Reddit is reportedly laying off 90 employees which is 5% of its workforce as the company is restructuring some of its operations and strives to reach breakeven by the next year. Would it consider an IPO next?
The news was first reported by the Wall Street Journal which added that apart from the layoffs, Reddit would also slow down hiring and would only hire 100 people as compared to the 300 that it was previously planning.
In his email to employees, Reddit CEO Steve Huffman said, “We’ve had a solid first half of the year, and this restructuring will position us to carry that momentum into the second half and beyond.”
Notably, tech layoffs have mounted globally this year and over 200,000 tech workers have lost their jobs.
Venture capital firm Atomico estimates that in the first quarter, the European tech industry laid off 11,000 workers. The research firm also estimates that European startup funding would dip 39% YoY this year.
Meanwhile, it’s not that only startup and unlisted tech companies have fired workers – if anything, their listed counterparts have been even more brutal.
Meta Platforms for instance has laid off 21,000 employees – which affected a quarter of its workforce. Amazon has fired 27,000 corporate employees in two rounds which in absolute terms is the highest among all tech companies.
Alphabet and Microsoft have also respectively laid off 12,000 and 10,000 employees. Barring Apple, it is hard to conceive of any major tech company that hasn’t fired employees amid the current economic slowdown.
Reddit Lays Off Employees Amid Profitability Push
The layoffs are not limited to tech and companies like Disney and Hasbro have also laid off employees.
That said, the overall US job market is still quite healthy and the US economy added 339,000 jobs in May – which was way ahead of the 190,000 that analysts were expecting.
Meanwhile, Reddit is targeting a breakeven by the next year. The company was founded in 2005 but was sold to magazine conglomerate Conde Nast the next year.
In 2011, Conde Nast’s parent company Advance Publications spun off Reddit into a separate company.
The social media company rose to prominence in 2021 when the subreddit WallStreetBets shot into prominence with its bets on stocks like GameStop and AMC Entertainment.
It was among the most memorable trades on Wall Street as a bunch of retail traders – acting as a cohort – took on big funds leading to the eventual shutdown of Melvin Capital which suffered massive losses on its GameStop short position.
Would Reddit Next Consider an IPO?
In December 2021, Reddit confidentially filed for an IPO. It did not disclose the IPO price, date, as well the total issue size.
It was last valued at $10 billion in August 2021 when it raised $700 million in the Series F funding round. That investment round was led by its lead investor Fidelity which recently marked down its Twitter investment by 66%.
Like Twitter, Reddit mostly relies on ad revenues. Twitter tried turning to a subscription-driven model but by all accounts, the pivot hasn’t succeeded.
Reddit has started overcharging for their API, effectively killing third-party apps like Apollo that make use of their API. Also the official Reddit app sucks. pic.twitter.com/jES0CU8F7w
— Saved You A Click Video Games (@SYACVG) June 1, 2023
Twitter’s owner Elon Musk meanwhile alluded that ad revenues look the best course for Twitter and hired NBC Universal advertising executive Linda Yaccarino to lead Twitter.
He also spoke favorably about advertising and said that Tesla might also try advertising its cars.
Meanwhile, Reddit is also looking to diversify its revenue base and like Twitter, it has started charging for the APIs.
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