publive-image

Reddit Redefines IPO Marketing: Unveils AI-Powered Strategy for Investor Engagement

Shares of social media platform Reddit ended their first day of trading in New York, suggesting that investor appetite is promising but missing initial public offerings may have returned.

Reddit, which has not made a yearly profit since launching in 2005, has been tempting investors by pitching its content as a training ground for artificial intelligence (AI) programs. Reuters said last month that Reddit has signed a data licensing deal with Google worth about $60 million for one year.

Reddit still relies on advertising for most of its revenue. The Federal Trade Commission, which described it as a growth area in its IPO trading roadshow, also unveiled its AI data licensing agreement last week. "At the core, we're a growing company. To achieve our mission, we want to grow users and community," said Jane Wong, Reddit's chief operating officer.

The San Francisco-based company’s shares opened at $47 on the New York Stock Exchange on Wednesday, as the IPO was priced at $34, above the company’s suggested price, and closed trading at $50.44.

The IPO valued Reddit at $6.4 billion, and the company and its shareholders raised $748 million. Reddit was valued at $10 billion in a private equity round in 2021, and the strong stock market reception suggested that the company doesn’t need to tighten its price expectations significantly to get the IPO off the ground.

Reddit announced the IPO in December 2021, but Russia’s war in Ukraine and a spike in Federal Reserve interest rates have largely stalled and delayed the IPO market.

Risky Retail division

In 2021, Reddit's popularity soared to new heights in the "meme-stock" story with a group of retail investors collaborating on its platform "wallstreetbets" to buy heavily shorted companies such as GameStop's share.

As part of its user rewards program, 8% of the shares offered by Reddit are reserved for eligible users and moderators, certain board members, and friends of employees directors, and relatives.

It also offered some shares to retail investors through online brokerage Robinhood, Sophie Morgan Stanley Wealth Management, and Fidelity Brokerage Services.

But the move is fraught with risks, analysts said. Often closed by filing an IPO, retail traders eager to acquire a newly listed company buy shares when it starts trading.

Cultural Phenomenon

After its launch in 2005, Reddit became one of the cornerstones of social media culture. Its iconic logo which features an alien with an orange background - is one of the most recognizable symbols on the internet.

Its 100,000 online forums dubbed "subreddits" allow for conversation about topics ranging from "the sublime to the ridiculous, the socially irrelevant, the ridiculously serious," according to Steve Huffman, one of its founders and CEO Steve Huffman.

Huffman herself turned to one of the subreddits for help in quitting alcohol, she wrote in her post. The US President Barack Obama also held an "AMA" ("ask me anything"), Internet parlance, in 2012 for interviews with site users.

But despite its cult status in the social media world, the company hasn’t been able to replicate the success of its biggest rivals, meta platforms Facebook and Elon Musk’s X.

Conclusion: Reddit’s innovative use of AI in its IPO marketing strategy is an example of Technology transformative power revolutionizing traditional business practices. By harnessing the power of AI for investor engagement, content curation, market insights, and social media engagement, Reddit is setting a new standard for IPO marketing excellence.