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The Comparisons
Reddit is planning to launch its long-awaited IPO in 2024, with a target valuation of $15 billion.
To put that in context, X is presently valued at $19 billion, despite having 250 million daily users (against Reddit’s 70 million DAU) and projecting over $2 billion in ad income in 2023 (compared Reddit’s $800 million).
Snapchat is valued at $27 billion, with 406 million DAU, which is more than 5 times it’s user base.
Based on the comparisons available, the platform’s value aim appears to lack rationality. However, it is possible that this is merely an ambitious objective, and the platform will eventually have to settle for a lower price.
However, Reddit’s true worth is probably far lower than it will acknowledge.
Still a “lawless creature?”
The tough element of evaluating Reddit is determining how well it is doing since, while its active user counts have improved in recent years, climbing from 52 million DAU in 2021 to 70 million currently, it really had a lot more users four years ago.
The application has 430 million monthly active users in 2019.
This is very different from daily interaction, however based on overall platform statistics, the application did have approximately 200 million daily actives at one point.
However, the application was a considerably more lawless creature back then. While clearly wonderful for engagement, Reddit was not favorable to brand safety and consequent ad expenditure. To address this and prepare for an IPO, Reddit introduced stricter moderating procedures, which resulted in the shutdown of hundreds of the platform’s most offending subreddits.
It’s total readership fell, but it’s now lot more sterilized and safe, bringing in much more ad spend as a consequence.
However, its expansion is still comparably limited. For example, whereas Reddit adds 6 million DAU each year, Snapchat adds 50 million per year, and Facebook, which is now close to market saturation, adds 70 million additional daily actives per year. If Reddit sees itself as a $15 billion company, it should be adding more, and its ad run rate, at $800 million, is also well behind competitors in the field.
Reddit advertisements
Their advertisements have shown potential in specific categories, and it continues to be a vital conduit to active, focused customers. It’s discussion has also become a useful source of real-world knowledge, although it is not yet a major player in the digital marketing industry.
Is it possible for it to become one? Personally, I don’t see it gaining enough people to be a serious priority, but if it continues on its present trajectory, it may become a greater concern for more businesses.
But it hasn’t happened yet. And, while Reddit will claim that its user data is extremely valuable for conversational AI development, I doubt that any market analyst will perceive $15 billion in worth in its stats.
Will Steve Huffman and company continue to try? Huffman has stated that he supports Elon Musk’s approach, which is based on wildly optimistic expectations, whether feasible or not. So maybe he’ll go forward with it. But if he does, I believe 2024 will be a year of disappointment.
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