How Reddit Went From $12M to $2.2B + Cracked Social Media Monetization

In 2015, I did not think that was going to happen because I didn't think more than maybe a week ahead.

Being public is great. It's like a side hobby of mine to catch other CEOs who are thinking about going public and tell them that they should. Being public's not so bad. Going public is tough.

One of the reasons is I wanted our users who have a deep sense of ownership over Reddit that they've earned. Part of our IPO was doing one of the largest directed share programs ever to let users buy into the IPO at the IPO price at $34. It's a business model that scales with usage. And turns out it's a business model that's aligned with just what people talk about, which is what Reddit is. There's a natural fit.

Hi, thank you. My pleasure.

Yeah, thanks for being here. I was saying this, but this is genuinely like a gorgeous office.

Yeah. The worst is either the building we shared with Child Protective Services, or the office we had at Mid-Market and 10th during COVID, which was like a no-go zone. We had a nice-ish office in the Tenderloin. It was a little high-low experience.

Um, probably financial, I think. I didn't choose the CPS building. Well, so we shared an office with Wired when we got acquired. That was a couple blocks from here on the other side of South Park. That was really fun. And then when I was gone, yeah, they moved out into the CPS building. I don't know why, this is like bad vibes in that office. Yeah, not great. Not great.

Here is nice. Here's great vibes. The president is nice. Yeah, we now is great.

Yeah, I'm now blinking on the name of that restaurant. I would love to give them a shout out. It was great. If I recall, that restaurant during COVID was like making meals, or the chef who started that restaurant was like making meals for people and helping other restaurants. So, they have like a really nice story as well.

So being public is great and it's like a side hobby of mine to catch other CEOs who are thinking about going public and tell them that they should. I mean there's one big if there which is like if you're ready. But I feel like there was so much, it's easy to find feedback. It's easy to find a CEO who took their company public and then regrets it and it doesn't make sense to me. You know, you get to do this really incredible thing. For many people, it's a once-in-a-lifetime thing that I think anybody in business would aspire to. And then you spend the rest of your career bitching about it. It just doesn't. And it's like so great for the business, so great for employees and you do right by your investors in theory. And I think for us all those things are true. Very happy for our employees and for the people who supported Reddit along the way. And it's also made us a better business. Like the rigor, the routine, the pressure, I think all of that has really helped us. So there's no question we would not be where we are today without going public. Then being public's not so bad. You kind of get in the routine of things and it's nice. Going public is tough. We were in like a two-year purgatory. We thought we were going to go out in 2022. The markets were closed then and we thought we'd be one of the first companies out and it'd be a little chaotic, but Reddit's a little chaotic. So we're like, let's go for it. That fits. And then things got really chaotic. So we waited. We were on file for two years updating our S1 every quarter before we finally went out in '24. But I'm so glad we did.

I think there are two things. So one is the business itself and then maybe the conditions. So the business itself was really starting to click. So we've had revenue growth over 60% for five quarters in a row and we were able to get to GAAP profitability in our first year out a little bit ahead of schedule. And so that sort of momentum was very helpful, just having the business work. And I think especially in our space where we've seen companies go public at our scale but then not be profitable for a while or have some other, you know, maybe business gotchas, but we learned from that and so getting the profitability was really important to us. The conditions are interesting. So, you know, when we went out, it was like $34 a share was the IPO price. So we went out March 2024, our last private round was in end of '21. Share price was $61. So, we went out with a pretty big valuation haircut from our previous peak. Because the conditions were a little choppy, but the price can either go up or down. So, if you go out at the low end, much higher likelihood of it going up. And you know when some companies go public they really try to push the valuation and you save some on dilution but if you go out at a lower price and this is what the advice I generally give is go out at a lower price so you can have that momentum carry your price up, everybody's happy, your new investors are happy, your employees will be happy. It cost you a little bit of dilution but I think it's the best marketing dollars you may ever spend. You make a lot of friends that way. And so Reddit's price has been volatile, you know, over the last couple of years. But it's volatile between like, you know, a hundred something and 200 something, right? We IPOed at $34. So we made a lot of friends. A lot of people did really well. And I'm very happy about that. And so we had to, you know, maybe swallow our ego a little bit and just take effectively a down round and but then we grew out of it. So I feel really good about how that played out.

Well, so one of the reasons to go public is I wanted our users who have a sense of ownership over Reddit, a deep sense of ownership that they've earned, right? Everything interesting about Reddit is created by our users. I wanted them to be able to actually be owners of Reddit. And so part of our IPO was doing one of the largest directed share programs ever to let users buy into the IPO at the IPO price at $34. In a normal IPO, what would happen is the retail investors, they invest at the first trade. So if there's a pop, it would be higher. So we popped to $47. That would normally be their price. But we're like, we want the users to be able to buy in at the same price that the IPO investors get. And my only regret is not getting more users into that program. We actually had capacity to do a lot more. But what we were fighting and I learned some lessons here. We had within the last year during our IPO, we got in a big fight with our user base over the API access. So a lot of the users were mad at us and then didn't invest in the IPO and because of the quiet period, you can't really say anything. You can't sell the stock and there's good reasons for that obviously. So there was a negative sentiment among our users. So, we did get a lot in. Every user who came in to our DSP, we fulfilled their full order and I just wish more users would have participated because they all did very well. But I'm still very proud that we went through that. And I think as a general thing, I think if you're taking your company public, finding ways to include your customers or your users or your biggest supporters in that ride is a special opportunity.

Any community, whether on Reddit or online or offline, by definition I think has a few things. Like what is a community? And so I think a community is not just a shared set of interests, that's one dimension, but there's also a shared set of values. There's usually an affection or care for one another, the members. Often like a kind of shared vernacular or vocabulary. And so we see this on Reddit. So just putting aside the stock or company based communities, almost every Reddit community has these qualities. And I think if you don't spend a lot of time on Reddit, it's hard to appreciate this because elsewhere what you see online are more interest groups, but you lack the community aspect that really kind of binds things together. Now, Reddit's interesting because Reddit is communities, right? It's thousands and thousands of communities. One of the big evolutions that we've been through over the last, you know, Reddit's 20 years old, maybe call it over the last 10 years or so is, I think, the dilution of the Reddit community. Like, when we started Reddit, there were no subreddits. It was really just one place, the Reddit community, which had a distinct tone. Now there isn't just one place. And so we've seen that kind of Reddit community split into thousands of sub communities. But each of the sub communities does have an opinion about Reddit, the platform. And that's evolved a lot as well. Like one of my favorite communities now is like the Reddit stock community which are user shareholders. It's not as memey as some of the other ones which is a common actually pattern on Reddit.

Reddit creates meme stocks but itself isn't really that. You get there's a little bit of that energy but not like those other companies. But it's really special to see the Reddit stock users, you know, support each other. Like they really seem to care about how not just how Reddit does, but how their fellow shareholders are doing.

So, there's another paradox here in our history, which is when we started Reddit, I hated ads. And if you go on Reddit, there's like this almost like anti-commercial vibe. And that's because Reddit is authentic. And so, it's easy to go from authentic to anti-ads. But that's not actually what's happening. It turns out, much to our surprise and good fortune, what people talk about is what should I buy next? Like 40% of the conversations on Reddit are commercial. The anti-commercial space is just that's what people talk about. But they don't usually say what should I buy. They say what should I watch? What should I wear? Where should I go? What game should I play? What should I listen to? And so they're asking their friends, their online friends or community members advice. It just happens to be that advice is often answering a question of what should I buy? And so what that means is Reddit has become an essential part of people's purchasing decisions which makes it a really natural fit for advertisers. One of our world creative strategists, this guy Will Katay was here for a long time. He had this saying that I love which is users hate ads but they love brands. And just one of the brands' only way to communicate with their customers is through ads. But on Reddit, the brands are increasingly figuring out how to use the ads to communicate in a uniquely Reddit way. But we have a lot of subreddits, you take all the advertising away, we have a lot of subreddits dedicated to brands and their products. You know, our biggest category for a long time was gaming. Like every gaming subreddit is really a community about a product. And so there's just such a natural overlap. And then at the same time, our ads work, right? We've just invested a lot in our own adtech so that the targeting and the measurement and all these things that advertisers need actually get a return on. And Reddit works as a brand platform and as a performance platform. So, we've had to kind of grow our way into this and build our way into this, but it only works because the foundation kind of lined up with what the user, the users were the customers of our customers, everything lines up nicely.

Well, that's been an interesting third chapter for us. Right. If the first chapter of Reddit is Reddit's not traditional media, that was our thinking 20 years ago is just we need another source of information. And then the second chapter was Reddit's not social media. You know, Reddit's different than social media. It's organized around communities, not the what I call the Fs, friends, family, famous people, followers. Now we're in this third chapter which is Reddit's not AI. But in an interesting paradox, Reddit is the fuel for AI. So if you have a question on the internet pre-AI and post-AI, where is the answer going to come from? Ultimately, the answer is going to come from other people which are on Reddit. This is one of, Reddit is one of the best supplies of human intelligence. And so yeah, Reddit's data has been used to train every large language model you've heard of, some with and others without our permission, which has been a situation to navigate. But with our biggest partners, Google and OpenAI, you know, we do it on purpose. And I think it's worked well. I think those big search products help people discover Reddit, help people learn that Reddit has communities relevant to them, which is one of our biggest challenges at this point. Everybody's heard about Reddit, but not everybody realizes that Reddit actually is relevant to them. And so our presence in search and elsewhere on the internet actually helps just close that perception gap. And then in turn, we get users that create more content, which becomes more information for these AI products.

Oh, okay. So, there's a lot here. So, yeah, Reddit's had bots pre-AI but labeled bots. You know, bots that'll correct your spelling, bots that answer questions, you know, little utility things. So, funny things, utility things. Our moderators create all sorts of programs, bots to help moderate their communities. And so that's just a part of the Reddit ecosystem. When people say bots today, they're referring to AI masquerading as humans. That's not allowed on Reddit. What we see, but we've invested so much over a long time on preventing people from manipulating Reddit. Now, it's an arms race. So, the front in that battle is always moving and the state-of-the-art's always evolving and AI is another chapter in it, but it's not a new story for us. What we see a lot of now is the in between. And this is where I think it's a little bit more of a gray area, which is a human user. They registered as a human. They're using Reddit, but they used an LLM to write their post. But what's interesting, then that's a minority of posts on Reddit, but you will see it. But when you see those posts on Reddit, the comments will basically say, you know, go away bot or, you know, thanks for the post OpenAI or whatever. And so we're going through right now this development of like the immune system. Like before we have a policy that says you can't use prompts, which I don't think we're going to have that policy because that's just how people are going to write in a couple of years. Everybody's going to learn how to, for better or for worse, have learned how to write with AI. The communities themselves reject that sort of content. That's basically low effort and they download it, they'll flame it in the comments and you don't see that on other platforms. I see slop and now AI slop just going unchecked. And it just makes these platforms very unpleasant to use. Agents are a whole another can of worms which is you've got an agent using Reddit. But I think this is going to be a very popular way of using the internet. So we can't just say no agents. The way we're thinking about it today is we want to make sure there's an ass in seat, like are you physically watching this thing? And we'll have to see where that goes. I still think if you use a bot AI to write content on Reddit today, it's going to get flamed because the AIs actually aren't very good writers. But that's a societal thing we're all learning, which is why when these things came out, we were so amazed. It's like, wow, look how much content they can produce. But then after a year or two of this, you're like, oh, it's kind of, it's all the same tone. It used to be flat. Now it's like this weird bombastic style of writing that really stands out. I presume it'll get better. But our point is at the minimum we want a human behind it, right? The idea has to come from a human and if it's not, we'll probably reject it and our community will definitely reject it.

I don't want to judge other platforms. I think one thing that's always been important to Reddit is the authenticity. And I've said for a long time, Reddit is the world's greatest bullshit detector, right? Reddit is very sensitive to inauthenticity. So whether it's written by AI or it's some self-serving piece of content or just low-effort or crap, the community has a, they don't want that. Like that is one of the things that Reddit broadly craves is authenticity. And so our users fight for it, our mods fight for it, we fight for it. Reddit's never been the engagement platform, right? Find the most engaging or enraging post to drive time on site or to drive traffic. That's just not how we run the business. That's not what our community wants. When we were watching social media explode, right? We predate almost every social media platform. We're like a year younger than Facebook. YouTube was maybe six months old when we launched. But then, you know, Instagram and TikTok and Snap and Twitter, all these companies came later and grew past us. We saw what they were doing and we just said that's not, that wouldn't work on Reddit. It would kill Reddit. We could do that. And at the time we were making almost a business decision, well, a values decision and a business decision which to me felt like okay, we're going to be smaller because we're not going to do those things. But if we did those things, we'd kill the soul of Reddit. I'm very pleased that I think because we were stubborn, we get to exist today. What I was wrong about is that Reddit would always be small. Turns out people actually really appreciate what we're doing. It's just been a slower burn. It's taken us longer to get here. But I think in a world where social media is huge, it actually creates a context for Reddit or creates a context for people to appreciate why Reddit is the way it is. And now even more so with AI where the whole internet becomes sanitized and summarized by AI which actually has a lot of value, but it causes people to appreciate the humanness of Reddit. And so now we've seen this pattern enough times if we just stick to the things that we love about Reddit, the principles and values that got us here, we can continue to grow this thing that we love in a unique way.

It's tricky to do well. Or you could just buy ads.

Well, it is hard. It's doable. But you have to, I actually tell this to customers, like before you advertise on Reddit, you should use Reddit. Like you have to have some native understanding of the culture here and how it's different. And then you'll be more successful both paid and organic. One of the first early rules of Reddit was no self-promotion that kind of emerged from the community. It's the one thing like I'm so torn on this. I'd love to have that one back because Reddit loves original content. But Reddit hates self-promotion. But I'm like, where do you think original content comes from? And so there's a line in there between a writer, an artist, like some creator who's actually creating great stuff and maybe a company who's just trying to use Reddit to promote their stuff. And so we're trying to find how do we navigate that? Because we want the artists, the creators, the writers, the people who have interesting things to say and share. We want the brands too, but the brands need to show up as brands. Like, it's okay for them to say, 'We're here to sell you stuff.' In fact, they do a lot better paid and organic if they just tell the truth. I'm here to sell you something. Like, tried and true organic strategy on Reddit for a brand is to do an AMA. Like, I'm, you know, famous director. I'm here to answer your questions. I'm also here to promote my movie. People get that. Or I'm here to answer questions. I'm also here to promote my book. I think the difference is I think when you're transparent, it's still authentic. You can sell stuff authentically. But if you say you're there for one reason, but you're really there for another, they will sniff that out and then you will get flamed.

There is a lot of creative writing on Reddit. I was at a business dinner. There was like a tech guy and his wife was there and tech guy was working on some AI thing and his wife was like, 'I use Reddit. I love Reddit.' I was like, 'Oh, what do you do on Reddit?' She's like, 'Oh, I love to go to relationship advice and make up awful stories about my husband.' She's like, 'I've been doing this for 10 years.' And oh, okay, my favorite version of the story. I got an email. This was years ago. And the email said, you may have seen this post.

I had seen the post. The post was this guy posting legal advice, asking for advice. And I can't remember the original post. The original post was small, but then in the comments as people started asking questions, it came out that he was trying to hide a gun. And then people were like, "What? Like we're not going to be an accessory to whatever you did." And so the whole post had this like itself was a story as it evolved and it kind of blew up elsewhere on Reddit. So the author of that original post emailed me and said, "If you hear from the police about this, I want you to know this is all fake. I made it up. It was just a troll." And he's like, "If you don't believe me, you can check. I'm also the author of these other posts which happened to be one of my favorite stories on Reddit from way back when about Grandpa Wiggley. There's a series of posts, these AMAs like 15, 16, 17 years ago where the guy's like, 'My grandpa doesn't ought to use computers, but he makes Grandpa Wiggley's mannies.' And so if you want to ask me questions, I'll ask my grandpa and respond with whatever he says. He came back three times people interviewing this old guy, Grandpa Wiggley. He's like, I made all that up, too." Oh my. And we checked and it's just this guy, he's just a funny guy who just writes these elaborate like stories. But I think that I don't get upset about those things because the point of Reddit is often not the post. The point is the conversation, right? You read these relationship advice or am I the asshole or whatever. Like the experience is the conversation. The conversation is real. The post is just a prompt for a conversation. So sometimes it's a real request for advice. Sometimes it might be a troll, but the advice is real. And the experience is real, the community is real, but sometimes people are just goofing off. And I think that's one of the fun things about Reddit.

You can't beat the internet in a lot of ways, you know, for better or for worse. You just think about how much attention is concentrated in some of those moments. It is bewildering. We've seen this in the usage numbers. We had this one account used to be the highest account, the highest karma account on Reddit. QGYH2 was the username. And we were just like, is this a real person or is this a bot? This like 15 years ago or more. Bots like that weren't really a thing yet. That sort of automation. And everything we could find suggested this was a real person. In fact, somebody our team eventually met this person, but they were spending like 18 hours a day on Reddit. We're just like, when does this person sleep? Like, this is insane. But some people just have that sort of attention and stamina and, you know, whatever it is that you take a you add that up thousands of times and yeah, some crazy things can emerge.