The social network Reddit succeeds in its first steps on the stock market

It was one of the most anticipated IPOs of the beginning of the year. Reddit, an American social network born almost twenty years ago in San Francisco, made its debut on Wall Street this Thursday. Its share price was set at $34, for a valuation of $6.4 billion. When trading opened, the stock rose to $47, almost 40% higher.

In 2021, when it first considered a listing, Reddit's valuation reached 10 billion. But the platform was late in submitting its offer. In the meantime, the markets had turned around, and Reddit had to postpone the operation. Steve Huffman, co-founder who returned to the helm in 2015, can boast of having successfully completed the largest IPO of a social network since that of Pinterest in 2019.

Little known in France, Reddit - whose largest shareholder is Advance Publications (owner of Condé Nast, the parent company of Vogue and the New Yorker) - is a huge forum, with 100,000 communities organized around very eclectic subjects, from gardening to anime through celebrities. Its name is a play on words with “Read it”, in reference to its original vocation: a place for sharing content and discussions. Reddit is seen as one of the last social platforms to have retained its original DNA, unlike networks focused on advertising targeting, and where volunteer users themselves ensure content moderation. The number of its users, which has grown by 40% in two years, is around 267 million weekly and 73 million daily, with certain communities attracting tens of millions of users.

With this IPO, the platform hopes in particular to finance the development of a new activity. It is, in fact, banking on monetizing access to its data, in the form of licenses granted to tech giants who need data to train their artificial intelligence models. Reddit has made public a $66 million annual contract with Google. In total, it has already accumulated $200 million in contracts, according to the TechCrunch site. Enough to alert the American competition authority, which opened an investigation last week into this new business.

The latter is a way for Reddit - which counts Sam Altman, the boss of OpenAI as a minority shareholder (8.7%) - to make its model profitable. Because, despite its success with the general public, its advertising revenue still does not allow it to be profitable. Although it reduced its losses, the platform still had a deficit of $91 million last year (compared to $159 million in 2022). Growing strongly, it generated $804 million in revenue last year (21%).

To reduce its dependence on advertising, Reddit introduced a premium model in 2021 at 5.99 euros per month. Its general director also announced last June his intention to charge for access to its application programming interface (API), provoking the anger of developers. In solidarity, moderators went on strike and paralyzed the site. At the same time, Reddit announced 90 job cuts (5% of the workforce).

The fact remains that, for the tech ecosystem, this IPO serves as a test. Activity has slowed significantly, with only 100 listings last year, a quarter of the number of operations carried out in 2021.