Concerns Rise as Reddit Prepares for its Upcoming IPO

With an estimated IPO value of $10-15 billion, Reddit’s future should look rosy. So why are developers and users anxious about what’s on the horizon?

By Mitch Larrivee, Supervisor, Paid Social

Reddit is a key social network where retail investors can exchange advice and ideas. 42-50% of its userbase comes from the US, compared to 8% from the UK, and 5-8% from Canada. The organization is working to increase profit to boost its upcoming IPO. As part of that plan, Reddit has implemented some restructuring that’s resulted in several changes aimed at decreasing costs and increasing income. One of the outcomes is that the company has laid off 5% of the workforce, and reduced hiring plans from around 300 new roles to 100. In the process, Reddit has updated its Data API (Application Programming Interface) to limit free access, which has led to protests and concerns over content moderation.  

What does this mean for Social Media Advertising?

These Data API updates will have the most impact on paid social. For now, the effects are minimal, but issues may arise around Reddit’s inventory and brand safety moderation.  

This has had an effect on developers and users, as they’re now fearful that the API update will constrict 3rd party apps which will lead to higher fees, meaning they will no longer be able to operate. The Apollo app developer said that the API update would increase its costs by $20 million per year – which is close to Twitter’s API pricing. In response, Subreddit moderators planned a protest by temporarily blacking out their subreddits. 

These protests, although short-term, may have an impact on available inventory, especially as some of the largest subreddits joined in blacking out on June 12. Over 3,000 subreddits joined in, but many returned after 48 hours. Another concern is that inventory could be stunted in the long term, with apps that allow users to customize and streamline their Reddit interface. This could lead to usage declines with those users who prefer a different interface, assuming apps either begin to charge a fee, or shut down.  

Having said that, according to Gizmodo, the blackout protests are only having a minimal effect on Reddit’s traffic. While pressure from Reddit on those companies protesting to reopen have begun to work, large subreddits are protesting in other ways. Some of them have set themselves to NSFW (not safe for work) to remove themselves from advertising inventory. However, this is in violation of Reddit’s user agreement and moderators can be removed over it. Other subreddits have turned from their normal content to posting pictures of the comedian John Oliver.  

Organizations are facing a larger concern with the API update, as moderating content is becoming difficult. Many 3rd party apps are used to do this on Reddit, and we’ve already seen moderation tools like Pushshift lose access to the API for violating terms.  

 For advertisers this is an enormous concern for brand safety. In an announcement in April Reddit stated that API updates should not impact moderation bots and extensions. They go on to say that they’re continuing to build new moderator tools.  

While we don’t know what Reddit’s final solution will be, we do know the immediate effect – the community’s reaction is causing some disruption. Reddit’s goal of operating lean, and increasing fees, will no doubt help improve their IPO. Incidentally, the company still hasn’t officially commented on the blackouts. Despite this ongoing disruption, they’re unlikely to move away from the new pricing model, but some suspect the company could change tack with larger developers to avoid long-term disruption. Reddit can’t afford to lose users or control on brand safety, as its goal to win over more advertising partners might faulter unless they make some concessions. 

If you’re looking for a more in-depth analysis of your brand, drop us a line and our team of Social Media Experts will customize a strategy that meets your needs.

Mitch is a passionate and data-driven advertising and management professional offering 13+ years of experience leading key growth initiatives with a people-oriented vision. He is an expert in delivering innovative, cost-saving solutions and strategies that streamline processes and drive business growth in a fast-paced and competitive space. His peers often commend him for his relationship-building and communication skills, strategic thinking, and creativity. 

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