NEW YORK, June 16 (Reuters Breakingviews) – Reddit is used to brawls between its 57 million daily users. Now its keyboard warriors are directing their ire at its CEO, Steve Huffman. Thousands of moderators overseeing the site’s so-called subreddits are on strike. It’s a wrinkle in Reddit’s plan to go public, and a sign that plan is premature.

Community moderators at Reddit resemble workers who screen banned content on other platforms, but with some differences. In addition to setting guidelines for their forums, many are quasi-influencers who engage and lure users. And unlike counterparts elsewhere, Reddit’s mods are unpaid. That makes them an odd hybrid of employees, customers and suppliers. Researchers at Northwestern University estimate that Reddit’s mods perform at least $3.4 million worth of labor annually.

Willing free labor sounds neat, but in practice, it’s a vulnerability. Unlike Starbucks (SBUX.O) baristas or Hollywood scriptwriters, moderators can close down forums indefinitely without incurring a financial cost themselves. The ongoing strike, spurred by Huffman’s plan to charge fees to third-party apps that serve up Reddit content, was supposed to last for 48 hours. Five days later, many subreddits remain locked by moderators who feel those apps, some of which may close if forced to pay, keep communities vibrant.

Huffman deserves credit for thinking like an investor. Some third-party apps using Reddit content make money, which an owner of the still-unprofitable Reddit would probably prefer to share. A bigger target is artificial intelligence companies such as OpenAI that create value by scraping Reddit’s forums to hone their own products. Huffman’s plan would shut off that free-data spigot.

Still, with a chunk of Reddit shut down, there’s no initial public offering. So if Huffman really wants to go public, he will need to find a way to align moderators and investors. One option would be to pay mods, or – if they don’t want to become de-facto employees – reward them in other ways. For example, he has pledged to develop new tools to replace the beloved apps. Either path involves higher costs, and a more tortuous path to profitability.

In short, the mods have shown that Reddit needs a business-model tweak. And potential investors will want to see it in action before shelling out for the shares, which makes a rushed IPO seem unwise. The self-branded “front page of the internet” has been waiting to IPO since 2021; it may have to moderate its expectations again.

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(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

CONTEXT NEWS

Thousands of Reddit content moderators began protests on June 12 against the social network’s plan to start charging some developers for access to its data.

Community moderators who oversee popular forums on topics from gaming to music switched their groups to “private,” effectively locking out users, in response to the company’s plan to impose fees on some third-party apps that serve up Reddit content.

Reddit CEO Steve Huffman has said that the company can no longer subsidize commercial entities that require large-scale data use. Huffman told employees that the blackouts have not had any significant revenue impact, according to The Verge on June 13.

Reddit is looking to go public later in the second half of 2023, Reuters reported in February, citing technology publication The Information.

Editing by John Foley and Streisand Neto

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