Dawn Chmielewski & Sheila Dang

(Reuters] – Reddit users are credited with fueling dozens of stock rally “memes” this year. These rallies were initiated by retailers GameStop Corp (NYSE:) to movie operator AMC Entertainment (NYSE:) Holdings Inc. Analysts aren’t convinced that this is the platform’s salvation as it plans to sell its shares on the stock exchange.

A confidential filing was made by the San Francisco-based firm this week to U.S. regulators regarding an initial public offer (IPO). According to Reuters, the company is aiming at a minimum valuation of $15 billion.

Reddit founder and chief executive Steve Huffman hopes retail investors will play an important role in the stock exchange debut. He stated that he wants his users to become shareholders, and that he also wants shareholders to become users at Reddit’s Tech Live conference.

Reddit users posted Thursday saying they support the IPO. However, many industry experts questioned whether Reddit’s stock will be sustained by the “meme” stock trend over the long-term.

Ygal Arounian from Wedbush, an internet securities analyst, stated that the company was not able to sustain its growth due to the influx in Reddit users rallying around certain stocks. The question now is: “Was that growth sustainable?” He stated.

Reddit’s spokesperson refused to address industry analysts’ concerns about the company’s prospects for growth. He cited the “quiet time” that follows the submission of paperwork to the Securities and Exchange Commission.

According to Breakingviews, Reddit’s value would reach $20 billion in revenue or be three times as valuable as the Meta Platforms owned by Facebook.

This is despite Facebook’s 16-year-old age and its significant revenue loss to the company.

Reddit reported that it earned $100 million in advertising revenue for the second quarter. This represents a threefold increase in revenue from last year, which is approximately $400 million per annum. Reddit serves around 52 million people daily.

Reddit was created one year prior to Facebook. In 2020, Facebook generated $85.9 Billion and served approximately 3 billion users worldwide. Twitter (NYSE :), which was launched in 2006, generated $3.72 billion revenue and attracts more than 211,000,000 users per day.

Reddit is not as appealing to advertisers because it’s still a sideshow when it comes to marketing. This contrasts with platforms like Facebook, which offer much larger audiences. Matt Navarra, a British-based social media consultant, stated that Reddit has been a popular choice for many clients, including Google (NASDAQ:), BBC, and International Red Cross.

Facebook and YouTube both lure marketers by offering highly targeted video and text ads designed to increase sales. Reddit users also criticize the excessive amount of advertising.

Reddit is more relaxed about content moderation than its larger rivals and relies on the support of its communities to enforce its policies. Although this approach led to material such as hate speech being avoided by advertisers, the company has seen significant improvements in recent years.

Navarra said that “it feels quite a scary area to be in for many smaller, medium, and larger brands who are careful about where they put themselves,”

NEW FEATURES NEEDED

Reddit is still the same as when it was created from Conde Nast, a magazine conglomerate. Reddit’s popularity has increased recently due to WallStretBets, a forum that allows retail investors to make stock speculations.

Analysts said that Reddit will need to add new features in order to draw more people. Reddit rivals are chasing the metaverse, which is virtual reality and audio chatrooms.

This company is trying to raise its profile. Dubsmash is a TikTok-like application that it bought in December. The company also introduced real-time features, such as voting animations or typing indicators, for the first time.

Rich Greenfield, analyst at LightShed Partners, believes that Reddit could also generate additional advertising revenue through its loyal user base. This is a potential win for advertisers.

“Whether that’s on video gaming, whether that’s on stocks like WallStreetBets, or whether that’s on Marvel or Star Wars lore, Reddit creates an environment where you can target passionate communities of consumers,” Greenfield said.