Reddit shares fell nearly 6% due to concerns that Meta’s new Forum app could provide an alternative place for internet users to gather and form discussion groups. Forum is being tested on Apple’s iOS and is part of Facebook Groups. Analysts at Truist said the move aims to compete with Reddit as a forum for public discourse and represents a new threat. Reddit’s stock is down almost 40% year to date despite strong online advertising growth, including seven straight quarters of sales growth above 60%. Meta reported 33% revenue growth in the latest quarter. The risk is gradual erosion of Reddit’s usefulness for casual users who lack strong loyalty, affecting non-core users more than habitual ones.
"Forum, launched as a test app on Apple's iOS, is part of Facebook Groups. Analysts at Truist wrote in a note on Friday that it's "an attempt by the company to compete against Reddit as an online forum for public discourse" and "represents a new threat." Reddit's stock is now down almost 40% this year despite a strengthening online ad business."
""The risk from this move, if successful, is a gradual erosion of Reddit's utility for casual users who have less community loyalty to Reddit and simply want answers," wrote the Truist analysts, who recommend buying the stock. "This would affect non-core Reddit users more than directly logged-in, habitual users.""
"Meta, meanwhile, reported revenue growth of 33% in the latest quarter. "The risk from this move, if successful, is a gradual erosion of Reddit's utility for casual users who have less community loyalty to Reddit and simply want answers," wrote the Truist analysts, who recommend buying the stock."
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