Are Reddit Community Points a Threat to Reddit's Business Model

Steve Huffman and Alexis Ohanian are two of the founders of Reddit and they sold it in 2006 to Condé Nast for less than $20 million. There have been multiple rounds of funding after this and Reddit is thought to be looking at an IPO in the second half of 2023.

What does this have to do with Reddit Community Points (MOON and DONUTS)?

Reddit generated ~$350 million in revenue in 2021. Much of the value to Reddit shareholders in an IPO will be related to the amount of ad revenue they can generate. Right now RCPs are limited to a small number of subs, but Reddit has created a waitlist for other subs to get their own RCP.

r/CryptoCurrency and r/ethtrader have started using their RCPs as a way to pay for advertising on their sub. Currently, r/CryptoCurrency is burning ~90,000 MOON per month paid for by advertisers. By advertising standards, the amount being charged by r/CryptoCurrency is below the going rate for very targeted marketing with an engaged user base.

These MOON are normally purchased on the open market and currently, this equates to ~$22,500 per month, $270,000 per year. This might not seem a lot compared to Reddit's $350 million in revenue, coming in at slightly less than 0.1%.

What would Reddit shareholders say if every sub did this?

Reddit has said they want to roll out RCP to more subs. If many subs started using their community points in this manner this could have a negative impact on Reddit's bottom line. Shareholders might start to wonder why they should be giving up highly targeted advertising dollars to individual subs.