Not sure what’s going on at Reddit HQ, but they apparently see something in their platform that others, very logically, do not.

Last week, Business Insider reported that Reddit’s looking to launch its long-awaited IPO in 2024, at a target valuation of $15 billion.

To put that into context, X, which has 250 million daily users (versus Reddit’s 70 million DAU), and will bring in over $2 billion in ad revenue in 2023 (versus Reddit’s $800 million) is currently valued at $19 billion.

Snapchat, with 406 million DAU, more than 5x Reddit’s user base, is valued at $27 billion.

Based on the comparisons at hand, there’s seemingly not much logic to Reddit’s valuation target. But then again, maybe it is just that, an ambitious target, and Reddit will eventually have to settle at a lower price.

But the real value of Reddit is likely way less than it’s going to admit.

The difficult part in assessing Reddit is trying to measure exactly how well it’s going, because while it has increased its active user numbers over the past few years, rising from 52 million DAU in 2021 to 70 million now, it actually had a lot more users four years back.

In 2019, Reddit reported 430 million monthly active users. Which is a lot different from daily engagement, but based on general platform averages, that would have meant that Reddit did have around 200 million daily actives at one stage. 

But back then, Reddit was a far more lawless entity. Reddit was the home of leaked celebrity nudes, and horrific gore content, which, while clearly great for engagement, was not conducive to brand safety, and subsequent ad spend. In order to address this, and move towards an IPO, Reddit implemented tougher moderation requirements, which also saw thousands of the platform’s most offensive subreddits shut down entirely. Reddit’s overall audience shrank, but it’s now much more sanitized, much more safe, and as a result, it’s now bringing in significantly more ad spend. 

But its growth is still comparatively limited. For example, while Reddit’s adding users at a rate of 6 million DAU per year, Snapchat’s adding 50 million per annum, while Facebook, which is already close market saturation, is adding 70 million more daily actives each year.

Reddit should be adding more if it sees itself as a $15 billion company, while its ad run rate, at $800 million, is also well behind others in the sector.

Reddit ads do show promise in certain niches, and it remains an important connector to engaged, targeted consumers. Reddit conversation has also become a valuable source of real world insight, but it’s not a prime mover in the digital ad space as yet.

Can it become one? Personally, I don’t see it adding enough users to be a real focus, but maybe, if it keeps moving on its current path, it can become a bigger consideration for more brands.

But it’s not yet. And while Reddit will also argue that its user data is hugely beneficial for conversational AI development, I don’t think that any market analyst is going to see $15 billion in value in its numbers.

Will Steve Huffman and Co. try anyway? Huffman has said that he’s a fan of Elon Musk’s approach, which is all about radically optimistic projections, realistic or not. So maybe he’ll push ahead. But I suspect that 2024 will be a year of disappointment if he does.