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r/IPO 💰
Can Zoom zoom past its slump? 📹
Asteroids ☄️
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r/IPO 💰
The landscape of venture-backed tech IPOs has been as dry as the Sahara in the past few years. But there’s a rumble of excitement. The camel on the horizon?
None other than the social media platform - Reddit.
The same r/wallstreetbets crowd that turned GameStop into a Wall Street soap opera might soon get their hands on the very stock that birthed their existence in the first place.
Talk about life coming full circle.
Source: Know Your Meme
A report recently suggested that Reddit might be looking at an IPO this spring after a failed attempt in 2021.
Money Money Money
Reddit’s revenue growth over the past years has largely come from growing its advertising business, which is the company’s primary source of revenue.
The company still isn’t profitable though, despite growing revenue by 20% to $800M in 2023.
While other social stocks have mooned, Reddit itself has admitted its user base is built a bit different.
And not in a good way at all. They definitely tend to be less receptive to ads invading their space.
And then there’s the content. Let’s just say that it’s not all family friendly. This has been a stumbling point for big corporations looking to advertise on the platform - 24% of the top 5000 subreddits on Reddit are NSFW.
Reddit’s content was one of the data-troves that was used to train ChatGPT which led to a civil-war within the platform ~6 months ago.
This led to Reddit hiking the price for API access, squeezing AI companies for a slice of its data pie – a move likely aimed at beefing up revenues in preparation for the IPO.
The biggest question mark, however, is what value will Reddit fetch.
Fidelity, which pumped $700 million in Reddit at a valuation of $10 billion, slashed the worth of their stack by a staggering 41% in 2023.
If Reddit IPO’s, it will be the first major social media IPO since Pinterest in 2019. And the expectation with every IPO now is that it can kickstart the IPO market.
Didn't happen last year with the Instacart and Klaviyo IPO, but maybe 2024 has something different in store?
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Can Zoom zoom past its slump? 📹
What’s the epitome for a tech company?
Growth?
Profits?
Nah. It’s when you become synonymous with a thing so much that you become a verb. And few companies have become as synonymous with video calling as Zoom.
Zoom was one of the biggest darlings of the pandemic. But things haven’t been faring so well lately.
The Glory Days
Once upon a time, when handshakes became a relic and sweatpants became haute couture, Zoom zoomed into our lives.
From playing online games to pretending to attend virtual meetings, it seemed as if life was incomplete without Zoom.
And boy oh boy, did it bring good fortune for Zoom. The company clocked in a phenomenal $882M in revenue in Q1-2021, an almost 5x jump from its last pre-pandemic quarterly revenue of $188M.
At its height, Zoom’s (NASDAQ:ZM) shares were trading at ~$568 valuing the company at a staggering market cap of $160B+.
The Not-So-Glory Days
Fast forward to present day and the company’s market cap is a fraction of what it was at its height at around ~21B. What happened?
Investors seemed to have visualized a utopian future for Zoom where the only way it could go was up - until people actually started to go out and competition started catching up.
Zoom’s rise during the pandemic days paved the way for the ‘Video Conferencing Wars’ as players such as Microsoft Teams, Salesforce’s Slack and Cisco’s Webex started battling for a piece of the pie.
This led to Zoom losing out market share resulting in slower growth post-pandemic.
Still, let’s not undersell Zoom. The pandemic boosted it into $1B+ quarters with solid profits.
The company posted a revenue of $4.49B in 2023.
But Wall Street is like that friend who’s never quite satisfied. They don’t just want cash; they also want the promise of tomorrow’s cash. Growth, Growth, Growth!
Zoom is trying to diversify their revenue streams and not just be a one-trick pony. The company has expanded their product offerings to products such as Zoom Phone, Zoom Contact Center and everyone’s beloved - AI features.
Though relatively smaller sources of revenue right now, the new products show promise with Zoom Phone at 7M paid customers and Zoom Contact Center at a $500M revenue run rate.
Could these new product offerings zoom through and pull the company out of its growth slump? What do you think? Let us know by replying to this email.
☄️ Asteroids ☄️
TikTok, while still growing, sees a slowdown in user growth as TikTok Shop sparks debate. The platform's shift towards e-commerce leads to user complaints about an 'ad-filled wasteland'. 🛒📉
YouTube skips dedicated app for Apple Vision Pro, leaving viewers to use Safari. Netflix and others, like Spotify, also bypass the new mixed-reality headset. 🌐🎧
Rabbit r1 debuts at CES with Perplexity AI tech, offering free Perplexity Pro for first 100K buyers. A $200 AI-first gadget for web searches, Spotify, cab bookings without a phone. 🤖🎵
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