On the 15th of December 2021 they filed with the SEC in the build up to IPOing, at that time the rumours were they'd be looking for a $15Bn valuation. At that time, SNAP was worth about 60Bn, TWTR 40Bn (a notoriously shitty stock), Facebook 900Bn. SNAP is down about 60% since then, Meta is down 75%, and TWTR is out of whack because of the acquisition. So basically they missed their chance. They could IPO today, but they'd be selling reddit very cheap, and they'd also be putting it under huge pressure since every other social media company is in the process of doing a huge round of layoffs so reddit would immediately need to start looking at their cost structure.
There's a couple reasons why it's so bad. Firstly, everyone's expecting a recession, so advertising budgets are getting cut and that's going to tank Reddit's revenue stream (which is already weak) and secondly, a high interest rate environment means that all that future growth has to be discounted back to a much lower net present value. It's also just in a bad place narratively, none of the small scale social media sites are doing well revenue wise, and Tiktok is eating their lunches anyway.
"a high interest rate environment means that all that future growth has to be discounted back to a much lower net present value."
Could someone explain this to me like I'm a 5 year old (who understands what a discount rate and present value are, but not why that collection of words makes things harder for reddit)?
Reddit is unprofitable. They're telling investors: give us a dollar today and we'll give you ten dollars in as many years. (Hopefully.)
If interest rates are zero, that's a good deal. If rates are 25%, that $1 will almost get there on its own in a Treasury. A good deal in a low-rate environment is a bad one when rates, the price of money, are high.
Picking this one at random to reply to, but this goes to everyone: Thanks for all the replies.
I'm still confused. I think of inflation as a thing that devalues a present day $1. But as it applies to companies with revenue it seems like a rising tide that would lift all boats, and something that kind of divides out of the analysis of the future revenue stream of a company.
e.g. If Reddit's daily revenue is $x and inflation is 10%, then its daily revenue in a year is (approximately, caveats about their ability to raise prices, etc.) $1.1x. So Reddit can say "give us a dollar today and we'll give you $10 multiplied by ten years of 10% inflation in ten years". Is that mental model wrong?
I'm also confused why this problem particularly applies to Reddit, which seemed to the the implication of the comment I originally responded to. Is that just because Reddit makes a loss, and this challenge applies to all such companies?
I never understood why company like Reddit, which no users give a fuck if it is 50Billion or 250Billion valuations. It is kinda like Craigslist, it provides a benefit to the society as public forum for information sharing. The cost to run it shouldn't be too high. Just keep it running for the purpose of that. Don't get into those MBA talk about making it profitable. There are business that can be profitable. Something like a public forum, should be like digital public utility, kind alike park and public library.
It goes to stock pricing theory - you can basically say the total value of a company (all the shares added up) is the value of all the future profits, discounted back to todays dollars. If interest rates go up, we apply a bigger discount to reddit's future profits, so the value of reddit goes down. Since reddit is a growthy tech stock what we're kind of saying is reddit's biggest profits are a long way off so we're going to discount them a lot when interest rates are high, making reddit highly sensitive to interest rates.
If you understand what a discount rate is, you understand why higher interest rates decrease value. It's just math: the present value of x cash n years in the future at i discount rate is:
x / ((1+i)^n)
Discount rates are affected by interest rates, because interest rates represent what else you could do with your capital (you can always invest in a Treasury instead of a tech stock).
High interest rates mean more low-risk money in your pocket. Reddit needs to increase their growth rate to make sure the investment has a higher yield than interest+risk to make it valuable. Either you reduce present value or increase expected growth (which is significantly harder for tech companies).
Think of it as the opportunity cost. If interest rates are high, I can go out and buy a us gov't bond at x% risk free. This makes other investments that maybe looked attractive at lower interest rates less attractive now, and this is reflected in the lower npv value.
The safest investments are now giving higher interest rates than they did a year ago. So the expected future growth of reddit looks less appealing in comparison even if the company's prospects are unchanged.
One of the variables of a NPV calculation is the discount rate that corresponds to the risk profile of the investment being assessed. The lower bound on that discount is the treasury rate as that is what a USD investor deems "risk free". Therefore after a treasury rate hike, the discount rate for any given investment needs to be adjusted up and that lowers the NPV calculation result.
TL;DR the higher returns from US bonds make other investments comparably less attractive because you can get better yields from the USD bonds.
That is too bad. I've noticed that Reddit has been working on changing its underlying tech stuff and they are likely doing some cool stuff that the public isn't aware of
One of Reddit's largest subs (BPT) actually requires the user to submit a picture of their forearm skin color[1] to be granted access to the full sub. If you are the wrong skin color they require a written mea culpa disowning the sins of others who may have had a similar amount of skin pigment as you. And yes, in 2022 this is still the policy.
Reddit being a home for racists like this would probably generate a ton of scrutiny if they go public.
Reddit is home to hundreds if not more of porn subreddits, including some that the majority of people would consider vile/controversial (rape, race play, etc.). While Reddit sometimes goes on a subreddit-banning spree, they often don't touch the porn ones as they generate a lot of traffic and I guess revenue (via awards). They are also indirectly used for escort services.
Not sure this is still true... what do you mean by "access to the full sub"? On https://www.reddit.com/r/BlackPeopleTwitter/ I cannot see any restriction. And the rules in the sidebar state 'BPT is an inclusive space for POC and allies alike.'
your post or comments will likely be auto-flagged and deleted by a moderation bot if you haven't been verified, that's the standard enforcement mechanism there that subreddits use for more draconian verification/moderation.
one of the more painful experiences on reddit is spending 30 minutes writing up a post for a subreddit only to hit submit then get your content immediately deleted by a moderation bot ran by the sub's mods for breaking some rule you didn't realize existed or for having previously posted to some other subreddit that the mods disapprove of, even if you were posting a critical comment or disavowing the beliefs in that other subreddit.
/r/conservative does the exact same thing, why the handwringing about that sub in particular? What sub-text could possibly have caused you to select that sub as your example?
Reddit is a platform for communities. Some communities, across all spectrums of topics, find reasons to create a somewhat exclusive environment. They are not required to make space for all views, and that lack of forced-openness is not the same as censorship.
/r/conservative does the exact same thing, why the handwringing about that sub in particular?
No they don't. I just tested it and there is no skin color requirement to post in /r/conservative. Why would you try and draw that comparison when it obviously doesn't exist? Can't we just agree it's racist and Reddit allowing that is a bad look, to say the least?
Because that was the sub where I had that experience? I wouldn't disagree with you in the slightest if you wanted to pick any other sub including conservative and said they were just as shitty or dumb if that's how they work.
>Reddit is a platform for communities. Some communities, across all spectrums of topics, find reasons to create a somewhat exclusive environment.
I feel it's important to note that a similar restriction focused on any other race, even other minority races, would probably be banned within a week of creation.
there is a disturbing pattern the administrators have of proclaiming their love for freedom of speech in a post, receiving huge backlash, then going on a banhammer rampage. it's happened at least four times /in my memory/, and probably more throughout the site's entire history.
Yes, it is still true and has been for years. I encourage you to try and post in one of their threads flagged "Country Club" and see for yourself. They don't hide the requirement. It's not a secret.
Racist policies always have an origin story. Ask anybody who supports racist policies like this and they'll give you a reason, not sure I understand the goal of that though.
Rates will continue to rise and you can lock in high rates.
My college was paid for by 12% US Savings Bonds that my parents bought when I was a small child. That late 70s/early 80s inflation went away in the meantime.
You can think of the value of a stock being the value of all the future profits. So if I know that a company will make $100m in it's lifetime, I can say that company should be worth $100m. But we have to discount that - because money in the future is generally worth less than money today. If I give you a dollar today, you have a dollar, you put it in the bank and collect interest and next year you'll have $1.02 (2% interest). If I give you a dollar next year, you have a dollar. So the dollar today is clearly more valuable than the dollar next year. So what we have to do is look at when the company will make that money, and discount what that money in the future back to what it's value is now. "This is the net present value of future cash flows"[1]. So as interest rates go up, we apply bigger discounts, so companies whose profits won't come for a long time get heavily penalized by this in their valuation.
That's not the source of the problem, just a symptom. What caused the financial problems for social media was the censorship, blatant propaganda and use of addiction based behavior modification to subjugate the population; AKA population control.
Reddit might actually be one of the worst offenders, but because they aren't public, and have a smaller user base, they went unscrutinized. I highly recommend everyone watch the documovie the Social Dilemma.
TLDR; Social media is military grade psychological weaponry aimed at the most vulnerable amongst us.
Not if your users discover the ruse, and mass quit using social media, or worse start abusing it themselves. Reddit had a large drop off in users after the Black day, however, the latter is in fact is definitely going on as well.
The genie is out of the bottle on this one, and social hackers planet wide are now playing the game.
They make every effort too silence people who cut against the grain on this issue: browbeating, gaslighting, censorship, and eventually the ban hammer. Of course, this only slows the fight against these dystopian oligarchs. My hope is that the tipping point will be reached before they have silence too many of us.
When I built reddit's mobile website, I refused to add any mobile ads - I told the product owner that they could buy ads like anyone else. Literally the week after I quit, they added in mobile ads. lol
At some point recently they changed it to ask you every time you visit. There used to be an option to disable the mobile app ads. Funny that that's the only thing they've changed in six years (I left late 2016.)
There's an ever present orange button. There's the first visit pop up, there's the hey you're looking at something NSFW try the app (why??) pop up and so on.. It's a wonderful experience.
Which person, or people, is responsible for the direction Reddit has taken in terms of increasing user hostility to drive growth metrics? I am wondering if they have a track record for this sort of crap, in previous companies.
I believe they're saying that they were asked to add ads specifically for the mobile app. Their stance was that if the team for the mobile app wanted the app advertised, they could just buy any of the regular ad slots on the website.
The idea is that "try the Reddit app" is an advertisement and so belongs in the advertising system (as a house ad) instead of as a special-cased popup.
Yea I got tired of that and switched to their app and it is horrific. I quickly deleted it and went back to site surfing. Maybe they can IPO with such a garbage app but why not fix it first?
It's truly baffling how Reddit changed from a fast loading & information dense UI to something that takes about 15 seconds to load on average and shows about 1/10th the information than before.
> It's truly baffling how Reddit changed from a fast loading & information dense UI to something that takes about 15 seconds to load on average and shows about 1/10th the information than before.
The compact mode on new reddit is actually slightly more information dense than old. Sadly it’s still a crappy, slow JS app, if it was performant I’d switch from old in a heartbeat.
I just tried it and it doesn't display the thumbnails of any of the posts. On old reddit you get to see a small inline thumbnail for each post. New reddit's compact mode doesn't show this, so it still gives you less information over all. Also, it's still way slower than old reddit.
Huh. I could have sworn there was a version that looked almost like old, just more tastefully designed and slightly smaller. But I didn’t feel like checking it out after I had this [0] toxic experience within seconds of trying the current state of new reddit.
Except all the users that will pay money not to use the iOS app because Apollo is that much better. It's kind of shocking a few solo developers can make a better mobile experience than anyone at Reddit.
> It's kind of shocking a few solo developers can make a better mobile experience than anyone at Reddit.
Don't you rather believe that the reason why Reddit's user experience is worse is that Reddit has economic incentives (e.g. better options for ad placements; advertisers prefer this US; ...) to do so?
I think that's part of it, especially how it prioritizes certain behaviors that are counter to how Reddit used to be driven. But deeper than that I think their management and engineering are firmly to blame. They've never had a good reputation for either.
Its like no one involved in the design used Reddit regularly. Reddit's best quality was the way it made forums work at scale, but they tried to copy content feeds at the cost of community. That's why old.reddit, Apollo, and RIF are the better experiences for using Reddit - you can engage in community more than just consuming memes and gifs. Certainly a part of that is incentives, but the job of good leadership is to push back and point out that Reddit isn't Twitter or Instagram.
And even if they wanted to make it like Twitter or Instagram they really screwed the pooch by having terrible stability and performance.
I've never tried the app, but that's pretty weird if it's actually good. The mobile site is notoriously hostile, and even the desktop site seems to completely fall apart on pages with lots of videos.
I was curious about traffic stats in regards to your statement. Reddit used to provide monthly traffic figures an various other data at https://www.reddit.com/about/ .
That now redirects to some low-content page with obfuscated numbers that haven't been updated in 2 years. And it's not for lack of updating. The one thing I did learn from that page is that they just hired a new VP of UX, yesterday.
Not at all. Everyone that uses reddit fucking hates it.
I used to use reddit constantly and they've killed all the useful subs, made the mobile ux nigh unusable, and turned the user based in to a leftwing circle jerk.
I totally agree with that, although the language is unnecessarily diminutive. It's just an extension of the eternal September problem.
Companies often seem to forget that only like 1% of their users typically actually create the vast majority of content. Even fewer create the real quality content that is so attractive to begin with. It is the quality content, not general content that actually creates value to other users of the consumer variety.
So... looking at metrics of what appeals to the 99% of consumer users and allowing that to drive design, to the point where it pisses off that 1% is a ticking time bomb. It's a seductive one though! You can have all manner of metrics that will look good, but are actually catastrophic in a delayed way: 'More engagement!' is easier to conclude from measurements and looks a lot better than 'Signal to noise ratio of quality content to generic content has decreased'. 'This new change makes it easier for non-technical people to sign up or post or consume content' seems great until you realize that's code for 'uh oh, it looks like the voting effects of newer users are suppressing quality content over less-nuanced content and signal to noise has decreased even further'. But those things also temporarily look good: 'more users!' 'more revenue!'
And the social media implosion cycle begins anew as quality users leave in droves to a new platform.
Same, I use old.reddit.com, with an adblocker enabled, and create a new account whenever I want to comment on something or argue with someone (which is relatively rare these days), thus only interacting with subreddits that don't require accounts above a certain age or karma level.
This limitation keeps me from getting too addicted to the site while still enjoying it. I used to have a several-years-old account that I'd spend hours arguing politics with. Complete waste of time. Deleted it.
And their mobile app is just so bad also :( I want to browse reddit on the web but the web app is doing everything they can to prevent me from browsing without the mobile app.
I use the old UI due to being used to it but the new UI has some advantages like a quick search to select a subreddit rather than scrolling through a long list.
You could say the same thing about a lot of companies that were allegedly on the edge of IPO. Lots of IPOs got shelved due to the bad market conditions
Whether due to bad timing in the market or general hubris, Reddit won't sell until it reaches the likes of Yahoo and the Ruperts of the world. Every day they look more and more like Digg v4, their own raison d'être
Nah they are cultivating a growth story, and the markets will eat it up in a few years when they are desperate for growth stocks again. Even though it'll be 20 years old by that time. Maybe they won't get a 15 billion valuation or whatever but the early investors/conde nast will make a healthy profit.
> markets will eat it up in a few years when they are desperate for growth stocks again
This requires low short-term and long-term rates for more than one fund cycle. That puts the IPO out, at a minimum, 5 to 7 years. It also puts it at odds with most near-term rates forecasts. If Reddit is waiting for peak valuations to go public, they'll be waiting for 10+ years or, more likely, be bought while running out of money, because waiting for multiples to change as a business strategy is a piss poor one.
They don't need peak valuations, just a market that's not cowering in fear. It may even come within a year, I don't know their financials but they will find a window, maybe one where FB's social networks show clear weakness and they can sell a story as usupers of their market share. My guess is reddit is just trying to weather the storm to find that window and eventually it will come though maybe not satisfying their pre-recession fantasies.
So the claim is interest rates will never get low enough to make unprofitable social networks that are growing enticing IPOs again? Or at least for years? If that's the case I guess private acquisition is another way out, but I think kicking the can down the road and waiting for sentiment to change makes sense. No doubt interest rates play a role in appetite for risk, but also there's a lot of public cash out there looking for growth companies even in a higher interest rate environment and I can see Reddit taking that route even if it's not the perfect outcome.
Ultimately, remaining private and trying to grow a sustainable, profitable business isn't going to be what they choose. I didn't even get into the porn situation, which may be why they decide to just go the tumblr route and try and cash out to a larger tech co though.
I’m sure it’s really helping their numbers having literally every single mobile page aggressively push you toward the mobile app with no way of disabling it.
At least anecdotally this push was the final push I needed to stop using reddit. I went from probably browsing for a few hours a day to maybe once or twice a month when a friend links me a post.
>Someone with the app installed on their phone is going to engage much more frequently
This sounds like something management would claim, but how so? What's inherently more appealing or engaging about the app, especially when you're practically forcing people to use it?
I never did understand how Reddit could realistically remain the site it was after IPO. All the 18+ subs would have certainly vanished, and the fact they are now quarantining is the first step in the process. They've also tried to start paying moderators by making them curators, and that fell apart due to controversy. Is Reddit competently managed enough to merit an IPO?
Is it though? Just a few days ago we had a troll incite redditors over a court case and once again, the only time Reddit responds is when they hit the news wires.
It is hard to groom a community, but if you have this many public denigrations, there's problems in the company AND on the site.
In addition to the market turn, the IPO was a bit of an odd choice to begin with. Conde Nast, a large media company, owns Reddit and treats it like a media distribution channel, not a rocket-ship tech company. They were never IPOing to grow - it was basically Conde Nast saying "we think this is the best price we're ever gonna get for this asset."
The IPO goes away when the independent cash value of the company dropped below the business value of the distribution channel.
Conde Nast... Yesterday I observed a user suspiciously plugging a pay therapy web site, but in a subtle way, in strange contexts on various subs. Looking at the user's other posts, there were THOUSANDS of messages for that and all sorts of other links to various websites, saying something personal about how it helped them.
I went to flag it but there was absolutely no option within the flag reason. Commercial astroturfing is 100 percent okay on Reddit, in other words.
Is that because of Conde Nast owning it? They must own a portfolio of ad and product stuff.
It would be fiscal malpractice to IPO right now if you have the cash to wait out market weakness. Practically no healthy companies are going to try until mid-2023 at least.
A lot of companies that otherwise weren't going to IPO saw the opportunity to IPO and a marge larger multiple than they should have. That opportunity went away, so many of them also backed off. I worked at a company that was in this same position, and backed off. It's hard to consider IPO when both valuation multiples and your fundamentals have worsened.
Anecdotally, now is not a good time to be doing an IPO if you can help it. My company was also thinking about an IPO and is now delaying. I imagine they're waiting for market conditions to be better
There's a couple reasons why it's so bad. Firstly, everyone's expecting a recession, so advertising budgets are getting cut and that's going to tank Reddit's revenue stream (which is already weak) and secondly, a high interest rate environment means that all that future growth has to be discounted back to a much lower net present value. It's also just in a bad place narratively, none of the small scale social media sites are doing well revenue wise, and Tiktok is eating their lunches anyway.