Created to become the future "front page of the Internet," Reddit was launched in 2005 by roommates, Steve Huffman and Alexis Ohanian. The site officially launched in June of 2005. The initial idea sought for users to submit content and have their communities vote on what was submitted. The more upvotes a submission received, the closer it reached the front page of the main site, regardless of which community it was posted in. 

With the ability to remain anonymous and share potentially newsworthy content instantly, Reddit has also been at the center of multiple controversies. From incorrectly identifying the Boston Marathon Bomber to sharing leaked celebrity photographs, the site has not been without some negative attention. Despite negative press, the ever-growing social media community continues to remain a fixture for millions of people around the world.

Reddit goes public

Following Pinterest, Reddit has been the most recent social media platform to be publicly traded. It's also the first social media company to make such a move in half a decade.

Reddit debuted on the New York Stock Exchange in March under the ticker RDDT. The original plan was to raise nearly $750 million in the IPO - a plan which was in the works for years.

Reddit's strategy to ensure a successful IPO has been multi-faceted and four-pronged:

1. Community-building focus
2. Competitive advantage
3. Strong PR campaigns
4. Strong infusion of capital

This isn't a multi-stage plan. Reddit's strategy revolves around accomplishing these goals simultaneously. 

Reddit's IPO offers a unique gamechanger

Reddit is not the first social media platform to go public, though they are the first to freeze a portion of shares for 75,000 of their top-rated or most engaging users. Those site members were offered the shares at the IPO-reserved price originally set for investors. The Reddit team also plans to follow up on this with a tiered share allocation system. 

The idea behind these moves was to instill a sense of ownership for the users of the site. This new territory of allocating digital space and attributing ownership of it is quickly becoming a popular topic of discussion and analysis. The original launch plan saw 22 million shares go public between $31-$34 USD. Reddit's take on user ownership could potentially shift the way brands interact with their fanbase and customers. As shareholders, communities can now be rewarded with potential voting power on the site and on the direction it takes.

Hesitancy about Reddit's IPO

Despite achieving its goal of being on the front page of the internet and boasting large daily numbers, Reddit has never turned a profit. The shift from being a private to a public company now brings added pressure on the site to begin turning profits. If the investors aren't happy, the share price could quickly drop.

There is potential for the site to  turn to a more advertising-based revenue strategy, however some are concerned that this could negatively affect users’ experience and Reddit's communities could take their activity to other, less crowded platforms. Reddit also lacks the same market saturation as both Google and META. Even though the majority of Reddit's revenue comes from advertising among its myriad of communities, the capital structure isn't sufficient enough to give ample voting power to the IPO's initial investors. The difference between the voting power in Class A and Class B shares (10x the power of Class A shares) affects their worth.

Given that social platforms are ever-changing, Reddit is exploring innovative new ways to generate revenue. Data licensing for the AI industry has been one avenue they've been exploring. Reddit's foray into AI data licensing will also build a bridge with Google, who can pay Reddit for access to the platform's posts and utilise them as training material for new AI models.

Even if it proves to be a positive financial gain for the site, there are multiple communities against Reddit's adjustment towards further monetization. Despite some users against Reddit's new public face, the IPO has launched at a time when social networks are evolving into investable platforms.

What's the best action to take?

Social media is a staple in our lives and it's hard to imagine it going away anytime soon. Reddit's IPO is a perfect example of the current landscape as social media platforms continue to grow into even more significant businesses. Reddit’s unique content and voting structure, which has given the company enough of a USP to attract vast user numbers and thus a lot of potential for monetization - an important aspect for prospective investors. My advice? If you’re thinking about adding Reddit to your portfolio, perhaps give the company a quarter before investing. It's best to watch and see if this move can exceed everyone's expectations before making any big decisions.

By Evgeny Kireev

Keywords: AI, Digital Disruption, Culture