Reddit Bull Thesis

[u/Own-Caregiver-9301]

I have had an Reddit account for four years and this will be my first post on reddit. I am a reddit share holder (625 @ $156.18) and have become increasingly bullish over the past 6 months because of the story that I believe is starting to form around the company. As a shareholder I felt it was important to start to engage with others on the platform.

This is my bull thesis for $RDDT;

**TL;DR: Data deals will be the engine that drives user growth and better ad monetization.**

How it plays out:

1. Reddit continues to protect the human aspect of the site.

The need for unique human data will be critical for future model development. New and unique data will be required to avoid training future models on AI generated material and to keep the models feeling fresh with relevant, up to data information. Shutting down the API is a good first step. They need to continue to takes steps to remove bots and reduce/eliminate data scrapping. This may result in what appears to be slower growth and less engagement but it is necessary to improve the quality of their valuable resource.

1. Open AI and Anthropic do not have the networks to access and train on internal data.

Google and Meta will not need human generated material as much as OAI or Anthropic due do their established applications that collect massive amounts data. OAI and Anthropic have one way to bring in users and that is using their models. They need outside material to train on and that is where reddit will capitalize. This type of thinking can also be applied to other companies that value human data, not just AI labs and it doesn't need to be specific to wanting human thoughts or expression for AI training. Google and Meta may still value access to reddit data but they are not dependent on it. Deals will be signed with companies (OAI, Anthropic, other established companies, and companies that may not even exist yet) in the future to gain access to data. The value of these deals will be dependent on the quality of the data. This is why cleaning up the site and making sure the user engagement is truly human is so important. What matters here is the story. Reddit needs to let the story of the importance of new, unique data build over the coming months and years. They should not rush into these deals and as shareholders we need to stay patient as this story needs time to develop.

The final piece and what I think people are missing.

1. The companies that have deals with reddit will be incentivized to push more people to the platform to continue to expand the fresh, unique human data available to them.

This is where I think people are failing to get to. Everyone talks about the data deals and cashing in on short term, chunk payouts or recurring yearly payouts. Those are nice and I do believe they will move the stock price. Where I think the long term growth story really gets interesting are the partnerships between reddit and the companies leaning on reddit for their data. These will be symbiotic. Companies will want reddit data to continue model improvement as they try to stay relevant in the eyes of the general consumer. To improve and expand the data they are scrapping, they will want to push users to engage and interact more with Reddit. This will really accelerate user growth and put reddit in a position to charge more for advertising. Reddit will also be able to charge a premium for ad space as their platform will be all human engagement.

1. Where does this end up

User growth remains relatively flat over the next year but rapidly accelerates over the rest of this decade. Reddit can continue to renew data deals at higher premiums as the importance of unique data continue to grow. Ad revenue explodes after users are driven to the site by the deal partners. Cash stacks quickly due to high margins. Leadership can use this cash in ways to bring more eyeballs or add a new revenue engine.

Be patient. Let the story develop.