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Social media company Reddit filed an IPO prospectus After years of preparation, report filed with the Securities and Exchange Commission on Thursday. The company will trade on the New York Stock Exchange under the ticker symbol “RDDT.”
Scheduled to make its market debut in March, it will be the first major tech initial public offering of the year. This is the first social media IPO since then. pinterest It was listed in 2019.
In the filing, Reddit said its annual revenue for 2023 was $804 million, up 20% from $666.7 million the year before. The social networking company’s core business relies on online advertising sales resulting from its website and mobile apps.
The company, founded in 2005 by technology entrepreneurs Alexis Ohanian and Steve Huffman, said it has had a net loss since its inception. Our net loss for the year ended December 31, 2023 was $90.8 million, compared to a net loss of $158.6 million for the prior year period.
Reddit is one of the most-visited websites in the U.S., but it has struggled to build an online advertising business that rivals tech giants such as Facebook’s parent company, according to analytics firm Semrush. meta and Google’s parent alphabet.
Reddit has more than 100,000 communities, with an average daily active unique count (DAUq) of 73 million people and an average weekly active unique count of 267 million people, according to the filing. As of Q4 2023, Reddit’s average revenue per user (ARPU) in the US was $5.51, down from $5.92 a year ago. The company’s global ARPU was $3.42, down 2% from $3.49 in the year-ago quarter.
Reddit said it estimates that by 2027, the total global addressable market for advertising, excluding China and Russia, will be $1.4 trillion. According to Reddit, the current addressable advertising market is $1 trillion, excluding China and Russia.
The company is enhancing its search capabilities and plans to “more fully address the $750 billion opportunity in search advertising that S&P Global Market Intelligence estimates to be a 2027 market.”
Reddit plans to leverage artificial intelligence to improve its advertising business, hoping to open up new revenue channels by providing tools and incentives to “continuously create, improve, and drive commerce.” He said he is doing so.
We are also in the early stages of developing and monetizing a data licensing business that allows third parties to access and search data on our platform.
For example, Google uponOn Thursday, it announced an expansion of its partnership with Reddit. This will allow the search giant to access the company’s data and use it for things like training AI models.
In June, several prominent Redditors took to Twitter to protest the company’s decision to increase the fees some third-party developers pay to use its application programming interfaces (APIs), depending on their usage. Moderators have locked the subreddit as part of a blackout. At the time, Reddit said the price change was necessary because many big tech companies use the data to train large language models.
Regarding its data licensing business, Reddit said, “In January 2024, we entered into a certain data licensing agreement with a total contract value of $203 million and a period of 2 to 3 years.” “We expect to recognize at least $66.4 million in revenue for the year ending December 31, 2024 and the remainder of the period thereafter.”
Reddit appears to be exploring business strategies such as: robloxThe company derives the majority of its revenue from digital sales on social gaming platforms and online retailer eBay. According to the filing, the company wants to introduce more features to build a user economy that includes gaming. Reddit said that the informal exchange of physical and digital goods and services is currently taking place, which could create another source of income.
Reddit plans to offer three types of shares with different voting rights. Class A shares carry one vote per share. Class B shares carry 10 votes per share and are convertible into one Class A share at any time. Class C shares have no voting rights.
Reddit said unemployed moderators, known as Redditors, can participate in the company’s IPO offering through its “Directed Shares Program.” As a result, Reddit said, “retail investors, individual investors, and other investors may represent a greater proportion of investors participating in this offering than in a typical initial public offering.” According to Reddit, there were an average of more than 60,000 daily active moderators as of December 2023.
“These factors may result in fluctuations in the market price of our Class A common stock,” the company warned.
Regarding risks, Reddit said daily active unique numbers “may fluctuate or decline from time to time in one or more markets due to a variety of factors.”
“For example, while our user base increased during the COVID-19 pandemic, our DAUq growth declined and we also experienced a decline in DAUq as the effects of the COVID-19 pandemic subsided.” is stated in the application. “DAUq may be affected by certain global events, such as the outbreak of conflict between Russia and Ukraine during the three months ended March 31, 2022; and traffic related to r/wallstreetbets for the three months ending March 31, 2021.”
Reddit first filed a confidential draft of its initial public offering prospectus with the Securities and Exchange Commission in December 2021. The company had 2,013 employees as of December 31, 2023, an increase from 1,942 in the previous year.
Reddit has raised about $1.3 billion in funding and is valued at $10 billion, according to transaction tracking service PitchBook. Publishing giant Condé Nast acquired Reddit in 2006 and spun it out as an independent company in 2011.
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