Reddit needs to increase content moderation

Reddit will need to spend more heavily on content moderation as it may face tighter scrutiny as it becomes a public company, analysts say, threatening its long-standing policy They rely on a strong team of volunteers to maintain order on the platform.

The newly listed company warned in its public offering (IPO) filing that its unique approach to content moderation could at times expose it to disruptions like in 2023, as some moderators have objected to Reddit’s decision to charge third-party app developers to access data.

Julian Klymochko, CEO of alternative investment solutions firm Accelerate Financial Technologies, said relying on volunteers is unsustainable, given the regulatory scrutiny the company will face.

He added: “That’s like relying on unpaid labor when the company has nearly a billion dollars in revenue.” According to a previous filing, Reddit reported $804 million in revenue in 2023.

Klymochko said Reddit would need to make significant investments in trust and safety, which could lead to a “spike” in costs.

A Reddit spokesperson said that in addition to moderators, they also have robust internal safety teams that use a combination of artificial intelligence, machine learning, and human review to enforce content policies. my content.

This policy allows users and communities to be banned for harassment, incitement of violence, and hateful content.

The company also invests in safety tools for operators to help automate their tasks, the spokesperson added.

Removing offensive content is important for social media platforms, which may see an exodus of advertisers who want to prevent ads from appearing next to inappropriate content .

Many advertisers have become cautious about Elon Musk’s X after the relaxation of censorship policies.

Josh White, a former economist at the U.S. Securities and Exchange Commission and now an assistant professor of finance at Vanderbilt University, also said that Reddit’s biggest risk is betting on free volunteers. fee.

The company will need to increase spending on anti-disinformation efforts, Mr. White said, especially as the United States prepares for a presidential election later this year.

A Reddit spokesperson said: “We believe our approach is the most scalable and sustainable moderation model available online today. We are constantly investing and iterating new tools and policies to improve internal capabilities.”

Brilliant opening

Reddit shares jumped 48% on its debut on the New York Stock Exchange, which was positively received by investors even though the company has not posted an annual profit since its launch in 2005. Its stock price fell nearly 5.4% on Friday.

Stock trading will be closely watched over the next few weeks for further clues about investor interest in new share issuances after the prolonged freeze, analysts said. long on the market.

Dan Coatsworth, investment analyst at AJ Bell said: “Reddit’s successful IPO marks a return to pre-pandemic days, when investors were willing to buy shares of money-losing companies if they provides a compelling story.”

ARK Invest, the investment arm of prominent investor Cathie Wood, also bought nearly 10,000 shares of the company on Thursday, an email from the asset manager showed.