Many Redditors hate the Reddit IPO

If you're a certain kind of cynic, Reddit's S-1 filing should set off alarm bells. It mentions r/WallStreetBets. (There are actually five mentions in total.) It holds reserves of Bitcoin and Ethereum. And there is a program to give some electricity users the option to buy stocks before they hit the public market.

The S-1 is a document filed with the U.S. Securities and Exchange Commission before a company goes public. It reveals all sorts of things: revenue figures, risk factors, key data about the business. And it sends some signals. Case in point: I'm looking at some meme stock nonsense.

I can totally imagine corporate insiders being like, okay, Reddit is the place for meme stocks, so YOLO, etc. Except that's the thing: Redditors aren't excited about it.

"Shut the fuck up," one r/WallStreetBets user wrote. "They have not proven that this user base or data set can be monetized."

And there was this guy: "Puts in a cannon loaded with malicious intent." (For those who are not familiar with the colloquial term, their intent is to bet that the stock will go down. Given the use of "put-cannon", I assume they are betting heavily. I would assume such a situation Must agree. Trying to imagine someone loading put-cannon without any malicious intent, but it doesn't make sense.)

Okay, but that's just r/WallStreetBets! Surely there are other Reddit users who are more enthusiastic, right? On r/technology, the top comment on the IPO story is, "The beginning of the end." There is wild speculation about what steps management might take to make the company profitable – which subreddits might be banned, how much users might have to pay to post, heavier ad loading. And one user called the Guided Share program "a scam" that lets top users buy in early. This is just a Reddit scam going on. They are also angry that Aaron Swartz has been wiped out as a co-founder.

It's not just stomach ache. There are serious questions about Reddit as a business. Reddit is not profitable. Reddit has never been profitable. As Bloomberg Opinion's Dave Lee points out, the risk factors section of Reddit's IPO is longer than the IPO risk factors of Twitter and Facebook.

This is because Reddit is more vulnerable to its users than other social media sites, as various Reddit reblogs have made clear. Its model of community moderation has advantages – it means the 60,000 mods are more familiar with their community than the contractors. But Reddit does not pay them and thus it would be hard to control them.

If you squint, you can see how Reddit is trying to mitigate that risk by offering shares to power users. Because they are shareholders, they will want to maintain the value of their shares. This means they will be less likely to do things that will cut into ad revenue, such as suddenly shutting down a subreddit in protest.

“I think it's great that Reddit is offering this IPO for its mods and users,” a Reddit user who identified himself as Kevon told me. “It's a nice little thank you that might actually have some monetary value.”

Reddit's Guided Share program works like this: Eligible users – people with enough karma or who have spent enough time working as mods – received an email from the company allowing them to pre-register for the program. gives. gives. gives. Asks you to provide certain personal information. After about three weeks, everyone who signed up will receive an email letting them know if they qualify. (Depending on how many people have signed up, there may be a waiting list.) Those who qualify will receive "further instructions," though Reddit's FAQ doesn't make clear what those instructions will include.

Kevon is considering buying shares in the Reddit program, and if he thinks the stock is undervalued, he can buy more shares when it goes public.

You can see this as a nice thank you to people like Kevon who have made meaningful contributions. But let's say you wasted hours of your life becoming a Reddit mod and you bought shares. There is a possibility that you will lose money – and effectively pay for the privilege of content moderation. fun!

The SHARE program "honestly seems like a gimmick to me," says Dan M., who also received the offer. After all, it's not like the shares are being given away for free, he says.

The Redditors I spoke to for this story were all enthusiastic about Reddit as a community. In the Internet age of SEO garbage and social media engagement, this is one of the bright spots. It's a place where there are still enthusiasts and experts, where people can still learn things, says Dan. “While the rest of the Internet is a whole big mess, Reddit still feels like a place where you can learn things and have fun,” says u/ItsReallyReallyTrue, who also received an invite and is Considering purchasing a stock program.

But a good community does not equal a viable business. Despite being founded in 2005, the S-1 notes that Reddit "is in the early stages of monetizing our business and there is no assurance that we will be able to scale our business for future growth." Most of Reddit's revenue comes from advertising, but it hasn't been very good at making money. This may possibly be due to their laissez-faire approach to moderation; Hate speech was not banned on the site until 2020.

Also, user interaction is not regular. Events such as the war in Ukraine and the release of the video game Elden Ring – Reddit's own examples – have led to increased user engagement. And many users are inactive, not even logged in. So targeting is a little trickier than Instagram.

Dan, who is not buying shares, says, "It's Tumblr all over again." "Executives look at a highly engaged community and think 'There must be some way to make money from this.' But maybe that's not the case."

Sure, Reddit is trying to diversify its revenue by selling its data to help train AI; I don't think the timing of the Google deal, just days before the S-1 went public, was a coincidence.

Reddit has also attempted to monetize through blockchain initiatives. It sold NFTs as another revenue source. (During the peak of the NFT hype, some of these assets sold for millions – and now most NFTs are “worthless.”) It also had to end the Community Points product, which was a disaster for many whose tokens suddenly had no value. was not. was not. was not .

Entering Web3 – beyond the Bitcoin and Ethereum holdings, the value of which Reddit did not disclose in its S-1 – I am a little skeptical about the shares offered to users. Community points were a gimmick; Is share also a gimmick?

We can blame CEO Steve "u/space" Huffman for these conspiracies. These aren't the only bizarre decisions he's made. He has said that, for example, the API price increase last year that led to user protests was partly because "Elon Musk did it." (How is Twitter – sorry, I mean X – doing with advertisers, spaz?) His PR tour during the Reddit revolt was apparently disastrous.

And while Huffman now thinks Reddit is valuable as a repository of training data for AI, he let his board member Sam Altman give away the Reddit data for free; Altman was and remains the CEO of OpenAI. Altman is also Reddit's third-largest shareholder and owns more than twice as many shares as Huffman. Altman was CEO of Reddit for eight days.

In the S-1, Huffman is listed as a risk factor, but perhaps not properly. "Huffman is critical to the management of our company and instrumental in the development of our technology and our strategic direction" and is therefore difficult to replace, the S-1 states. The real risk factor is the number of people who think "fuck spaz" is a great catchphrase, because their job depends more on keeping users happy than any other social media CEO's job.

Well, many of those users are not very happy with the IPO and are hoping that Huffman will shut down the site. Dan M. told me, "I don't think anything good would come from Reddit going public." "It doesn't sound dramatic, but this feels like the last nail in Reddit's coffin after years of declining quality."

Kevon, who told me he was thinking about investing, says he thinks Huffman was overpaid. (In the filing, Huffman is listed as earning $193 million in 2023.) He was surprised that Huffman earned so much while the company was running at a loss.

u/ItsReallyReallyTrue was more concise. "Tech narcissist CEO vibes," he said of Huffman. "Fuck Spaz, fuck Elon, fuck Sam Altman."