Reddit has filed to go public. It’s a long time coming: The social-media company is a hugely popular, influential, and often useful platform whose peers all went public a long time ago. Over nearly 20 years, Reddit has grown from a small link aggregator into the web’s largest community of communities, amassing in the process a library of user-generated content that is, among many other things, one of the only reasons Google is still a good search engine.
But, also, it’s Reddit: a platform that is dependent on and therefore in conflict with its users, who provide its material, moderate its communities, and tend to have strong and well-earned opinions about how it should be run. This tense dynamic hasn’t always been productive or healthy, but it has arguably kept Reddit more or less intact. The site gets billions of views a month, but its subreddits still resemble communities. Reddit has resisted (or missed out on) major industry trends that ruined the web around it. It tends to change slowly. It’s also barely monetized, so Reddit doesn’t make money, which isn’t ideal under any circumstances, but especially the ones it has created for itself now. And so, rather suddenly, the company’s leadership is in the mood to make some deals. According to Reuters, Reddit is licensing its content to Google for use in AI training for a price of “about $60 million per year.”
Additionally, the companies are partnering to include Reddit material directly in Google’s interfaces, including “new ways for Reddit content to be displayed across Google products by providing programmatic access to new, constantly evolving, and dynamic public posts, comments, etc., on Reddit.” As training data for Google, Reddit is attractive. Its billions of posts and comments are pre-structured, organized, moderated, and ranked; it’s also a rare source of real-time posts about a wide range of subjects.
This “data,” of course, is a bunch of posts and conversations produced by uncompensated users, and the traits that make it especially valuable — it’s relatively free of spam, organized by topic, and generally higher quality than, for example, a poorly moderated comment section — are the result of volunteer labor carried out by people for whom corporate partnership with Google is not a priority, or even desirable. “Moderators do so much work for free,” says Sarah Gilbert, research director of the Citizens and Technology Lab at Cornell University. “They’re building tools, they’re building communities, they’re dealing with spam, they’re dealing with animal cruelty and even CSAM (child sexual abuse material).”
Gilbert, who has published a wide range of research on Reddit communities and is herself a moderator, suspects some influential users won’t be happy with this arrangement. Last year, when Reddit boxed out third-party app developers, thousands of communities protested the changes, temporarily limiting access to huge portions of the platform. Now moderators are burned out, and some observers have argued that the quality of posts on major subreddits has declined, which is at the very least a perception shared by many longtime users. User-leadership relations are already sour and moderator morale is low. “A misalignment between the expectations of users and how Reddit allows their data to be used could be catastrophic for Reddit,” Gilbert says.
This week, however, Reddit’s leadership shared some related plans in an email to some of its most active users. “As you may have heard, Reddit has taken steps toward becoming a publicly traded company with the initial public filing of our registration statement with the U.S. Securities and Exchange Commission on February 22, 2024,” the company wrote. “And because you have helped make Reddit what it is today, you now have the opportunity to become Reddit owners at the same price as institutional investors.”
Offering power users a chance to buy into Reddit’s IPO isn’t exactly charitable, and most Reddit users probably won’t find the offer enticing or relevant to their lives (Reddit’s largest trading community, /r/WallStreetBets, is the 49th-largest subreddit on the site, between /r/Creepy and /r/WholesomeMemes). As Matt Levine writes at Bloomberg, Reddit’s offer is at best a “symbolic” response to complaints that none of the value of Reddit’s $5 billion IPO belongs to its users, who helped create that value. The implied opportunity to take advantage of an IPO “pop” — generally fueled by post-listing retail investors hoping to get in on the action — is sort of defeated by the whole “let users buy stock ahead of time” plan. Levine outlines another angle:
Not every company can get meme-stock investors. But you know who probably can? The whole idea of meme stocks originates with Reddit; Reddit’s boards are where the great meme stocks were created; Reddit is where the online communities of investors are. Surely Reddit has some advantages in appealing to retail investors on Reddit. It might as well get some of them in its stock early.
This is true, and also sort of funny to think about. Communities like /r/WallStreetBets organized retail investors — many investing for the first time — around an eclectic range of stocks, and into an occasional war with a trading platform or a billionaire short-seller. It was wild! They made a not bad movie about it!
Reddit’s ZIRP-era meme-stock adventure was something in which Reddit’s leadership took a keen and public interest. It made a case for Reddit’s influence and power, certainly. It was also one giant legal and ethical gray area; in 2024, this sort of retail trading has decreased significantly. Still, as Reddit admits in its IPO filing, a bunch of Reddit investors talking about Reddit stock in communities built and organized to manipulate prices is risky:
Given the broad awareness and brand recognition of Reddit, including as a result of the popularity of r/wallstreetbets among retail investors, and the direct access by retail investors to broadly available trading platforms, the market price and trading volume of our Class A common stock could experience extreme volatility for reasons unrelated to our underlying business or macroeconomic or industry fundamentals, which could cause you to lose all or part of your investment if you are unable to sell your shares at or above the initial offering price.
I’d argue the risks go well beyond that. Yes, Reddit will be a public company; yes, Reddit provides a weird sort of product that some people use to move markets in ways that are sort of beyond the scope of rules that typically govern such things. But Reddit is also a broadly popular product that derives its value from the activities of its many users, whose sense that they’re there for each other — to hang out, joke around, or answer questions — is vital to the function of the entire enterprise. In the past, fights about the Reddit platform have unfolded between groups of users and the platform’s staff and executives, whose interests fall out of alignment in pretty obvious ways. Reddit doesn’t always listen to them, but it also doesn’t want them to leave or to stop contributing free labor.
Turning some users and volunteers into shareholders complicates this situation in ways that are hard to predict. Perhaps you end up with a bunch of user-owners wielding their collective ownership of what Reddit says is a “big chunk” of the company as a threat to force Reddit to make user-friendly choices while also being mindful of the company’s profitability — sure.
Or maybe you end up with user-owners who, because they now have skin in the game, are more amenable to, say, lucrative partnerships with Google. And who are suddenly less sympathetic to the feelings of non-investor users who might see such partnerships as gross or exploitative. Those users, in turn, might become not just more skeptical of the Reddit corporation’s leadership but also alienated from prominent and influential fellow users, too. A Reddit where users and voluntary moderators feel like they’re working to make shareholders rich is already hazardous to the platform’s health. A Reddit where some of those shareholders are fellow users — and where big discussions about how the platform should work are therefore unavoidably conversations about Reddit’s stock price — doesn’t resolve these tensions so much as it creates new ones.
This is just one of the many ways that taking a strange, fragile, and precious (in both senses of the word) platform of communities public risks ultimately killing it. Or maybe it’s a scenario that Reddit doesn’t need to worry about because its biggest investor community just doesn’t care. Business Insider’s Katie Notopoulos notes that r/WallStreetBets subscribers don’t seem all that enthused about Reddit’s offer:
“Can someone teach me how to short an IPO?” one user posted on r/WallStreetBets about Thursday’s announcement.
Another user — a moderator with a Karma score of over 300,000, posted a screenshot of the message he received from Reddit about being part of the Directed Shares Program, wondering if he should invest.
“Hard pass,” replied someone.
“The question is, should we eat where we shit talk?” another mused.
“Only if you want to sell it to me for half as much the week after,” said another.
It’s probably not the best sign that Reddit’s internal investor class thinks the company is a dud. It’s not the worst sign, either: Like a lot of Reddit’s power users, they’re not thrilled with what’s going on there, but they also don’t have anywhere else to go.
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