Reddit, recognized for its unique volunteer-driven content moderation strategy, has stepped into the public market, a move that analysts predict will compel the company to significantly invest in content moderation.
This necessity stems from anticipated increased regulatory scrutiny, which could challenge Reddit’s longstanding reliance on its vast volunteer moderator community.
The company, in its initial public offering (IPO) documentation, flagged the potential for operational disruptions akin to the 2023 incident when several moderators staged a protest over Reddit’s decision to impose charges on third-party app developers for data access.
Experts argue that the volunteer-based model might not hold up under the new pressures of being a publicly traded entity.
Julian Klymochko, CEO of Accelerate Financial Technologies, pointed out the unsustainability of depending on unpaid labor, especially given Reddit’s considerable revenue, which was reported at $804 million in 2023.
Klymochko predicts a “dramatic” increase in expenses as Reddit bolsters its trust and safety efforts.
In defense, a Reddit spokesperson highlighted the company’s combination of internal safety teams, artificial intelligence, machine learning, and human review to enforce content policies, alongside investing in safety tools for moderators.
The spokesperson asserted Reddit’s moderation model as highly sustainable and continuously evolving with new tools and policies.
Content moderation is crucial for social media platforms to maintain advertiser relationships, as seen with platforms like Elon Musk’s X, which faced advertiser backlash over loosened moderation policies.
Josh White, a former economist at the Securities and Exchange Commission and a finance professor at Vanderbilt University, emphasized the risk of relying on volunteer moderation, especially with the upcoming U.S. presidential election.
Despite not having turned a profit since its inception in 2005, Reddit’s shares surged by 48% in their New York Stock Exchange debut, although they saw a slight decline on the following Friday.
This performance, coupled with interest from notable investors like Cathie Wood’s ARK Invest, indicates a cautiously optimistic market sentiment towards Reddit’s future, marking a significant moment for the company and potentially signaling a revival of investor interest in growth-oriented, yet unprofitable, tech companies.