Ross Gerber, the President and CEO of Gerber Kawasaki Wealth and Investment Management, has raised questions about the advertising model of Reddit Inc. RDDT.
What Happened: On Wednesday, Gerber, who is known for his bullish stance on Tesla Inc., took to X, formerly Twitter, and expressed skepticism about Reddit’s advertising model. He responded to a tweet about Reddit insiders selling stock after the IPO, saying, “Ever click on an ad on Reddit? Isn't this really a tech non profit?”
According to a recent SEC filing, Steve Huffman, the CEO & President and 10% Owner of Reddit, sold 500,000 company shares on March 25, 2024.
Reddit is a social media platform where users can submit various content types, including links, text posts, and images. The platform’s USP is its community-driven structure, where members vote on submitted content, shaping discussions across a broad spectrum of topics ranging from news and politics to hobbies and pop culture.
In the comment section of Gerber’s post, one social media user highlighted that Reddit sells user data to Alphabet Inc.’s Google for LLM training. Last month, it was reported that Google has inked a $60 million annual deal with Reddit, allowing the tech giant to use the social media platform’s content to train its AI models.
Why It Matters: Reddit, the social media platform that has been in the spotlight since its IPO, witnessed a surge in bullish options activity on Tuesday. Despite its history of not posting an annual profit since its inception in 2005, Reddit’s shares skyrocketed by 48% on the NYSE following its debut last week.
The IPO was a milestone moment for the 19-year-old social media platform founded by Huffman, Aaron Swartz and Alexis Ohanian. The IPO was not just open to institutional investors.
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Huffman said the goal was to “level the playing field” by bringing in retail investors and institutional players, and around 2 million of the 159 million shares on offer were held for retail investors.
Reddit’s advertising model has been a topic of interest, especially given its history of not posting an annual profit. Gerber’s comments add to the ongoing discussion about the sustainability and profitability of Reddit’s business model.
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