Reddit shares reportedly fell up to 6% on Friday, following Meta’s announcement of a new standalone app for Facebook called Forum, which aims to provide an alternative platform for internet users to convene and create discussion groups.
For those unversed, Forum has launched as a test app on Apple’s iOS. In line with analysts on Friday: “It’s an attempt by the company to compete against reddit as an online forum for public discourse and represents a new threat.”
It has been observed that Reddit’s stock has fallen down almost 40% this year despite an expanding online ad business.
The company reportedly posted its seventh-straight quarter of sales growth surpassing 60%. Conversely, Meta reported revenue growth of 33% in the latest quarter.
Truist analysts reads: “The risk from this move, if successful, is a gradual erosion of Reddit utility for casual users who have less community loyalty to Reddit and simply want answers.”
“This would affect non-core Reddit users more than directly logged in-habitual users.”
Meta and Facebook previously created a standalone Facebook Groups application over a decade ago but closed it in 2017.
Notably, these community discussion features still exist within both Facebook and Reddit on all sorts of topics.
Meta has a long history of identifying successful models from rivals and building its own versions. Reddit’s stock reaction may prove to be hyperbole if Forum stays a niche testing product.
However, if Meta commits real resources and begins an expanded release, the 6% drop would be like the opening act of a longer repricing of Reddit’s competitive risk profile.
