Sales have quadrupled in four years, which is admirable, but the company is still not profitable, with an operating loss of $140 million in 2023. 

Our analyst team, which receives research notes every morning from both buy-side and sell-side analysts, noted a recurring theme in those devoted to Reddit: the parallels between its IPO and that of Meta - Facebook in its day - twelve years ago.

Comparison is rarely reason, yet some promoters argue that the two situations would have much in common. They are also quick to point out that Facebook was also starting from a long way off - fifteen years ago, its sales were more or less the same as Reddit's - which hasn't stopped it from growing at an annualized rate of 45% since then.

It's also true that, at the time, skeptics were railing against Facebook - and the peculiar personality of its founder. The $1 billion acquisition of Instagram had been the subject of much ink, and some were quick to describe it as a clear case of hubris on the part of Mark Zuckerberg. It would be laughable today!

To be honest, the parallels drawn in these research notes seem excessively bold. Firstly, because Facebook was already very profitable at the time of its IPO; in the three years leading up to it, in fact, its net margin was close to 20%.

Reddit's case would be more reminiscent of Twitter, Snapchat or Pinterest, which also grew rapidly but never managed to turn a profit. If we're going to risk a comparison, we might as well not compare apples and oranges.

Secondly, the market context between the two periods is radically different. In 2012, valuations in the US technology sector remained deeply depressed - nothing like today's exuberance. Microsoft, we recall, was trading at eight times earnings, and Google at twelve times. That, too, would be a laughing matter!

Last but not least, the two platforms have very little in common. Facebook was a global success, as spectacular in North America as on other continents; its platform attracted all demographic classes, and its users quickly found themselves captive to an integrated end-to-end communications service - all the more so after the acquisition of WhatsApp in 2014.

Reddit is far from such integration, and even further from such ubiquity. It remains a kind of "super forum", essentially North American, which moreover attracts to itself a very specific user profile - generally white, male, educated, middle to upper class and politically anchored to the left.

With such parameters, its advertising model bears incomparably less resemblance to the one developed by Meta at the start of its rise to prominence.