Congratulate me folks. I’ve promoted myself to Intergalactic President of unCharles’s Digital Media Ink. It turns we can just give ourselves meaningless, lofty-sounding titles. Reddit did. They call themselves the front page of the Internet. Seventy million people visit the site every day. Reddit is going public and could be worth $5B dollars. What does that tell me?
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What does it tell me that the front page of the internet can attract 70M daily users on every topic and sub-topic, pay nothing for content, while recycling readnews (rn) tech from 1986, and still lose gobs of money despite getting paid to let Google scrape their content… money that comes with near-infinite margins?
That tells me the idea of the internet as a place where a non-social media can make money is a fallacy.
And, what does it tell us about the state of investing that a mature company with limited growth prospects that’s losing money and — at best — can eke out a meager profit is worth $5B or more?
That tells me investors are cuckoo for Coco Puffs and that Morgan Stanley and Goldman Sachs can sell sugary cereal to the parents of overweight kids with early onset diabetes.
Yeah, you can look at Reddit’s 6.2x multiple of revenue and say it’s inline (ish) with Meta’s 10x multiple. But there are two big differences.
First, Meta makes money. Lots of it. In 2023, they made $40B. They’re worth $1.3T. That’s 32.5x each dollar of profit. And, that’s because they grew revenue by 16%. And, that that is on a gaudy $116B base of revenue. Reddit? They Lost money and grew a 1/100th the revenue by 10%.
And here is the much bigger second thing. Content on Meta’s platforms are off limits to folks like Google and OpenAI. Meta knows their users generate the kind of gibberish that AI companies flush with money are all too happy to flush buying access to gibberish. But Meta has the cajónes to say whatever “no” is in Spanish to the likes of Google and OpenAI.
That tells me Meta realizes you don’t sell the thing that makes you special for pennies on the dollar like publishers did twenty years ago. Meta is playing to win. Reddit is playing to not lose.
Which brings us to two-decade-long money-loser, Reddit. Last year, they lost $90M on $800M in revenue. How? You pay for nothing… There’s no tech. No advertising. What could they possible lose money doing?!?!?! Which means there’s no easy way to big profits. Which is a problem because profits are as trendy to investors right now as a Dior graffiti logo couture is to Parisian fashionistas. Which explains why Meta stock is up 70% in the past six months. And, had Reddit been a growth story, ten percent topline growth ain’t so stellar when it’s on a very small (by Meta standards base) and looks even more meh when eight percent of it came from Google’ buying content.
That tells me Reddit can’t monetize their content any better with ads than selling it for scrap.
The other day, I said Google should just buy Reddit. They need it to drive better search results and may need it to refresh the flagging brand image of their weirdly racist AI bot.
This is the other side of the same coin. Reddit shouldn’t be public. It’s going to look far too much like a lot of very meh media companies that were public. Were. Past tense. Primedia. A collection of B2B magazines that KKR needed to get public to cashout. Bore meet ring. WebMD. Nichey cash cow that never set the world on fire. Both went private. There are many, many more examples.
How did we get here? Reddit needs to go public because it’s been private and losing money for way too long. Attaching its user generated content cart to the AI horse maybe the only window that’s going to show up for a long, long time. If/once it gets public, it will bore the tar off investors and stagnate as a stock.
That tells me that Reddit knows Google is the end game and is pretending to date the stock market to make it jealous. The play comes from the cover of any 80s issue of Cosmo.
And, yes, as the Intergalactic President of unCharles’s Digital Media Ink, I’m reddit-ing these tealeaves right.
