In a messaging muddle, Reddit faces concerns about $150M Chinese bump

As part of $300 million in new funding overall, the Tencent infusion has users and investors worried about censorship. That, along with tepid ad revenue, raises analysts’ concerns.

The controversial source of a huge cash infusion had Reddit execs jittery about announcing it—and they didn’t even get to trumpet their own victory.

The platform will get a $300 million jump-start to help it compete with digital advertising giants such as Facebook and Google—including $150 million from Chinese tech giant Tencent, which has raised more than a few eyebrows.

Beyond the Tencent concerns lies a major question: Can Reddit convince advertisers and consumers that it has the team and assets to go toe to toe with those goliaths?

To top it off, Reddit didn’t even have a chance to crow about the windfall. TechCrunch scooped the release.

TechCrunch wrote:

Last week TechCrunch reported that Reddit was raising $150 million from Chinese tech giant Tencent and up to $150 million more in a Series D that would value the company at $2.7 billion pre-money or $3 billion post-money. After no-commenting on our scoop, today Reddit confirmed it has raised $300 million at $3 billion post-money, with $150 million from Tencent.

The deal makes for an odd pairing between one of the architects of China’s Great Firewall of censorship and one of America’s most lawless free-speech forums. Some Redditors are already protesting the funding by trying to post content that would rile Chinese’s internet watchdogs, like imagery from Tiananmen Square and Winnie the Pooh memes mocking Chinese President Xi Jinping’s appearance.

Reddit’s move offered an opening for TechCrunch to bring up past controversies.

It continued:

Reddit’s CEO Steve Huffman has had his own problems with attribution after the exec was caught editing users’ comments to mislead viewers into thinking they were insulting their Subreddit’s moderators. Huffman managed to get off with just an apology and vow not to do it again, though he seemed to laugh off and excuse the abuse of power by saying “I spent my formative years as a young troll on the Internet.”

The financial data also revealed how much influence the platform has among its users.

CNBC wrote:

Reddit’s latest funding round values its users at a lower price than any other social network.

The company announced Monday it had raised $300 million in its Series D investment round at a valuation of $3 billion. CNBC previously reported the company’s annual revenue topped $100 million, according to sources familiar with the matter, and at 330 million monthly active users (MAUs), this would make Reddit’s average revenue per user (ARPU) about $0.30.

Reddit did not immediately respond to a request for comment regarding its latest revenue details.

That estimate would make Reddit’s ARPU significantly lower than other social networks, even those with similar MAUs. Twitter, for example, reported 321 MAUs for its latest quarterly report, and with annual revenue of about $3.04 billion in 2018, that would make its ARPU about $9.48.

[…]So, in descending order:

  • Twitter ARPU: ~$9.48

  • Facebook: $7.37

  • Pinterest: ~$2.80

  • Snap: $2.09

  • Reddit: ~$0.30

Can Reddit challenge social media giants such as Facebook and Twitter? Reddit says it hopes to corner the market on a specific age bracket.

CNBC continued:

While Reddit’s value per user is much lower than its peers, it is betting its access to a valuable demographic will appeal to advertisers and potentially even draw their dollars from larger rivals like Facebook and Google. The company said half of its MAUs are between the ages of 18 and 24.

“When we are talking about competing for ad dollars, of course we are talking about Facebook and Google, who take up the vast majority of ad spend,” said Reddit CEO Steve Huffman in an interview with CNBC. “We are competing with anybody, or anywhere people spend their free time.”

Reddit users were ready to lash back against the company’s Chinese investment.

The Verge reported:

The protests have centered around two images in particular: Winnie the Pooh, whose likeness is largely banned because users have mocked its resemblance to President Xi Jinping, and images of the iconic Tank Man from the Tiananmen Square massacre. Both are censored in China because of state rules aimed at keeping internet users from opposing the government. One Reddit user quipped, “I thought it would be nice to post this picture of “Tank Man” at Tienanmen Square before our new glorious overlords decide we cannot post it anymore.”

Reddit confirmed the investment to The Verge, but declined further comment.

Reddit itself has been banned in China since August.

Some have found the hubbub around Tencent’s investment to be overblown.

Tim Culpan wrote for Bloomberg:

I’ve yet to see evidence that Snaps are being curtailed because Tencent holds 14 percent of the stock. On the flip side, Tencent’s investment of less than $300 million makes Reddit less than 0.8 percent of the Chinese company’s entire investment portfolio. Tencent’s expertise in video games – it makes $15 billion annually from the category – is one reason the two got together, Reddit chief Steve Huffman told CNBC.

I’m willing to take that statement at face value because Tencent’s overseas investments are largely strategic and mostly innocuous – it has no interest in curtailing Western free speech, but it’s entirely happy to make money from it. And I’m not so naive as to believe that investing in the stewards of openness will make Tencent itself more open.

And rather than being deplorable, I think it’s a perfect match that once again highlights the dichotomy between Chinese and foreign approaches to the internet.

Some questioned Reddit’s future and business model, while others predicted changes will come to the platform.

What do you think of the company’s messaging, PR Daily readers?

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