Thread

Reddit's valuation doubles after a $250M fundraise — will it become more like Facebook?

Snacks / Wednesday, February 10, 2021

Adorable little alien robot... Reddit's logo is cute, but its threads don't always fit that description. This year, Reddit has been at the center of a social-driven retail trading frenzy. On Sunday, it made headlines again for spending its entire marketing budget on a five-second Super Bowl ad (inspired by the trading frenzy). Now it's making headlines for a different (but also likely related) reason:

  • Reddit raised $250M, doubling its valuation to $6B from $3B in 2019. Reddit's fresh cultural relevance and an influx of new users lured VCs.

Craigslist aesthetic... The internet has transformed since Reddit launched in 2005 — but Reddit has stayed true to the early 2000s vibes. That's fitting, since it thrives on being the dark horse of social media. Though Reddit and Facebook were founded just one year apart, they couldn't be more different – especially in the eyes of advertisers:

  • Design: FB gets a Millennial-friendly facelift every few years. Reddit is still sporting the text-heavy Craigslist look.
  • Identity: Redditors are anonymous, with obscure usernames and no headshots. FB makes you send 10 forms of ID to change your name.
  • Discoverability: FB is all about a single feed for following friends. Reddit loves interest-specific communities and hard-to-find threads.
  • Size: Reddit has 50M+ daily users. Facebook has 1.84B, including Instagram and WhatsApp.
  • Moderation: Facebook gets the brunt of regulatory and media scrutiny around moderation, and has hired thousands of reviewers. Reddit relies on user volunteers and is known for moderation-light policies.
  • Advertising: Facebook is basically a digital billboard (worth $84B in ad sales last year). Reddit is far from a powerhouse, with $100M in 2019 ad revenue. But that could change...

With more funding comes more pressure... to cater to advertisers and make $$$ for investors. Reddit said it's using some of its new funds to grow its ad biz, and noted that ad sales jumped 90% last quarter from the previous year. But to really capitalize on its engaged communities and cultural relevance, Reddit will likely have to address some of its non-ad friendly traits — and possibly become more like FB (not necessarily a good thing). Most importantly, it'll have to revisit its laissez-faire moderation. Reddit has been criticized for allowing racist/sexist/offensive dialogue on its platform. That could scare off marketers.

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