Reddit Users React With Dismay To IPO Plans

Some prominent contributors to Reddit have reacted with pessimism to a regulatory filing by the company last week ahead of a planned IPO, with one popular post calling it the “beginning of the end”.

Reddit included a long list of risk factors in the S-1 filing, along with revenue figures and other key data.

The company, founded in 2005 – nearly 20 years ago – has never made a profit and lost more than $90 million (£71m) last year.

But it said in the filing the company had only seriously started focusing on revenues in 2018. The firm reported $804m in revenue last year, up more than 20 percent from the previous year.

‘Excited’

Advertising accounted for nearly all the revenue, but in a note to prospective investors chief executive Steve Huffman said he was “excited” about opportunities in e-commerce and licensing content to AI companies.

“I have never been more excited about Reddit’s future than I am right now,” Huffman wrote.

“We have many opportunities to grow both the platform and the business, the latter through advertising, monetising commerce on the platform, and licensing data.”

Reddit last week reached such a deal with Google, reportedly worth $60m, which will allow the search and advertising giant to use Reddit content to train AI systems.

Share offer

The filing did not indicate how much Reddit seeks to raise by its New York Stock Exchange listing. It was valued at about $10bn by a private fundraising round in 2021.

Reddit’s forums are moderated by unpaid volunteers, not employees, and the company has sought to bring some of its highest-profile users into the IPO plan by offering them shares at the same price as institutional investors, ahead of the start of open trading.

“Because you have helped make Reddit what it is today, you now have the opportunity to become Reddit owners at the same price as institutional investors,” the company wrote to those invited to take part in the programme.

Some moderators were sceptical, with one noting in a private chat room for mods that they would effectively be paying for content they themselves had generated.

‘Beginning of the end’

“They’re using my data and work on Reddit to sell me back to me through an IPO!!! Look Ma, I’m gonna be rich!!!!” the mod wrote.

Users who were not involved in the share scheme expressed concern the site would go downhill as it focused on the interests of investors rather than those of users.

On r/technology, the top comment on one of the threads about the IPO is “The beginning of the end,” while another comment called the share offer scheme a “scam”.

“It is a scam. It’s just Reddit running the scam,” the user wrote.

“End of an era,” another wrote.

User protests

A number of users expressed surprise at the filing’s revelation that Huffman was paid $193m last year as chief executive of the loss-making company.

“WTF, that’s 20 percent of all revenue for the company,” one user wrote.

“And they reported a loss of $91m in 2023. Gee, wonder how that happened,” wrote another.

Reddit moderators have a history of conflict with the company’s management, including shutting down high-profile discussions last year in protest against a decision to begin charging for the Reddit API.

The company did not back down on its decision, however, as it continues to seek revenue opportunities.