Reddit Goes Public Despite Years of Losses, Betting on Future AI Growth
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Reddit is going public but has lost a lot of money in recent years despite being founded in 2005 and having over a decade to build a profitable business.
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Reddit brings in revenue by selling ads against user-generated content that is provided for free, but spent 55% of its 2021 revenue on research and development costs.
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High R&D spending has gone towards hiring engineers and paying their high salaries rather than building new products.
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Reddit's user growth has accelerated recently, but much of the gain has come from Google search traffic that could disappear overnight.
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An AI partnership with Google will help Reddit's margins going forward, but it's uncertain if that justifies an estimated $5 billion valuation.