From Breakingviews - Reddit’s golden geese foul up its IPO plans
to third-party apps that serve up Reddit content, was supposed to last for 48 hours. Five days later, many subreddits remain locked by moderators who feel those apps, some of which may close if forced to pay, keep communities vibrant.
Huffman deserves credit for thinking like an investor. Some third-party apps using Reddit content make money, which an owner of the still-unprofitable Reddit would probably prefer to share. A bigger target is artificial intelligence companies such as OpenAI that create value by scraping Reddit’s forums to hone their own products. Huffman’s plan would shut off that free-data spigot.
Still, with a chunk of Reddit shut down, there’s no initial public offering. So if Huffman really wants to go public, he will need to find a way to align moderators and investors. One option would be to pay mods, or – if they don’t want to become de-facto employees – reward them in other ways. For example, he has pledged to develop new tools to replace the beloved apps. Either path involves higher costs, and a more tortuous path to profitability.
In short, the mods have shown that Reddit needs a business-model tweak. And potential investors will want to see it in action before shelling out for the shares, which makes a rushed IPO seem unwise. The self-branded “front page of the internet” has been waiting to IPO since 2021; it may have to moderate its expectations again.
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