per share, existing shareholders get 10 per share)… what the fuck. Why would anyone buy that shit

No wonder they are trying to sell it to redditors.

Great article and very thorough, if you have interest in the subject, I'd say it's a must read, despite the source. And I 100% agree that reddit would be a very risky stock to buy, with more chance of becoming worthless than actually make you money.

This is completely disregarding my personal opinion that reddit quality has deteriorated for years, because sometimes even poor quality can be a great money maker, when it has achieved market dominance or critical mass in its segment, and no doubt reddit has done that.

a very risky stock to buy, with more chance of becoming worthless than actually make you money.

Sounds like a retail investor wet dream!

Future penny stock.

I think it's worth less than that. But "reddit gold stock" doesn't roll off the tongue as well.
I know what we all wish, but I'm pretty sure they are going to do ok. Especially with X down for the count.. where will people flock? I'm not talking about fundamentals here, just consumer sentiment.
- Only if the the accurate bot population is never disclosed. If people found out how much of Reddit is bots, the value would drop.
- Yeah, they are getting that Google bump. Honestly I'd have bought a bit of IPO stock if it didn't require giving reddit my real info. I'm not that desperate though.

I’ve never shorted a stock before, but this is looking like a solid play.

Looks like it's finally time to bite the bullet and watch the big short.
- If you really haven't... you need to. Better yet read the book. It should be required reading in America to see how the financial institutions fucked over America in 2008 and most of them got away with it or got the government to pay for it's mismanagement, while a LOT of people got saddled with absolutely awful loans because all that mattered was creating and selling new debt.

Extremely well written and put together. Still, as harsh as it is, I think the author was still not harsh enough.

Ditch reddit, join lemmy!

Return Of

It never left, bro.

It's a hard call on Reddit.

This article seems to leave out the reality that Reddit's big win is data and an in built machine learning capability in what is good quality. For future AI and LLMs it's actually a treasure trove of information that will only rise in value.

Realistically it's had massively bad PR and issues but people still use it over Lemmy and many others, and Lemmy/others aren't going to overcome it any time soon (if ever). So it doesn't seem like it's going to go away at end of day, and it's still one of the best sources of information on the internet available.

At end of day it's stocks so it's coin flips all the way. No one beats the market consistently over time that doesn't also utilise insider information.

From the article:

Reddit earns an Unattractive Stock Rating.

Of course it does, have you seen the average redditor?

“[moderators] may be able to leverage their influence within those communities to change the dynamics of the discourse within the communities or to disrupt the normal operation of their communities or other communities on our platform.”

And they can give you rando-bans out of nowhere, suddenly cutting you off from your topic of interest and exposing serious flaws with the entire site.

sounds like a ripe opportunity for YOLO Stock Option Puts

They know WSB can tank their stock and there's sweet fuck all they can do about it lol.

Absolutely savage

Is Reddit a crypto?

or a Ponzi scheme
They have avatars linked to ETH NFTs. They also have a crypto tip system in some sub's.
It should be! All comments in a blockchain might actually be better than what they have now, i e censorship, banfest, and revisionism! Up 3000% in the last 5 minutes, solid investment.
- It's crazy. Used to be almost a lifestyle. Now it is just another failed social media project.