On the 15th of December 2021 they filed with the SEC in the build up to IPOing, at that time the rumours were they'd be looking for a $15Bn valuation. At that time, SNAP was worth about 60Bn, TWTR 40Bn (a notoriously shitty stock), Facebook 900Bn. SNAP is down about 60% since then, Meta is down 75%, and TWTR is out of whack because of the acquisition. So basically they missed their chance. They could IPO today, but they'd be selling reddit very cheap, and they'd also be putting it under huge pressure since every other social media company is in the process of doing a huge round of layoffs so reddit would immediately need to start looking at their cost structure.
There's a couple reasons why it's so bad. Firstly, everyone's expecting a recession, so advertising budgets are getting cut and that's going to tank Reddit's revenue stream (which is already weak) and secondly, a high interest rate environment means that all that future growth has to be discounted back to a much lower net present value. It's also just in a bad place narratively, none of the small scale social media sites are doing well revenue wise, and Tiktok is eating their lunches anyway.
"a high interest rate environment means that all that future growth has to be discounted back to a much lower net present value."
Could someone explain this to me like I'm a 5 year old (who understands what a discount rate and present value are, but not why that collection of words makes things harder for reddit)?
Reddit is unprofitable. They're telling investors: give us a dollar today and we'll give you ten dollars in as many years. (Hopefully.)
If interest rates are zero, that's a good deal. If rates are 25%, that $1 will almost get there on its own in a Treasury. A good deal in a low-rate environment is a bad one when rates, the price of money, are high.
It goes to stock pricing theory - you can basically say the total value of a company (all the shares added up) is the value of all the future profits, discounted back to todays dollars. If interest rates go up, we apply a bigger discount to reddit's future profits, so the value of reddit goes down. Since reddit is a growthy tech stock what we're kind of saying is reddit's biggest profits are a long way off so we're going to discount them a lot when interest rates are high, making reddit highly sensitive to interest rates.
If you understand what a discount rate is, you understand why higher interest rates decrease value. It's just math: the present value of x cash n years in the future at i discount rate is:
x / ((1+i)^n)
Discount rates are affected by interest rates, because interest rates represent what else you could do with your capital (you can always invest in a Treasury instead of a tech stock).
High interest rates mean more low-risk money in your pocket. Reddit needs to increase their growth rate to make sure the investment has a higher yield than interest+risk to make it valuable. Either you reduce present value or increase expected growth (which is significantly harder for tech companies).
Think of it as the opportunity cost. If interest rates are high, I can go out and buy a us gov't bond at x% risk free. This makes other investments that maybe looked attractive at lower interest rates less attractive now, and this is reflected in the lower npv value.
The safest investments are now giving higher interest rates than they did a year ago. So the expected future growth of reddit looks less appealing in comparison even if the company's prospects are unchanged.
One of the variables of a NPV calculation is the discount rate that corresponds to the risk profile of the investment being assessed. The lower bound on that discount is the treasury rate as that is what a USD investor deems "risk free". Therefore after a treasury rate hike, the discount rate for any given investment needs to be adjusted up and that lowers the NPV calculation result.
TL;DR the higher returns from US bonds make other investments comparably less attractive because you can get better yields from the USD bonds.
That is too bad. I've noticed that Reddit has been working on changing its underlying tech stuff and they are likely doing some cool stuff that the public isn't aware of
One of Reddit's largest subs (BPT) actually requires the user to submit a picture of their forearm skin color[1] to be granted access to the full sub. If you are the wrong skin color they require a written mea culpa disowning the sins of others who may have had a similar amount of skin pigment as you. And yes, in 2022 this is still the policy.
Reddit being a home for racists like this would probably generate a ton of scrutiny if they go public.
Rates will continue to rise and you can lock in high rates.
My college was paid for by 12% US Savings Bonds that my parents bought when I was a small child. That late 70s/early 80s inflation went away in the meantime.
You can think of the value of a stock being the value of all the future profits. So if I know that a company will make $100m in it's lifetime, I can say that company should be worth $100m. But we have to discount that - because money in the future is generally worth less than money today. If I give you a dollar today, you have a dollar, you put it in the bank and collect interest and next year you'll have $1.02 (2% interest). If I give you a dollar next year, you have a dollar. So the dollar today is clearly more valuable than the dollar next year. So what we have to do is look at when the company will make that money, and discount what that money in the future back to what it's value is now. "This is the net present value of future cash flows"[1]. So as interest rates go up, we apply bigger discounts, so companies whose profits won't come for a long time get heavily penalized by this in their valuation.
That's not the source of the problem, just a symptom. What caused the financial problems for social media was the censorship, blatant propaganda and use of addiction based behavior modification to subjugate the population; AKA population control.
Reddit might actually be one of the worst offenders, but because they aren't public, and have a smaller user base, they went unscrutinized. I highly recommend everyone watch the documovie the Social Dilemma.
TLDR; Social media is military grade psychological weaponry aimed at the most vulnerable amongst us.
When I built reddit's mobile website, I refused to add any mobile ads - I told the product owner that they could buy ads like anyone else. Literally the week after I quit, they added in mobile ads. lol
At some point recently they changed it to ask you every time you visit. There used to be an option to disable the mobile app ads. Funny that that's the only thing they've changed in six years (I left late 2016.)
Yea I got tired of that and switched to their app and it is horrific. I quickly deleted it and went back to site surfing. Maybe they can IPO with such a garbage app but why not fix it first?
It's truly baffling how Reddit changed from a fast loading & information dense UI to something that takes about 15 seconds to load on average and shows about 1/10th the information than before.
> It's truly baffling how Reddit changed from a fast loading & information dense UI to something that takes about 15 seconds to load on average and shows about 1/10th the information than before.
The compact mode on new reddit is actually slightly more information dense than old. Sadly it’s still a crappy, slow JS app, if it was performant I’d switch from old in a heartbeat.
Except all the users that will pay money not to use the iOS app because Apollo is that much better. It's kind of shocking a few solo developers can make a better mobile experience than anyone at Reddit.
I've never tried the app, but that's pretty weird if it's actually good. The mobile site is notoriously hostile, and even the desktop site seems to completely fall apart on pages with lots of videos.
I was curious about traffic stats in regards to your statement. Reddit used to provide monthly traffic figures an various other data at https://www.reddit.com/about/ .
That now redirects to some low-content page with obfuscated numbers that haven't been updated in 2 years. And it's not for lack of updating. The one thing I did learn from that page is that they just hired a new VP of UX, yesterday.
Not at all. Everyone that uses reddit fucking hates it.
I used to use reddit constantly and they've killed all the useful subs, made the mobile ux nigh unusable, and turned the user based in to a leftwing circle jerk.
Same, I use old.reddit.com, with an adblocker enabled, and create a new account whenever I want to comment on something or argue with someone (which is relatively rare these days), thus only interacting with subreddits that don't require accounts above a certain age or karma level.
This limitation keeps me from getting too addicted to the site while still enjoying it. I used to have a several-years-old account that I'd spend hours arguing politics with. Complete waste of time. Deleted it.
And their mobile app is just so bad also :( I want to browse reddit on the web but the web app is doing everything they can to prevent me from browsing without the mobile app.
I use the old UI due to being used to it but the new UI has some advantages like a quick search to select a subreddit rather than scrolling through a long list.
You could say the same thing about a lot of companies that were allegedly on the edge of IPO. Lots of IPOs got shelved due to the bad market conditions
Whether due to bad timing in the market or general hubris, Reddit won't sell until it reaches the likes of Yahoo and the Ruperts of the world. Every day they look more and more like Digg v4, their own raison d'être
Nah they are cultivating a growth story, and the markets will eat it up in a few years when they are desperate for growth stocks again. Even though it'll be 20 years old by that time. Maybe they won't get a 15 billion valuation or whatever but the early investors/conde nast will make a healthy profit.
> markets will eat it up in a few years when they are desperate for growth stocks again
This requires low short-term and long-term rates for more than one fund cycle. That puts the IPO out, at a minimum, 5 to 7 years. It also puts it at odds with most near-term rates forecasts. If Reddit is waiting for peak valuations to go public, they'll be waiting for 10+ years or, more likely, be bought while running out of money, because waiting for multiples to change as a business strategy is a piss poor one.
I’m sure it’s really helping their numbers having literally every single mobile page aggressively push you toward the mobile app with no way of disabling it.
I never did understand how Reddit could realistically remain the site it was after IPO. All the 18+ subs would have certainly vanished, and the fact they are now quarantining is the first step in the process. They've also tried to start paying moderators by making them curators, and that fell apart due to controversy. Is Reddit competently managed enough to merit an IPO?
Is it though? Just a few days ago we had a troll incite redditors over a court case and once again, the only time Reddit responds is when they hit the news wires.
It is hard to groom a community, but if you have this many public denigrations, there's problems in the company AND on the site.
In addition to the market turn, the IPO was a bit of an odd choice to begin with. Conde Nast, a large media company, owns Reddit and treats it like a media distribution channel, not a rocket-ship tech company. They were never IPOing to grow - it was basically Conde Nast saying "we think this is the best price we're ever gonna get for this asset."
The IPO goes away when the independent cash value of the company dropped below the business value of the distribution channel.
Conde Nast... Yesterday I observed a user suspiciously plugging a pay therapy web site, but in a subtle way, in strange contexts on various subs. Looking at the user's other posts, there were THOUSANDS of messages for that and all sorts of other links to various websites, saying something personal about how it helped them.
I went to flag it but there was absolutely no option within the flag reason. Commercial astroturfing is 100 percent okay on Reddit, in other words.
Is that because of Conde Nast owning it? They must own a portfolio of ad and product stuff.
Readit News
There's a couple reasons why it's so bad. Firstly, everyone's expecting a recession, so advertising budgets are getting cut and that's going to tank Reddit's revenue stream (which is already weak) and secondly, a high interest rate environment means that all that future growth has to be discounted back to a much lower net present value. It's also just in a bad place narratively, none of the small scale social media sites are doing well revenue wise, and Tiktok is eating their lunches anyway.
Could someone explain this to me like I'm a 5 year old (who understands what a discount rate and present value are, but not why that collection of words makes things harder for reddit)?
If interest rates are zero, that's a good deal. If rates are 25%, that $1 will almost get there on its own in a Treasury. A good deal in a low-rate environment is a bad one when rates, the price of money, are high.
x / ((1+i)^n)
Discount rates are affected by interest rates, because interest rates represent what else you could do with your capital (you can always invest in a Treasury instead of a tech stock).
So if i goes up, x goes down.
TL;DR the higher returns from US bonds make other investments comparably less attractive because you can get better yields from the USD bonds.
I see them:
* Purposely crippling the web experience on desktop or mobile web
* Implementing a SPA badly. Clicking on some posts loads entirely different posts. Comments don't work sometimes.
* Purposely crippling the logged out experience
Reddit being a home for racists like this would probably generate a ton of scrutiny if they go public.
[1] https://www.nytimes.com/2019/10/08/us/reddit-race-black-peop...
But inflation is still higher than interest rates.
My college was paid for by 12% US Savings Bonds that my parents bought when I was a small child. That late 70s/early 80s inflation went away in the meantime.
[1]https://www.investopedia.com/terms/n/npv.asp
Dead Comment
Reddit might actually be one of the worst offenders, but because they aren't public, and have a smaller user base, they went unscrutinized. I highly recommend everyone watch the documovie the Social Dilemma.
TLDR; Social media is military grade psychological weaponry aimed at the most vulnerable amongst us.
That would probably be good for the stock value, wouldn't it?
I use old.reddit.com
The newer UI is just so much bloat.
Bring back IRC style UIs that are data rich and don’t have a million pixels of white padding cause some UX graduate thinks it looks cool.
At some point recently they changed it to ask you every time you visit. There used to be an option to disable the mobile app ads. Funny that that's the only thing they've changed in six years (I left late 2016.)
Respect my preference, or don't offer the better UI at all if you want to punish me for it, or needle me out of using it.
The compact mode on new reddit is actually slightly more information dense than old. Sadly it’s still a crappy, slow JS app, if it was performant I’d switch from old in a heartbeat.
edit: Checked the current state of New Reddit. Yikes! https://i.imgur.com/FnMDjmM.png
If anything, the new UI changes are in service of an IPO, not the reason it would fail.
That now redirects to some low-content page with obfuscated numbers that haven't been updated in 2 years. And it's not for lack of updating. The one thing I did learn from that page is that they just hired a new VP of UX, yesterday.
I used to use reddit constantly and they've killed all the useful subs, made the mobile ux nigh unusable, and turned the user based in to a leftwing circle jerk.
So now I barely ever use it.
Dead Comment
This limitation keeps me from getting too addicted to the site while still enjoying it. I used to have a several-years-old account that I'd spend hours arguing politics with. Complete waste of time. Deleted it.
https://twitter.com/paulg/status/1360263618508521480
This requires low short-term and long-term rates for more than one fund cycle. That puts the IPO out, at a minimum, 5 to 7 years. It also puts it at odds with most near-term rates forecasts. If Reddit is waiting for peak valuations to go public, they'll be waiting for 10+ years or, more likely, be bought while running out of money, because waiting for multiples to change as a business strategy is a piss poor one.
It is hard to groom a community, but if you have this many public denigrations, there's problems in the company AND on the site.
The IPO goes away when the independent cash value of the company dropped below the business value of the distribution channel.
I went to flag it but there was absolutely no option within the flag reason. Commercial astroturfing is 100 percent okay on Reddit, in other words.
Is that because of Conde Nast owning it? They must own a portfolio of ad and product stuff.