Podcast Summary
Expected Icebreaker for the IPO Market: Reddit: The IPO market is on hold due to investor trauma from SPACs and interest rate hikes. Reddit, as the modern-day Saudi Arabia of digital attention, is expected to be the icebreaker for the market.
The IPO market is currently experiencing a freeze due to psychological factors, specifically the trauma caused by retail investors being negatively impacted by SPACs and interest rate hikes. The market is eagerly awaiting a successful IPO to generate confidence and unleash the pent-up supply and demand of firms and capital. According to Scott Galloway, the icebreaker for this market is expected to be Reddit, as it commands a significant amount of attention in the US market, making it the modern-day equivalent of a resource-rich economy like Saudi Arabia. If attention is the new oil, then Reddit is the Saudi Arabia of the digital world, holding a vast sea of valuable attention.
Reddit's Undervalued Potential for Monetization: Despite modest revenue growth and inferior ad stack, Reddit's massive user base and unique contextual user attention make it a significant potential value for data buyers, with upside potential suggested by historical comparisons and potential catalysts.
Reddit, with its massive user base of 850 million monthly users and an attention volume that rivals giants like Alphabet and Meta, is currently undervalued in the market. Despite its modest revenue growth and inferior ad stack, the potential for monetization is immense due to its unique contextual nature and the desirability of its particular form of user attention to deep-pocketed data buyers. Reddit's recent efforts to restrict API access and roll out advertiser tools indicate its commitment to figuring out monetization. The question remains whether Reddit will continue to grow like DIG and Vine or transform into a global platform like Alphabet or Meta. History suggests the upside potential is significant, and potential catalysts like non-English growth and a focus on valuable consumer segments could further boost its market value.
Reddit's valuable user-generated content attracts AI companies, generating over $200 million in revenue: Reddit's extensive user-generated content is valuable to AI firms, leading to over $200 million in revenue for the platform. Investors like OpenAI's Sam Altman hold significant stakes, adding value through association.
Reddit's extensive and diverse user-generated content makes it an attractive training ground for AI companies, generating significant revenue for the platform. With over a billion posts and 16 billion comments, Reddit's corpus is valuable to AI firms, leading to over $200 million in revenue. OpenAI CEO Sam Altman, with a 9.1% voting stake, is an investor in the company. The association with AI firms has added value to Reddit, with Oracle mentioning NVIDIA and AI more than their own name in recent earnings calls. However, Reddit's governance structure, which gives CEO Steve Huffman near total control due to dual class shares and deals with major shareholders, is a concern. Additionally, Reddit's role as the "meme factory" to the meme stock movement is not a sustainable engine for shareholder value. Despite these challenges, there is a possibility that Reddit could become a major player in the mid-cap market, with its large user base, modest valuation, and potential as a meme stock offering option value. Overall, Reddit's relationship with AI and its unique position in the market make it an intriguing investment opportunity.
