In September, Reddit announced it was looking for advisers to help prep for a $15B IPO (and no doubt create the hottest new meme stock).
As part of its IPO preparation, Reddit has honed its advertising business, which makes up the bulk of its revenue. But unlike other social media platforms, Reddit has better options for monetization.
In a recent post from the Every newsletter bundle, Rohit Kaul broke down why advertising is a bad fit for Reddit. Here’s the rub:
Reddit’s biggest asset is its ability to foster deep engagement within its communities. Rohit has a simple suggestion to tap into this asset: Build products that enable its communities and creators.
… Reddit has 500+ subreddits with over 1m followers but few ways for those communities to make the experience unique.
Some products that Reddit could introduce to drive monetization within its communities are live events, in-app marketplaces, and premium content.
… Reddit could do 2 things:
Reddit is on track to double its advertising revenue this year to $350m. While that’s impressive growth, it still pales in comparison to other social platforms (e.g., Pinterest did $1.1B through the 1st half of 2021).
Another concern? If it becomes too saturated with ads, Reddit may ruin some of the magic of the platform.
That gives all the more reason to build a better product for its communities and users, who may reward them by pumping the stock to the moon.