> In 2023, the company’s revenue was $804.0 million. Research and development, at $438.3 million, was more than half, an awfully big number for a company of this age. Total costs and expenses were $944.2 million. The net loss was $90.8 million, which at least is an improvement over 2022, with its $666.7 million in revenue and $158.6 million in losses. [1]
These expenditures blow my mind. But if reddit can grow revenue to 1200m and cuts expenses to 300m, the story looks totally different. A turnaround like that might only take a couple of years. Reddit is an incredibly sticky product, just badly mismanaged. With some new management, it could even be a buy at 5bn.
they sure had a good trajectory before huffman fucked that up and bought moonshot projects and hired 2,000 employees and did everything possible to mess up that trajectory so they could pump and dump for an ipo.
I think a more natural move would be to IPO. Since Steve Huffman stated that monetization is not a top priority, it won't be happening anytime soon.
Fun fact : they sold reddit in it's infancy and then later regained control. That sale didn't end well. Even if they do find a more savvy buyer like FB/Google , reduced founder control in a community driven website can't be a good thing. Having spent billions to acquire reddit, the new owner will likely begin to turn it into an advertising machine which has the potential to alienate the core userbase. On reddit, the core userbase is everything.
> The San Francisco-based company reported that its revenue rose more than 20 percent as its losses narrowed last year. It added that it had 73 million daily users and more than 100,000 active communities.
> In its prospectus, Reddit said revenue in 2023 was $804 million, up about 21 percent from $666 million a year earlier. The company lost $90 million in 2023, compared with a $158 million loss the year before, according to the prospectus.
I don’t know what’s crazier, that Reddit had nearly a $1B in revenue, or that they somehow manage to still lose money. What the heck are they spending it on?!
Will be interesting to see what the 2024 appetite is going to be for unprofitable companies looking to cash out. I know I’m not alone in avoiding this thing like the plague.
> But in the startup world it’s make profit, sell, or shut down
In the startup world 90% of companies are shut down because their ideas are not viable. If reddit still isn't viable after 18 years it might be time to pull the plug and move back to something sustainable.
> or be owned by Meta
I voted for kodos
> or 10 companies
Would that be the total number of companies that could pay the money reddit wants for API access?
> It sold for a lot, suddenly the new owners are eager to get returns on that investment.
Reddit launched in June 2005, sold to Condé Nast in October 2006, and was spun off as an independent company with Advanced Publications (Condé Nast's parent) maintaining a majority interest in 2011. So it's only actually been sold once, back in 2006, and that was not for a lot of money -- under $20M. Maybe there's a billion dollar exit in the company's future, but there definitely hasn't been one in its past.
(N.B.: I doubt there's one in its future, either.)
Most likely scenario is spez’s boss wanted better numbers to maximize price at IPO.
I think they decided to cash out when things were very frothy in 2021, and they missed the window. It will be interesting to see if they even get to $10B. I would bet on less than $5B.
According to Wikipedia:
>In October 2014, Reddit raised $50 million in a funding round led by Sam Altman and including investors Marc Andreessen, Peter Thiel, Ron Conway, Snoop Dogg, and Jared Leto.[13] Their investment valued the company at $500 million at the time.[14][15] In July 2017, Reddit raised $200 million for a $1.8 billion valuation, with Advance Publications remaining the majority stakeholder.[16] In February 2019, a $300 million funding round led by Tencent brought the company's valuation to $3 billion.[17] In August 2021, a $700 million funding round led by Fidelity Investments raised that valuation to over $10 billion.[18] The company then reportedly filed for an IPO in December 2021 with a valuation of $15 billion.[19][20]
>If the steps Reddit takes to try to make a big return on investment anger those communities,
Yes, but that won't happen. They've been incredibly hands-off for the past 7 years. They basically worked their asses off on too few engineers for years, and during all that time kept showing almost no ads, and if they did they did it on the far right where almost no one notices.
Just because they're raising capital now, doesn't mean they'll go out and fuck it up. Whatever outside money they take on, they'll be extremely conscientious about retaining control or their future stakeholders sharing their values.
> Reddit also has a business incentive to clean up its act: It needs to appeal to marketers—and live up to its investor’s expectations. In July, Reddit raised $200 million at a $1.8 billion valuation.
> [truncated]
> Mr. Huffman didn’t give specific numbers, but said Reddit’s ad revenue had grown fivefold over the past two years, from a small base.
I'm sure given the scale of the userbase the property is worth something substantial, but $1.8 billion for a 10-year old company that, AFAIK, has never turned a profit is nuts.
Either 1) investors saw something in the revenue growth numbers that painted a rosier picture about the future, 2) the entire valuation is illegitimate, or 3) the tech world is really that bubbly right now.
>Reddit is closing on its IPO and is seemingly desperate to generate "growth" by bumping every possible metrics possible virtually.
If by "growth" and "metrics" you mean they have to figure out how to make money to sell themselves to investors in an almost-hostile financial environment, then yes, I agree.
Beginning of the end and all that. You can't sell "community". IPO means ads, ads, ads and dodgy strategies like you describe above.
> Why can't it be more sexy to run a sustainable small business? - I think they could run reddit profitable with less staff, which focuses on the core functionality instead of trying to grow into new markets and segments.
Investor returns, obviously. The whole funding model is throw money, make it big, monetize, sell out.
I do think it would maybe be possible to make company like Reddit "just" be profitable and keep on chugging but that's not what the investors throwing millions at it want.
The funding model is antithesis to "just a sustainable company in their niche"
> how on earth reddit manages to be valued at $10B
Reddit is ~16 years old and was in one of YC's first batches (first batch ever?). This is an absolute dinosaur in "startup" age. It's been acquired, traded, and recap'd multiple times for (presumably) sub-$1B value. For all intents and purposes it's a distressed asset in "enchanted forest" terms (note - this is not a criticism per se, many distressed assets can be very valuable).
I'm convinced (with limited evidence as an outsider) the following drives their valuation:
- Record valuations of FB, Snapchat, Instagram, Twitter, etc. that have comparable features and "industry metrics" (DAU, MAU, etc.) that can be easily parsed by public analysts. The latest round of investors probably got a great insider deal so they could prep it for IPO and pass it off to the next sucker.
- Reddit started to receive more and more M&A attention when mobile biz models went public (Snap, Uber, etc.). The key to any financial success for Reddit is simply mobile. This an incredibly risky, because (1) reddit allows 3p mobile apps where they can't control ads/tracking and (2) their conversion to their own Reddit mobile app is extremely user hostile. But this is essentially it - you can track and sell ads on Reddit via it's native mobile apps. If somehow (I'm personally not convinced) they can get everyone on to their native mobile app, then sure, they will be as valuable as Snap/Twitter.
- It's essentially a "cost of doing business" for YC. If Reddit became essentially not valuable or not as valuable in the public eye it undermines YC's brand. This has become less and less an issue overtime as more successes have come out of YC, but during those time periods when it wasn't the value had to be continually projected as being valued (thereby creating steam that never fizzeld out). Think of this like saying one of your clients in the 90's was Bear Stearns, which gave you social proof to work with Goldman Sachs, etc. you'll hold on to that Bear Stearns logo on your sales deck until it ultimately fails, but now you have Goldman, Morgan, etc. to show your social proof.
Reddit are valued at ~5bn, which makes them a full-blown unicorn. But in 2023 the gap between a unicorn and an IPO-ready company can be huge.
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