Written by Niket Nishant
(Reuters) – As a publicly traded company, Reddit will have to spend more money moderating its content as it prepares for more scrutiny, analysts say, and the company's long-standing policy of relying solely on volunteers for gatekeeping duties will be challenged. said to be threatening.
The newly public company said in its initial public offering (IPO) documents that it relies on moderators to “work in good faith” and that their approach “does not contain content that is offensive, inappropriate, hostile, or otherwise objectionable.” It warned that there was a risk of being seen as condoning “. In moderation.
But Julian Klimochko, CEO of alternative investment solutions firm Accelerate Financial Technologies, said relying on volunteers is not sustainable given the regulatory scrutiny the company will face. Said it was not possible.
“It's like relying on unpaid labor when the company has nearly $1 billion in revenue,” he added. Reddit's 2023 revenue was $804 million, according to previous filings.
He said the company would need to make significant investments in trust and safety, which could lead to a “dramatic” increase in expenses.
Weeding out offensive content is critical for social media platforms, which are expected to see an exodus of advertisers keen to prevent their ads from appearing next to inappropriate content.
Many advertisers have been wary since Elon Musk's X relaxed its moderation policies.
Josh White, a former Securities and Exchange Commission economist and assistant professor of finance at Vanderbilt University, also said that relying on free volunteers is Reddit's biggest risk.
He said the company will need to increase its spending on fighting misinformation, especially as the U.S. prepares for a presidential election later this year.
Reddit did not respond to Reuters' request for comment.
great debut
Reddit's stock price rose 48% in its first listing on the New York Stock Exchange and was warmly received by investors, even though the company has not made an annual profit since its founding in 2005. It was down 3.3% before the bell on Friday.
Analysts said stock trading will be closely monitored in the coming weeks for further clues about investor interest in issuing new shares after a prolonged period of market freeze.
“The success of Reddit's IPO is a return to the pre-pandemic era, when investors were willing to buy up shares in loss-making companies if they presented a compelling story,” said Dan Coatsworth, investment analyst at AJ Bell. It symbolizes,” he said.
Popular investor Cathie Wood's ARK Invest also bought about 10,000 shares of the company's stock on Thursday, according to an email from the asset manager.
(Reporting by Niket Nishant in Bengaluru; Editing by Anil D'Silva)
