Reddit (RDDT) is making its market debut on the New York Stock Exchange on Thursday.
Ahead of the stock's opening trades, Reddit Co-Founder and CEO Steve Huffman tells Yahoo Finance Executive Editor Brian Sozzi that there are three "chapters" to Reddit that investors should pay attention to: the company's ad business, user economy, and then its data.
Reddit's data has been of particular interest to investors, given its potential to be used in large language models that form the basis for generative AI programs. On that, Huffman points to all the conversations that have occurred on Reddit, saying that "in an AI world, where everything is increasingly written by AIs, the human-generated content actually becomes more valuable over time. We're starting to see that the best response to artificial intelligence is actual intelligence."
When asked directly if Reddit is an AI play, Huffman would only say that investors should view the company as "a community platform that has many paths to success, so the ads, the user economy, data. There's, I think, so many things we can do and so we're pursuing all of them."
Overall, Huffman says that the company wants "our users to be investors, but we want our investors to be users as well."
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Stephanie Mikulich.
Video Transcript
BRIAN SOZZI: You've been out in the road show what past two weeks, but there was a lot of preparation even before the last two weeks. But within the past two weeks, what have you heard from institutional investors?
STEVE HUFFMAN: You know, this process that people warn me about the road show, I actually really enjoyed it. I've met so many great investors. And like, I love talking about Reddit, and I love seeing for folks when the light bulb goes off and they start to get it. And so I've had a lot of that in the last couple of weeks. And so I think we put together a good team.
BRIAN SOZZI: Has it been difficult for investors to get it?
STEVE HUFFMAN: Reddit is unique and special, right? It's so deep. And so one of the things I did over the last couple of years with investors is actually showed Reddit. I did a lot of demoing. My thinking is like, we want our users to be investors, but we want our investors to be users as well. And so I think sometimes we just have to-- I can only talk so much. So just showing it off is the best way to go.
BRIAN SOZZI: Did you get pushed-- that Google deal we talked a little bit off camera, that's a big win for Reddit. Are institutional investors pushing you to make more deals with big cap tech companies to help feed their large language models?
STEVE HUFFMAN: I'd say, investors-- I wouldn't frame it as pushing. I think they're very interested in where this company can go. And so we've got our ads business today and the core of Reddit. I think of that as chapter 1. And then I think of chapters 2 and 3 as the user economy, and then what we're doing on the data side.
On the data side, we've got almost two decades of human conversation about anything and everything. And so in an AI world where everything is increasingly written by AIs, the human-generated content actually becomes more valuable over time. And so we're starting to see that the best response to artificial intelligence is actual intelligence.
BRIAN SOZZI: Should investors view Reddit as an AI play?
STEVE HUFFMAN: I think they should look at Reddit as a community platform that has many paths to success. So the ads, the user economy, data, there's I think so many things we can do. And so we're pursuing all of them.
BRIAN SOZZI: There's been a lot of focus on the losses. What, $90 million-- $90.8 losses last year, net loss basis. But you actually had some profits in the back half of the year. Is this a full year of profits for the company?
STEVE HUFFMAN: Yeah. So it's actually in the second half of last year, we were profitable on an adjusted EBITDA basis. We grew costs slower than revenue last year, revenue three times as fast. And so I like the way the trend that we're on. And I think if we can keep doing that, we're in great shape.
BRIAN SOZZI: What gets you to sustainable profits?
STEVE HUFFMAN: Look, the work that we're doing right now. I think our work is working. Reddit, we have such high margins that if we just continue to sell, and we continue to be mindful about costs, this company scales, I think, in a really impressive way.
BRIAN SOZZI: I think, of course, retail investors are heavily invested in this, allocate a large percentage of stock to them. What's your message to those Reddit investors that have picked up stock today?
STEVE HUFFMAN: Look, I'd say, thank you. You built Reddit. One of the things I think is special about Reddit is our users have this incredible deep sense of ownership. I mean, they did create Reddit after all. And so part of our purpose of doing all of this so that our users can not just feel like owners, but have the potential to be owners. And so for those who invested, I'm really happy to have them on the ride with us.
BRIAN SOZZI: I caught some of the conversations in this morning on various channels. Are you concerned-- and I think you mentioned this in the S-1 that this retail investor base adds unnecessary risks to the stock price.
STEVE HUFFMAN: Look, all-- we want investors who love Reddit. You know, I've heard that story, and of course, we have to enumerate all of the potential risks in our prospectus. But that's Reddit. Reddit is people. Reddit is communities. We're nothing without our users. And if our users can be investors and vice versa, I think that there's nothing more Reddit than that.
BRIAN SOZZI: Real quickly, you left and then came back to the company in 2015, right?
STEVE HUFFMAN: That's right.
BRIAN SOZZI: How much longer do you see yourself running Reddit?
STEVE HUFFMAN: I've got my dream job. And I know it's my dream job because I had a taste of the world outside of Reddit. So I feel so profoundly grateful to have had a second chance at this. I mean, most people don't get a chance like this at all. And I've had it twice. And so I just feel this deep sense of gratitude. And there's so much more we want to do with Reddit, so.
BRIAN SOZZI: Well, congratulations and good luck on dad life. You're going to be a busy guy over the next year, Steve Huffman.
STEVE HUFFMAN: Thank you.
BRIAN SOZZI: Appreciate it.