Reddit goes public: The spiritual ranger of retail investors, has begun to embrace capitalists?

At the beginning of this year, with the enthusiasm of the "national stock market", a show was staged on the other side of the Atlantic, where retail investors and Wall Street were at their peak.

This holy war triggered by online speech has not only created a new generation of traders, but has also benefited Robinhood’s commission-free trading software and a place where Reddit retail investors hold groups.

Recently, Reddit reported that it plans to go public next year. It is looking for suitable investment advisers and lawyers for the IPO, seeking to list on the US stocks at a valuation of 15 billion US dollars.

1 The power of the "knight" forced Citron to "surrender"

In September 2011, thousands of investors collectively occupied Manhattan, New York, for no other reason, but to resist the social injustice of Wall Street's money rights trading and attempt to crusade against the "elite" of Wall Street.

It seems that this movement did not really come to an abrupt end in November of the same year. The show continued at the beginning of this year, but this time it is more meaningful than the demonstrations held ten years ago. Retail investors sniped Wall Street through community forums, and won...

At the beginning of the year, the global financial vision was attracted by the actions of a group of American retail investors.

Retail investors who have long been unable to bear the fate of being manipulated by capital for a long time, shouting "YOLO" (you only live once, you only live once) to buy heavily, due to business difficulties, the stock price fell continuously, and Wall Street's short-sighted game chain-Games Station (NYSE, GME).

While chanting slogans, retail investors rushed into the market with all their fortunes without looking back. Fueled by this wave, GME also ushered in a rise. This wave of rising prices soon attracted the attention of the well-known short-selling agency Citron.

Obviously, they disdain the buying behavior of retail investors and are not optimistic about the company. The old saying goes, because the company's fundamentals have not changed at all during the process of rising, and the inexplicable rise has led to an inflated valuation.

Citron believes this is a great opportunity to make short profits.

As everyone knows, it is the plan of this group of retail investors to lure shorts. They secretly cheered, "Finally, the professionals on Wall Street are under our control."

Indeed, the rise of this group of knights has achieved a brilliant victory, causing the game station's share price to soar. At one point, GME soared from $4 to $400.

In addition to GME, a series of short-selling hot stocks such as AMC and BlackBerry doubled overnight.

Previously, due to poor information, high-frequency traders have always been ahead of retail investors, but now, the "YOLO" slogan is resounding on Wall Street, retail investors spontaneously group together, and retail transactions allow retail investors to seize the opportunity.

This also made Wall Street have to unite with the US government to jointly suppress and adopt a series of countermeasures. Cut off the source, wipe out the Baotuan venues, close the retail exchange forums, and let the brokerages stop retail short-selling transactions.

Despite the recent downturn in Game Station, the stock has risen by more than 150% so far this year.

And Andrew Left, the founder of Citron, who suffered a huge loss, announced on January 29 that he would withdraw from short selling and only focus on long research. This seems to mean that Wall Street is also losing pricing power.

How did this group of outrageous, organized, and disciplined retail investors gather together?

It is the Reddit forum "WallStreetBets", where they convene "allies" to launch a direct confrontation on Wall Street.

"WallStreetBets" heard the name and knew it was not easy to mess with. Most of the people here are retail investors in the United States, including the direct victims of the 2008 subprime mortgage crisis. There are many sweepers who know Wall Street tricks.

The principle believed here is a shuttle. Of course, there are also some young guys who gamble on the lives of the whole family and Wall Street with anger.

The atmosphere of the WSB forum is always full of a sense of the Internet's barbaric age. Obviously, the investors who participated in the war at WSB are not trying to make money, but the retail investors who have been complaining about Wall Street for a long time, and found their own window of vent.

2 Grasp the traffic dividend, take advantage of the morning market

So what does this website full of "justice" look like?

Reddit was founded in 2005 by 22-year-old Steve Huffman and Alexis Ohanian.

The world of otaku is not that complicated. What kind of air-squeeze war, what kind of confrontation Wall Street, is not the main purpose of founding Reddit. At first I just wanted to make an app that allows users to order sandwiches online.

The naive idea was unexpectedly rejected by Dr. Paul Graham, a partner of the seed fund Y Combinator. After all, in the Internet world at that time, applications were not mainstream. Subsequently, the Reddit prototype became a bulletin board-style news-related information platform.

Although the teenagers of Reddit, although they have dreams in their hearts and want to wield their swords into the world, they are also vulnerable to severe beatings by the society.

At that time, Internet forums were undergoing qualitative changes. In 2004, Facebook and Google were madly conquering cities. Forums the size of ants were naturally difficult to survive.

In addition, the preferences of forum users are difficult to control by themselves. Due to the algorithm given to moderators considerable power, users have been collectively complained, and they are also facing a series of problems such as the proliferation of bad information and the exposure of pornographic content. , Reddit, which has not become a climate, has no choice but to move towards the fate of "changing the seller's property" and being acquired.

In October 2006, Reddit was acquired by Condé Nast Group for $10 million. The two founders worked with Reddit until 2009. However, the days under the fence did not last so long. At the end of 2011, Reddit became an independent subsidiary of Advance Publications, the parent company of Condé Nast, and it spun off Reddit from its business line. Huffman and Ohanion returned to Reddit in 2015.

Subsequently, the gameplay evolved to be similar to Baidu Tieba, which also launched this competition.

Because of the vicious battle between retail investors and Wall Street, Reddit has become a beneficiary. According to public data, radical investors, with strong organizational capabilities, have called on a large number of retail investors to join the ranks of short-selling.

The WSB forum quickly poured in 6 million new members in just one month. Currently, Reddit now has approximately 52 million users every day and more than 100,000 active sub-forums.

If you have control over the flow, income is naturally indispensable. In fact, public data shows that most of Reddit’s revenue comes from website advertising. In the second quarter of 2021, Reddit’s advertising revenue exceeded $100 million for the first time, and revenue this quarter increased by 192% year-on-year.

As of August this year, Reddit announced that it is raising a Series F financing led by Fidelity Investments. After this round of financing, the company's valuation will exceed $10 billion.

Since the beginning of this year, Reddit has announced that it has received 3 rounds of E round and above financing. According to the company's check, investors include Tencent, Sequoia Capital, Fidelity, Tacit and Snoop Dogg, etc.

Reddit seizes the dividend of global traffic is a major point of the growth logic, but accidental victory does not mean forever.

I have to admit that it is currently an explosive growth stage for Reddit users, with a huge user base, but its revenue is very unstable.

Its main income comes from advertising business, and it also has a paid membership model. As we all know, advertising or payment is inseparable from the stickiness and loyalty of users. Under pressure, user retention seems to be an inevitable problem.

In fact, Reddit is not without efforts in the retention of users. It is trying to rely on a diversified user group to support the advancement of its advertising business.

In addition to the stock boom, Reddit also includes some cryptocurrency users. In April this year, the moderators of the Reddit sub-section r/wallstreetbets announced that they would allow cryptocurrency discussions on the Reddit sub-section.

However, even so, it is still far from the top players. In terms of users, according to the 2021 Facebook Q1 financial report, its total monthly active users are 3.45 billion. The status is still difficult to shake.

Although Reddit successfully entered the Canadian and British markets in March and September last year, and expanded its business to the Australian market in July this year, it is still difficult to form a suitable profit model.

According to Statista statistics, in May 2021, Reddit ranked seventh in the number of visits to social media sites in the United States, second to media such as graphic streaming media Facebook and Twitter.

In fact, setting up a forum like Reddit is not too difficult for giants who master traffic.

Reddit currently targets social users and is limited to investors. Although the author generates content, it is not the same as the current fashionable KOL. This feature also makes advertisers encounter a bottleneck in their monetization ability.

How to grasp the balance between the community atmosphere and user growth and commercialization, so as to truly enter the mass market, may need to explore a new path, such as opening up the direction of video, diversifying platform content, and so on.

4 ending

Behind this gamble that has made Wall Street capital predators angry, Reddit may be the winner. If it can go public, it will explore more ways to commercialize it.

However, whether the knights who stay in the forum will follow Reddit forever, we don't know. After all, winning once in 100 million times can't decide much.