Written by Niket Nishant
(Reuters) – As a public company, Reddit could face greater scrutiny, need to spend more money moderating content and hire more volunteers to maintain order on the platform, analysts say. It said it threatened the company's long-standing policy of relying on military personnel.
The newly public company said in its initial public offering (IPO) documents that its unique approach to content moderation means it charges third-party app developers for access to its data. He warned that the decision could lead to chaos similar to 2023, when multiple moderators protested the decision. .
Julian Klimochko, CEO of alternative investment solutions firm Accelerate Financial Technologies, said relying on volunteers is not sustainable given the regulatory scrutiny his company will face. He said no.
“It's like relying on unpaid labor when the company has nearly $1 billion in revenue,” he added. Reddit reported revenue of $804 million in 2023, according to previous filings.
Klimochko said Reddit would need to make significant investments in trust and security, which could lead to a “dramatic” increase in expenses.
A Reddit spokesperson said that in addition to moderators, the company also had a strong internal safety team that used a combination of artificial intelligence, machine learning, and human reviews to enforce content policies.
This policy prohibits content that harasses, incites violence, or is hateful to our users or communities.
The company is also investing in safety tools to automate moderator tasks, the spokesperson added.
Weeding out offensive content is critical for social media platforms, which are expected to see an exodus of advertisers keen to prevent their ads from appearing next to inappropriate content.
Many advertisers have been wary since Elon Musk's X relaxed its moderation policies.
Josh White, a former Securities and Exchange Commission economist and assistant professor of finance at Vanderbilt University, also said that relying on free volunteers is Reddit's biggest risk.
White said the company needs to increase spending on anti-misinformation efforts, especially as the U.S. prepares for a presidential election later this year.
“We believe our approach is the most sustainable and scalable moderation model currently existing online,” a Reddit spokesperson said in a statement. “We continue to introduce new tools and policies to improve our internal capabilities. We're continuing to invest and iterate.”
great debut
Reddit's shares rose 48% in its listing on the New York Stock Exchange, receiving a warm welcome from investors despite not making an annual profit since its 2005 founding. It fell nearly 5.4% on Friday.
Analysts said stock trading will be closely monitored in the coming weeks for further clues about investor interest in issuing new shares after a prolonged period of market freeze.
“The success of Reddit's IPO is a return to the pre-pandemic era, when investors were willing to buy up shares in loss-making companies if they presented a compelling story,” said Dan Coatsworth, investment analyst at AJ Bell. It symbolizes,” he said.
Popular investor Cathie Wood's ARK Invest also bought about 10,000 shares of the company's stock on Thursday, according to an email from the asset manager.
(Reporting by Niket Nishant in Bengaluru; Editing by Anil D'Silva)
