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**Edit: For those asking for numbers, I have already done a detailed calculation on Reddit's FV months earlier. See link below:**
[**https://www.reddit.com/r/ValueInvesting/comments/1qyltqm/enough\_with\_the\_opinions\_here\_is\_the\_actual\_math/**](https://www.reddit.com/r/ValueInvesting/comments/1qyltqm/enough_with_the_opinions_here_is_the_actual_math/) **(calculation error here)**
[**https://www.reddit.com/r/ValueInvesting/comments/1qz3twp/correction\_to\_my\_previously\_very\_flawed\_analysis/**](https://www.reddit.com/r/ValueInvesting/comments/1qz3twp/correction_to_my_previously_very_flawed_analysis/) **(this post corrected the error)**
I am seeing a lot of $RDDT bulls in this sub lately.
The main bull case for $RDDT is based on a fundamental misunderstanding of the business.
$RDDT bulls mistakenly assume Reddit users are the main customers of Reddit. That's not true, advertisers are the main customers of Reddit.
Even if Reddit feels like a much better social media than Twitter, advertisers do not care.
It doesn't matter what you feel as a user of the platform. The Twitter/X user can be a right wing dimwit who votes Trump and the Redditor a highly educated tech executive. Both are just eyeballs for ads.
So we should focus on the ad quality. The fact is Reddit's ad quality is not any better than Twitter/X. 99% of the ads on Reddit are irrelevant. Most of the ads look and feel spammy. Even high end brands like Iphone ads look spammy af, almost the same as Google adsense ads.
Advertisers have reported abysmal results and inability to scale good results because the available audience is very limited. Not surprised as Reddit only has 50 million DAU in USA and most niche subreddits (where the real commercial value is) are tiny.
Reddit has terrible ad targeting. Reddit's ad targeting capabilities are similar or worse than that of Twitter/X's. That's because both Reddit and Twitter do not have user data, Reddit even less so as users are not logged in.
Reddit can target interest and gather user data based on subreddit visits, which is the main and biggest draw for advertisers. However, this has not proven to be effective even after 3 years since IPO. This disappointing result can be explained quite simply. Subreddit visits do not equate to purchase intent. Subreddit visits CANNOT substitute actual user data for purchase intent. To get the kind of user data, you need to know everything about a user, not just what subreddit he visits. In this world, only Google and META has that kind of user data depth. Unfortunately, people will never let Reddit know their real identity.
What about the data licensing business? Reddit may have great data but its data is NOT valuable because everyone can access its data. To illustrate how bad this is, in 2021, Twitter actually had $500 million revenue from data licensing, that was Pre-AI. Why do people pay Twitter? Because they will have no other way to access Twitter's data. The fact that nobody, except for AI companies, pay for Reddit's data is VERY jarring and shows how indefensible is Reddit of its data.
Worse, AI companies like Anthropic and Perplexity actively scrapes Reddit's data through 3rd parties and there's nothing Reddit can do to stop that. The reason why Reddit allows this is it has no other choice as it needs to be visible on Google Search, which contributes more 50% of its user traffic. The fact that Reddit needs to sue Anthropic to enforce its right proves that Reddit cannot protect its data other than through legal avenues, which is a very fragile kind of protection.
I haven't even touch on the risks to Reddit's business, which are pretty serious:
\- Very high dependence on Google Search
\- Comments/posts by bots that are becoming and may eventually become Indistinguishable from humans
\- Uncontrolled SBC and weak shareholder rights (majority of voting power held by management) causing it to end up like SNAP.
For those who think $RDDT is a $100 billion company, rethink again from the perspective of an advertiser and not the user. Pre-Elon Twitter has higher DAU and yet was valued at $44 billion at its peak (during Elon's acquisition). Reddit is now valued at $33 billion despite having lower DAU than Twitter, giving it very limited upside. Yes, Reddit is profitable and Twitter is not. But the future returns from here is just too low. At current share price, $RDDT is at best a 10% growth/year compounder stock. I would rather just own $MSFT or $META as their risk to return are way better than $RDDT.