Reddit Has a Much Bigger Problem Than Protesting Third-Party Apps, Mods

Urian B., Tech Times 01 July 2023, 05:07 am

Reddit has recently been facing backlash for its many decisions. The latest is forcing moderators of protesting communities that are still private to reopen this week or lose their status.

However, the situation seemed to have worsened as a report highlighted the website's bigger problem because its relationship with its users was broken badly.

Report Says Another Problem Reddit Is Facing Is Its Views Completely Disconnected From Reality

According to INC, aside from the many third-party Reddit apps shutting down due to the company's new API pricing and removing mods of private communities unless they reopen, the bigger problem for Reddit right now is its view of itself, which seems completely disconnected from reality.

"That's not only true in terms of how it sees the value of third-party apps or how it sees its users. It's also true of how it sees its value," the outlet noted.

According to the New York Times, Reddit previously said one of the reasons it started charging for access to its API was that its content is a valuable data source for OpenAI's ChatGPT, which has been the same for Google Search that is already happening for years.

INC noted that the Reddit users' data is very useful to OpenAI or Google. The users contribute for free, and without them, the value of Reddit is zero.

Reddit Intent to Hold an IPO to Make the Company's Value at $15 Billion

Tech Crunch reported that the 18-year-old platform, founded in 2005, is looking to file an IPO, and the company did file privately its intent to hold an IPO which would have valued the company at $15 billion.

Most companies want to be big and successful, but not every firm is that valuable. Twitter owner Elon Musk paid $44 billion for the privilege of making up the rules on the social media platform. However, INC reported that Reddit is worth much less than its aspirations.

Reddit's Largest Investor Fidelity Says Its Stake Value Dropped 41%

Fidelity, the primary investor in Reddit's latest funding round in August 2021, recently cut the estimated value of its investment by 41%. Reddit reportedly had a valuation of $10 billion during the funding round in August 2021.

Earlier this month, Fidelity Blue Chip Growth Fund disclosed that their stake in Reddit was valued at $16.6 million on April 28, a cumulative decrease of 41.1% since August 2021, when Fidelity acquired the Reddit shares for $28.2 million.

There appears to be a big difference between $5.9 billion and the $15 billion the company believes it is worth. INC reported that Reddit CEO Steve Huffman Huffman probably thought that getting all of Reddit's users to use only its website or app and convincing OpenAI to pay for API access could result in a big payoff.

The outlet noted that some of what Huffman thinks he can do to make Reddit what he wants it to be would kill what made the public love the site in the first place. Even though it is not a $15 billion company, Reddit reportedly has value to its users and the world.