Reddit (RDDT) files for an IPO

Reddit, the self-proclaimed community of communities, announced yesterday the filing of a registration statement with the SEC for a proposed initial public offering (IPO) of its Class A common stock.

Key Details:

• Ticker Symbol: RDDT (proposed)
• Lead Bookrunners: Morgan Stanley, Goldman Sachs, J.P. Morgan, BofA Securities
• Joint Bookrunners: Citigroup, Deutsche Bank Securities, MUFG
• Co-managers: Citizens JMP, Needham & Company, Piper Sandler, Raymond James, Academy Securities, Loop Capital Markets, Ramirez & Co., Inc., Roth Capital Partners, and Telsey Advisory Group

Reddit is self-described as a "community of communities" built on shared interests, passion, and trust. Features "open and authentic conversations" on diverse topics. Boasts over 100,000 active communities and 73 million daily active users. Considered one of the internet's largest sources of information.Google and Reddit yesterday announced a new partnership for enhanced Search and AI Integration.

Financials:

• Revenue: $804 million (21% increase year-over-year)
• Net Loss: $90.8 million (narrower than 2022)
• Average Daily Active Users (DAUs): 73.1 million
• Weekly Active Users: 267.5 million

In the prospectus, the company, known for its diverse online communities built around specific interests, emphasized its mission of fostering belonging and empowerment while outlining its growth strategy and appeal to advertisers.

Reddit boasts over 100,000 active communities, each built and moderated by its users. This organic, user-driven approach differentiates it from traditional social media platforms, according to the prospectus. Users engage in authentic conversations, share experiences, and curate content through upvoting and downvoting mechanisms. This focus on user-generated content and control over personal information is a key differentiator for Reddit.

The company's growth strategy centers on attracting new users and increasing engagement within existing communities. Initiatives include expanding marketing efforts, improving search and content discovery, and prioritizing video content. Reddit also aims to grow its international user base by translating content and offering localized experiences in key markets.

For advertisers, Reddit presents a unique opportunity to reach a highly engaged audience with specific interests. Its contextual and interest-based advertising model allows advertisers to target relevant communities and conversations, reaching users with high purchase intent. Additionally, Reddit's privacy-focused approach, which relies on first-party data from user actions rather than personal information, resonates with advertisers seeking alternatives to traditional tracking methods.

Reddit monetization plans

Reddit detailed its plans to monetize its unique, community-driven platform through a three-pronged approach: advertising, data licensing, and the user economy.

Advertising:

• Reddit sees itself as a niche platform with high engagement and interest-based targeting capabilities, attracting $1.4 trillion in potential advertising revenue by 2027 (excluding China and Russia).
• The company plans to expand its ad offerings with video ads, search ads, and more granular targeting options.
• Leveraging AI and machine learning, they aim to improve measurement, optimize campaign performance, and attract new advertisers, especially small and mid-sized businesses.

Data Licensing:

• Recognizing the value of its vast user-generated data, Reddit is exploring data licensing opportunities.
• This data can be used for sentiment analysis, trend identification, and training AI models.
• The company estimates a $1 trillion market opportunity in data licensing by 2027 (excluding China and Russia).

User Economy:

• Reddit already fosters organic commerce within its communities, with users selling creations and goods.
• The platform plans to empower developers and creators with tools and incentives to further develop the user economy.
• Reddit sees a $2.1 trillion market potential in user-driven commerce by 2027 (in six core geographies).