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As Reddit's WallStreetBets Takes Centre-Stage, Here's A Look at Reddit's Rise and Controversies

Feb 10, 2021 12:49 PM 6 min read

Last month, a subreddit nearly broke Wall Street.

Reddit’s r/wallstreetbets community teamed up to buy shares of heavily shorted stocks of companies like GameStop. The resulting “short squeeze” caused the video game retailer’s stock price to surge 30x in less than a month and inflicted heavy losses on short sellers and hedge funds. (Read more on the GameStop frenzy here.)

This series of remarkable events helped bring millions of new users and new advertisers to Reddit. It also propelled the Wall Street Bets community to the centre of the financial universe. Netflix is already making a movie on the saga, which was also the theme of a much-talked-about Super Bowl ad on Sunday:

As Reddit's WallStreetBets Takes Centre-Stage, Here's A Look at Reddit's Rise and ControversiesWith $250m raised in a late-stage funding round on Monday and its valuation doubling to $6bn, 2021 has started off on a strong note for Reddit, the “front page of the internet”.

What is Reddit?

Reddit is a social news aggregation, web content rating and discussion platform. Founded in 2005, it was the brainchild of University of Virginia roommates Steve Huffman and Alexis Ohanian, who said he created the platform because he “wanted to make the world suck less”.

Fun Fact: The site was launched accidentally after investor Paul Graham got a beta version live and linked to it in a blog post, giving Reddit its first thousand visitors.

Reddit was bought by mass media company Condé Nast Publications in 2006. Today, it is an independent subsidiary of Condé Nast's parent company, Advance Publications. Investors include Tencent, Sequoia Capital, Fidelity, Tacit Capital, Peter Thiel and Snoop Dogg.


How Does Reddit Work?

The platform describes itself as the "front page of the Internet". And for many reasons, it is. It has content on an infinite array of topics, from cat memes and cooking tips to political debate boards and World War trivia.

On Reddit, posts and users are organised into user-generated boards or communities called subreddits. These subreddits are usually thematic in nature, such as r/dataisbeautiful, r/india, r/philosophy or r/jokes. Sometimes, the themes are less-than-conventional, such as r/birdswitharms, r/monkslookingatbeer, r/breadstapledtotrees or r/chairsunderwater!

Within these communities, users (aka Redditors) submit content in the form of links, images, videos or native text. Other subreddit members can comment on or up-vote/down-vote these posts. There are also moderators who can police content if they violate guidelines.

More the number of up-votes a post receives, the greater its visibility on the subreddit or even the website’s front page.

FYI: “Reddit” is a portmanteau of “read” and “it”. This combination was chosen to signify the phrase “I already read it on Reddit”.


How Popular is Reddit?

Reddit is one of the most popular social media platforms in the world. As per latest estimates, it is the 18th-most-visited website internationally and has around 430 million monthly active users. Nearly half of its user base is from the US.

While there are many platforms that have more active users, Reddit’s community is a highly engaged one, thanks to its numerous niche subreddits, relatively non-intrusive ads and something-for-everybody lure. (The lack of influencers must help, surely.)


How Impactful is Reddit?

As a company, Reddit is relatively small, even with its recently-boosted $6bn valuation. (In comparison, Facebook's market cap is more than $750bn.)

But that doesn’t discount its cultural impact and premium place in the zeitgeist. Redditors routinely set trends, be they memes on Instagram, major charity drives, interactive AskMeAnything interviews, highly informative deep-dives on r/explainlikeimfive or posts on r/coronavirus, which became a global lifeline during the early months of the pandemic.

Reddit’s importance also stems from its constantly rising clout. Its user base, monthly views and monthly comments have all surged by double-digit figures in recent years - and this rate would have accelerated in the wake of the GameStop squeeze.

Significantly, Reddit is one of the last textual engines of the internet (and it’s endearing how much of the textual content is grammatically sound!).

Fun Fact: Reddit’s influence has a term - the “Reddit hug of death”. This is when a link is up-voted to such an extent that it is displayed on the platform’s front page. This would provide the link with a crazy amount of popularity and virality...and sometimes cause that site’s servers to break under the duress of high traffic. 


How Does Reddit Make Money?

Reddit’s primary source of revenue is advertisement. Advertisers can market their ads on the front page, the sidebar or on a specific subreddit as a sponsored link.

Reddit also offers users a paid Premium Membership, which provides an ad-free experience and access to features like a Premium-only subreddit, a Premium Badge, and monthly refill of "coins" (which are the in-app currency to award users or show appreciation for some content).

You can also reward coins as a non-Premium Member, but then you’d have to purchase the coins.


Reddit’s Controversies

Now let’s look at its dark side.

When you have such a huge platform with so many communities, there’s bound to be some bad apples. But some of Reddit’s bad apples are downright toxic - and dangerous.

Much of the content moderation on Reddit is user-driven (akin to Wikipedia). It is handled by individual subreddits and its members. Many of the subreddits have their own rules - for example, r/science bans climate change denialism while r/news bans opinion pieces.

But broadly, Reddit has had a relatively lax policy towards policing hateful speech. Either due to this policy or due to Reddit’s sheer size and diversity, this has enabled a volley of objectionable content and communities to thrive. Such content includes child pornography, racism, misogyny, the sale of weapons and support for acts such as doxing, suicide and violence against women.

Reddit’s controversies have had many real-world implications.

In 2013, the Boston Marathon bombing sparked speculative investigations by members of r/findbostonbombers, who wrongly identified a number of people as suspects. The company’s general manager later issued an apology for the "online witch hunts and dangerous speculation".

During the 2016 US Presidential election campaign, a conspiracy theory alleging the existence of a child trafficking ring that involved officials in the Democratic Party was fueled by subreddits like r/the_donald and r/pizzagate. The debunked conspiracy theory escalated to death threats against certain individuals and a shooting at a restaurant.

The word “deepfake” was coined by a Reddit user in 2017 who posted doctored pornographic videos of female celebrities on a subreddit of the same name (it was banned a year later). These videos swapped the faces of celebrities like Gal Gadot, Taylor Swift and Scarlett Johansson on to those of porn actors. Deepfake technology continues to thrive and be an existential threat to the internet as we know it.

And last month, a group of adventurous Redditors rallied together to drive up the stock of some severely shorted stocks. This short squeeze sparked an abrupt move by brokerages like Robinhood to stop the trade of the concerned stocks (later rescinded due to public backlash), comments by the White House, a hearing by a US Senate committee, and an investigation by the US Securities and Exchange Commission.


Reddit and Free Speech

The GameStop saga led to some critics calling on social media platforms like Reddit to moderate commentary on market-related forums the same way content regarding illegal activity is moderated. This, they argue, needs to be done to avoid excessive volatility that pumps the value of generally weak companies. (What happened last month was a spectacular in-your-face to the bigshots at Wall Street. But all said and done, GameStop was a weak company and reality has already kicked in - its share price has plummeted 80% in recent days, wiping out $18bn from its stock-market value.)

But content moderation on Reddit - or indeed on any social media platform - is tricky. It’s easy to argue that pornographic, violent or racist content should be banned. Sure. But what to do about dark humour? Or bad language? Or sour political takes? Or objectionable religious opinions? Or indeed, coordinated stock market manipulations (if we can call it that)?

One man’s free speech is another man’s hate speech. There’s an infuriatingly thin line between acceptable speech and not-so-acceptable speech, because the latter is extremely subjective.

On Reddit at least, defining this line has been an ever-evolving, ongoing process. Expect this process to last a while!


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