The reason Reddit is worth $1 billion more than the NY Times is that investors favor Reddit’s user-generated content model over NYT’s costly content creation, despite profitability.
Here’s a question for you!
Which media company do you think holds more value? Is it the one that raked in $800 million in revenue last year but ended up with a $90 million loss?
Or perhaps it’s the company that brought in a whopping $2.4 billion and managed to secure a $232 million profit?
Time’s up: The surprising answer is the former, the money-losing company. That’s Reddit, the online forum that recently went public and now boasts a market capitalization of $8.15 billion.
Boeing has announced that Boeing CEO Dave Calhoun will resign after a long string of failures, and a board chaired by Steve Mollenkopf will select a new CEO.
Meanwhile, the profitable media company is The New York Times, currently valued at $7.2 billion.
One important thing to note is that Reddit’s stock value can be quite volatile. When the company went public last Thursday, its shares surged by almost 50%, but the next day, they dropped by 9%. Then, on Monday, they bounced back up by 17%. It’ll take some time for the market to decide Reddit’s true value.
This isn’t the first time someone has compared The New York Times to a tech-driven newcomer vying for attention and advertising dollars. Back in 2009, people were saying that Demand Media, a content farm, was worth over $1.5 billion while The Times was only valued at $1.3 billion.
As it turned out, the Times thrived while Demand Media struggled. But why are investors more excited about Reddit than the Times? Well, it’s because the Times spends a lot of money to create content that readers and advertisers pay for, while Reddit gets all its content for free from users.
This difference is evident when you compare their cost of revenue. Last year, the Times spent $1.25 billion—about 51% of its revenue—on producing and distributing its content. In contrast, Reddit’s cost of revenue was just 12%, mainly for hosting its site and app.
While the Times has made efforts to diversify its revenue streams by focusing on paying subscribers and expanding into areas like recipes and games, it will always need to spend more to create content.
On the other hand, Reddit believes its free content model will remain sustainable, and it aims to improve its ad sales. For now, investors are buying into that vision.
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