Reddit’s Market Debut and Advertising Structure
Founded in 2005, Reddit, the wildly popular online community forum for discussion and idea-sharing, has garnered over 52 million daily active users and over 100,000 communities and is set to debut on the public market early next year.
In September of 2021, Reddit stated that it was targeting a $15 billion IPO valuation on the stock market and is looking to hire advertisers as well as investment bankers and lawyers. Earlier, the online discussion forum’s last private valuation was $10 billion back in August when it gained new funding from Fidelity Investments that went towards video and audio features as well as user accessibility.
The recent increase in their user base in 2021 thanks to discussions over driving the price of stocks such as GameStop and AMC up to profit as part of Reddit’s WallStreetBets’ meme stock phenomenon.
In preparation for the IPO valuation and debut on the market, Reddit has been focusing on its advertising aspect that accounts for most of its revenue and brand-building but according to a post written by Rohit Kaul, this monetization strategy “prevents it from unlocking the actual value of its 52 million daily active users.”
The argument is that it is not as effective as Facebook and Twitter on the proliferation of information and gaining user attention. Furthermore, the online community does not allow for creators and communities to monetize their content with embedded commerce such as its other social media counterparts including Discord, Twitch, and Roblox.
Reddit’s structure, according to the article, requires a different approach to profitability. Their most effective asset is the communities within their platform with unique and deep levels of engagement and conversation that other platforms simply cannot do. The article touches on the idea of monetization that utilizes an in-app marketplace, live events, and other exclusive content for a price.
The current layout of Reddit, however, limits this expansion of creativity in their business model. To drive such a new type of advertising and revenue, Reddit can allow user customization and draw more attention to creators to help them grow their profiles.
While Reddit is a rapidly growing platform that gains more and more users day by day and has increased their advertising revenue two times more than last year, they are still behind when compared to other leading social media platforms such as Twitter, Facebook, Pinterest, and more.
For Reddit to experience an even greater degree of success before it hits the market, it may be beneficial to take a look at the ways in which it can improve its advertising and business model to accommodate and take advantage of the distinctive nature of its own platform in comparison to other competitors.