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Reddit’s Lost Money From the Start, Making a Profit Will Be Tricky

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  • Reddit is nearly 20 years old and still loses money. Changing that won’t be easy.
  • The social-media platform’s stock began trading last week and has soared by more than 75%.
  • Reddit plans to profit from advertising, data licensing, and building a user economy.

Reddit was founded nearly two decades ago, yet it’s never turned a profit. The social-media giant’s stock surged 48% on its trading debut last week, and is now up over 75% from its IPO price, as investors wager that will finally change. However, there’s reason to be skeptical.

Wall Street seems to be in two minds about the company. After the initial pop in Reddit stock, it slid nearly 9% during its second day of trading on Friday, only to jump 30% on Monday.

Traders may be thinking twice about Reddit’s aggressive valuation. At Monday’s closing price of almost $60 a share, the company is worth $9.5 billion — roughly 12 times its revenue of $804 million last year. For reference, that’s about $2.3 billion more than The New York Times Company, which is very profitable indeed.

Reddit also posted a net loss of $91 million last year. That was 43% lower than the previous 12 months, but still left the company firmly in the red with more than $700 million of cumulative losses. That situation is unlikely to drastically improve for a while.

After all, many internet companies that go public are startups with the vast majority of their growth ahead of them. Investors bet on these unprofitable names because they believe that once they scale up their business models, they’ll become profitable.

Where’s the money?

Yet Reddit has been grinding away for almost 19 years now, and continues to bleed cash despite being among the world’s most popular websites with some 267 million…

Read More: Reddit’s Lost Money From the Start, Making a Profit Will Be Tricky

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