Reddit may need to increase spending on content moderation

Analysts said Reddit will need to spend heavily on content moderation because as a public company it may face greater scrutiny, risking its long-term need to rely on an army of volunteers to maintain order on its platform. The policy is in danger.

The newly listed company warned in its initial public offering (IPO) paperwork that its unique approach to content moderation could sometimes lead to disruption, like in 2023, when many moderators asked third parties for access to their data. had protested against its decision to charge fees from app developers. ,

Julian Klimochko, CEO of alternative investment solutions firm Accelerate Financial Technologies, said relying on volunteers is not sustainable given the regulatory scrutiny the company will now face.

“It’s like relying on unpaid labor when the company has nearly a billion dollars in revenue,” he said. According to previous filings, Reddit reported revenue of $804 million in 2023.

Klimochko said Reddit would need to make substantial investments in trust and security, which could lead to a “dramatic” increase in expenses.

A spokesperson for Reddit said that as well as moderators, it also had strong internal security teams that used a combination of artificial intelligence, machine learning and human review to enforce this. Content Policy, opens new tab,

This policy allows banning of users and communities for harassment, incitement of violence, and hateful content.

The company also invests in security tools to help automate the tasks of moderators, the spokesperson said.

Stamping out objectionable content is important for social media platforms, which has seen an exodus of advertisers seeking to prevent ads from appearing next to inappropriate content.

Many advertisers have become wary of Elon Musk’s Ax after moderation policies were relaxed.

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

White said the company will need to increase spending on anti-misinformation efforts, especially as the US prepares for a presidential election later this year.

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

Grand openning

reddit share An increase of 48% was recorded At its debut on the New York Stock Exchange, it received a warm welcome from investors, despite the company not making an annual profit since its launch in 2005. They were down about 5.4% on Friday.

Analysts have said trading in the stock will be closely watched over the next few weeks to get more clues about investor interest in new share issues after a long period of market stagnation.

“Reddit’s successful IPO represents a return to the pre-pandemic days, when investors were happy to buy shares in loss-making companies if they offered a compelling story,” said Dan Coatsworth, investment analyst at AJ Bell. “

Popular investor Cathie Wood’s ARK Invest also bought An email from the asset manager showed that about 10,000 shares of the company were sold on Thursday.