Reddit: chatbots may be answer to post-float growth question

Reddit chief executive Steve Huffman describes the social media site as a city that develops naturally over the years. Compressed tech time spans imply Redditopolis features Roman ruins and Tudor half timbering. That is a quaint look for a business planning to list later this year.

Huffman co-founded Reddit nearly 18 years ago — not long after Facebook started up. In that time, the rival social media group has transformed into a public company called Meta with a market capitalisation of $446bn and nearly 3bn daily users. Reddit has remained private and has an estimated 52mn daily users.

The listing would come too late to exploit US initial public offering fever or the site’s high profile as the epicentre of meme stocks. When Reddit filed for an IPO at the end of 2021 it was valued at $10bn. It would struggle to achieve that price now. Meta’s market worth has almost halved since then.

Reddit has been slow off the mark generating revenue. It cannot collect as much data about users as larger social networks. Adverts are targeted via special interest groups and topics. Last year, Reddit bought ad tech company Spiketrap with the aim of improving ad relevance.

The business, spun out as an independent subsidiary by Condé Nast parent company Advance Publications in 2011, has yet to report a profit. But growth looks impressive. Revenue almost doubled in 2021 to more than $300mn, according to estimates by eMarketer. User numbers are rising. Tech stocks are above their low point in late 2022.

The company has done well to reconcile tension between change-averse users and the need to modernise. It has improved moderation and design. That should help attract new users and advertisers.

AI and chatbots present an opportunity for Reddit. Users habitually turn to the website when seeking direct answers to questions rather than Google-style lists of links. Reddit could enlist AI to improve those results.

Promoting Reddit as an alternative search engine could lure new users, adding an up-to date facade to the historic edifice.