Reddit stock drops after CEO Steve Huffman mocks paid subreddits
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Reddit’s CEO suggests the social media site could explore other paid options for select subreddits now that it’s publicly traded.
On Tuesday’s earnings call, Steve Huffman discussed potential specializations as an additional way for the company to grow revenue, but stopped short of giving a timeline for when it would take effect.
“I think the existing free version of Reddit will continue to exist and grow and be successful the way it has, but now we’re going to open the door to new use cases, new types of subreddits that can be created that can have specialized content or private areas, things of that nature,” Huffman said.
That risks upsetting Reddit’s always-opinionated community, which has rebelled against Huffman’s decisions in the past (though that rebellion hasn’t had a major impact on the company or user numbers).
While some upcoming subreddits may be placed behind a paywall, Huffman did not indicate that existing subreddits and established communities will see any changes. And he acknowledged that changing the existing formula for those channels would be harmful to Reddit.
“I think one of the things that’s really special, and almost magical about Reddit, is the time and effort people put into helping each other, giving advice, helping people with decisions, sometimes small decisions—what should I watch tonight—sometimes big ones. decisions, as I have to go through this separation,” he said. “In my experience. . . whenever we add a new way to use Reddit, what happens is it grows Reddit, but we’ve never seen it consume the existing Reddit.”
Reddit is open in its desire to improve finances. After its IPO in March, the company made deals with Google and OpenAI to help train their artificial intelligence systems. For the second fiscal quarter, the company reported better-than-expected numbers, with a loss of 6 cents per share (compared to analyst expectations for a loss of 33 cents per share) and revenue of $281 million, beating expectations by $33 million.
Otherwise, the company’s shares were down nearly 6% in midday trading on Wednesday. They’re up just 1.5% from their year-to-date IPO price, and are still well below the company’s 52-week high.
On the call, Huffman also talked about adding artificial intelligence to Reddit, which he said the company was using to help improve internal search results. Search is an important part of attracting new users and keeping existing ones, but Huffman admitted that it hasn’t been changed for “a long time.
“Search on Reddit is a huge opportunity,” he said. “A lot of new users are doing searches. You’ve heard me talk about onboarding, helping connect users to their interests on Reddit. For most users, they literally type what they want into a box. So, I think, the customer service area of the product is really important.”
He added that later this year the company will begin testing AI-powered search results, which will summarize and recommend content. As with paid subreddits, the company sees AI search results as a potential source of additional revenue. Huffman did not provide a more precise timeline for when the AI test will begin.
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