持有Reddit；下跌后估值合理，但由于登录用户同比增长仅7%且缺乏透明度，不建议加仓。

and I believe you're pretty heavily invested in Mata Libre, Amazon, but but also Reddit and some other names, too.

we record this when basically Amazon and also Reddit just reported earnings

Yeah, I think there might be a couple more percentages after today's earnings, but still. And you know, another company that just reported earnings and it's quite volatile is Reddit. It's one of the few companies where we actually took some profits when we felt like the stock had risen too much. And I got to say, our timing there has been quite good. You initially pitched the stock at about $85 per share. And if it wasn't for me, I got to take that one. You probably would have made it a larger position than just 2% of the portfolio at the time. Nowadays, it is a much larger position. Unfortunately, I was never a user, so I just needed a bit more time to be convinced by the investment case. Long story short, 4 months after we bought the stock, it was up already 140% and we decided to take some profits off the table at that price.

>> I only hold it against you a little bit there, Daniel, that we didn't make more money on that one. But, uh, no, I'm I'm kidding. As you said, I think trimming the position was a good call because the stock came down quite a lot, which we used as an opportunity to actually then buy back more. So, we currently are sitting on a realized gain of about 140% and an unrealized gain of about 60% on the shares that we bought back after we had trimmed the position. So, it's been one heck of a roller coaster ride, but so far so good. And I'm conflicted because we've been talking about letting our winners run, but when valuations get extreme, I also don't have any shame in taking some chips off the table. And I also factor in the quality of the company too, right?

Wouldn't have the same confidence in Reddit, even if it is still a good business. And so the thing is, the market did not love their Q2 earnings. And while a lot of the numbers were phenomenal, the number of loggedin visitors to their app and website only grew 7% year-over-year, which is not a lot for a company that is growing revenue by 60%. So, it's great that revenue is doing so well because they're more effectively monetizing their user base with ads and earning more per user, but that is not sustainable for forever. And for a company trading at 40 times earnings, come on. And you got to do you got to do better than 7% growth in logged in users because ultimately that is what underpins their earnings power going forward. How many people are using the platform on a consistent basis and so I don't want to be too pessimistic right off the the get-go here. But I I was pretty disappointed to see that. And rather than speak candidly about the issue with investors, they opted to just hide it. Right? management didn't acknowledge this point and they uh are now deciding to stop reporting logged in user metrics going forward. So right as this metric that I think is very important might be turning against them. They're offiscating things. Unfortunately, we've seen Netflix do something similar a few times. And so that's why I'm probably more open to taking gains with Reddit than I would have been even just a month ago.

But we're supposed to be talking about why Reddit has worked out so well. I feel like we want to have all the lessons that we can learn from these positions. And I think actually this earnings that we just got, I mean, we should say earnings just came out and now we're recording this. Um, I think it's an important lesson because it also shows you, well, you could have the rule that you just don't sell your winners. But stocks are different. Companies are different. You can do that for Google because Google is a much more mature business. It's way more diversified. Things will not change as quickly. For Reddit though, if your stock is up 150% after just a couple of months and you know the company and the stock are way more volatile, it just makes sense to not act the same way as if you would on Google. And again, I feel like this earnings report has shown that.

Again, what's quite interesting is that if you now go on Finred or just online, a lot of people like the earnings of Reddit quite a lot and I barely see anything negative about it, which goes to your point that management is not talking about some of the very important facts because you immediately messaged me and I reached out to you and we said, well, what's going on with users? Why are they so weak? And also, what's happening to the the locked in users? Which is one of the most important points. you want more people inside the Reddit ecosystem because we know that AI overviews and all of that have a quite significant impact on the user behavior and I think it's important to to point those things out. I would also say that I'm still quite bullish on the company. If you just look at the earnings numbers and the revenue growth despite users not growing that fast, it shows you how undermonetized this platform actually is. And I think they have a whole lot of room to keep growing that on a user base that's still 300 million people, right?

So I would say let's not get too far ahead of ourselves here and let's actually start with how you think about the quality of the business even after this earnings report. What's still there? Why are we invested? Why did it work out so well? >> Well, we just talked about Google and Amazon being perhaps two of the best businesses to ever exist. So we don't need to repeat all that, but that's pretty hard for Reddit to to follow up. Reddit, I would say, on the other hand, was actually for a long time seen as being a Snapchat 2.0. know, which is sort of a dirty word. And yeah, I say that after Snapchat received basically the worst rating from us of any company we've ever covered on this podcast. So, we definitely understand the weight of that comparison. But the idea was that it looked like a social media platform with a lot of users, but no real way to monetize them. Reddit came out around the same time as Facebook. For a long, long time, Reddit didn't generate any money. really not until just the last like seven or eight years did they start generating significant amounts of revenue. So it's interesting to contrast the two and I think in part this is because of what does make Reddit special which is that users are synonymous and so that means they have much less data on you than Facebook would. And so intuitively that would make you think it's much harder to monetize via advertising because you don't know the users as well as on Facebook or Instagram, but that also doesn't really matter in some cases. If you're interested in researching the best drill to use and renovating your house and you go on to Reddit to research that, then that's really all Reddit needs to know because then they can serve you an ad for the best drills to use while you maybe peruse conversations about home rens in a DIY subreddit. It sounds pretty straightforward and there are a lot of companies that took a lot of time until they actually figured out their business model. But what you just said about, you know, them taking such a long time wasn't part what made me doubt the business at first because it was founded in 2005. It wasn't profitable until very recently. So there was a long time where they just couldn't make the business model work. I would say though part of that is that the two founders sold the company very early on to a media conglomerate that didn't really care about Reddit at all and the founders only came back in in 2015. So you might say that the company is only really operating this model now for 10 years. And then it took a lot of time to sort of rebuild the infrastructure and deliver the best possible user experience for all the people on Reddit. And only then could they actually start thinking about how do we make advertising work? How do we monetize the entire platform? And I would say since then it's growing like a weed. And it's highly profitable. In my pitch, I estimated that Reddit might be able to hit a 30% operating margin by the end of the decade. That was what I thought was a reasonably ambitious goal. Well, instead, they did that by the end of last year. So, I way underestimated what they could achieve. And that's just another illustration of why financial models are only part of the investment process. You really have to be confident in the quality of the business more qualitatively. And that was where I felt of didn't exactly know where margins would go and they certainly exceeded my expectations, but I did know that they probably had a lot of room to grow and great businesses surprise you to the upside. That's what we figured out this episode and basically over the entire last year.

>> Well, that's right. And Reddit comes though with a much wider range of possible outcomes. And ironically, Google is part of the reason for that. So, Reddit does have some dependency risk on Google. You hear about it on every Reddit earnings call. The analysts love to ask about it and it's because a lot of their traffic does come from Google search. So, a bit more than half of daily Reddit users visit the website via Google search. So, they start on Google search, they search something, the best uh brownies in town, and then they go and find a local subreddit or whatever it is that gives them recommendations. And they're not necessarily logged into the app, though. They don't necessarily have accounts. So, that's why we were talking before about the importance of logged in users, people who have accounts and are recurringly coming back versus people who just Googled something. Google suggested a Reddit thread for them to check out and then that's how they ended up on Reddit. So really the entire debate of how LLMs will change the legacy Google search model, how people will have their queries answered, that's all fundamentally very very relevant to Reddit. And so maybe some listeners are surprised to hear that, but Reddit is truly one of the best places on the internet to get answers from real people. and Google is of course in the business of delivering the best answers to people who are searching for queries. So there's a natural relationship between them and it kind of es and flows. It certainly took me time to actually believe just the impact that Reddit has on the internet basically now also on on LLMs.

I guess this is something that we should generally mention because of the topic focus and the searchdriven nature of subreddits. The daily active users and also the monthly active users are structurally lower of course than for apps like Instagram or Tik Tok, right? I think the numbers are about 9% for Reddit, meaning 9% of people who log in once a month actually log in daily. And that number is about 35% for Tik Tok and it's about 50% for Instagram. So significantly higher. And users who use the app obviously log in much more frequently too. So they're also worth according to the company roughly three times more than locked out users. So driving more people to download the app and use that as an entry is one of the big tasks for Reddit in the future. And again like why is the stock reacting so negatively to the news today? Well because this is exactly what we're not seeing. And you can get a lot of money out of these users that only use Reddit, you know, once in a lifetime, but it can only go on for so long. So, in the end, you need people actually using the app. And I personally can say I never do that. Even now that I'm using Reddit more often, it's always through Google. And most of the time, if I just see an AI overview, I don't click on Reddit because I feel like if I have more questions, I will just answer Gemini to, you know, elaborate on on what's going on. So only by getting more people on the app, that's how you eliminate the Google dependency and also improve the RPU, the average revenue per user, which all of these companies want to do.

>> And now you see why I was ranting about Reddit's logged in users at the start of this segment. Well, another thing that Reddit has just announced or at least debated in order to reduce the dependency is not to renew their data licensing deal with Google because Google currently pays Reddit $60 million a year to use their data for their LLM results. And I already found that shockingly low back when you pitch Reddit to me about a year ago. And I think they should get multiples of that, which for a company of their size would be a whole lot of money. So, I'm actually glad that they play their cards right here. But I got to say too on this earnings call, you didn't get any update on when we can actually consider money coming in through those licensing deals or if that will even happen in the future. And now that companies like Alphabet in particular are starting to make money from AI and LLMs, I would think that the price that they're willing to pay for good data would increase. So yeah, you could probably argue that Reddit's corpus of human interaction from over the last 20 years. Actually, just last night, I was reading through a Reddit thread from 16 years ago that was still relevant and interesting to me today. So that that's the cool thing about Reddit. And uh yeah, that deal was signed in 2024. And back then, nobody knew how AI overviews on Google would affect web traffic, right? It could have been that they convert at similar rates to a classic Google search, but now two years in, Google has a billion Gemini users and clickthrough rates for original sources plunged by roughly 60% because users can find exactly what they're looking for answered in the AI overview, as you kind of alluded to, Daniel, and instead of going to the underlying website for additional information, they just do a follow-up question to the AI and get a customtailored answer. So, Google is almost in a way siphoning traffic from websites and kind of maybe cannibalizing itself in some way and then funneling people into Gemini chats.

So now the focus is sort of shifting to companies like Reddit and saying well Google is not affected but maybe you are.

But I think we are past that point now where you know even though Reddit is responsible for about 5 to 10% of the raw training data for LLMs and as much as 40% of real time search citations in AIdriven answer engines. So without that data you could probably say that LLM would have a problem and still because of where we are today I don't think even if Reddit says I'm not licensing my data anymore those LLMs would actually have a problem.

I think we're just past that point and the best thing you can hope for is that they get a significantly better deal than just getting $60 million. So again, you're the expert on Reddit. What do you say? Is it still a buy at today's prices, especially after it has come down about 20% after earnings, or should we actually consider the selling part of our stake?

I'm happy to sit on it for the moment. Reddit has grown so fast that actually the valuation looks a whole lot more reasonable than it did when we first took some profits in the position and when I first looked at it. So, I definitely wouldn't say that we need to sell.

I still believe in Reddit's growth prospects and its value as a platform in a world that's increasingly dominated by AI content because I think a lot of people don't want to just have conversations back and forth with Gemini in an AI overview. They want to talk to real people. They want to hear insights from real people who have used products or shared similar life experiences. And then that is what Reddit is great for.

And Steve Huffman, the CEO of Reddit, said something on the the latest earnings call that I thought was interesting, but it's that it takes a lot of people some time to get Reddit. I think you're an example of this, Daniel, but once they get it, they get it. So you might have to go to Reddit a few times, log in, try different things. It might take you a while. Uh hopefully one day it clicks. You see what makes the platform so special.

But anyways, I'm definitely not falling over myself to buy more shares after that last earnings call. Actually, if anyone wants to see an equity research analyst absolutely lay into a management team, go listen to Reddit's Q2 2026 earnings call and jump to the 31 minute and 30 second mark.

Steve, um I don't want to belabor this point, but your stocking is down sharply because there is just a sense from investors that you have a I don't want it to be blunt, a user problem, especially in the US that users are, you know, it's only a slight kick down, but they're ticked down despite all of the investments you've made over the last year. And I certainly hear you on the weekly improvement, but people are looking at the daily and saying, you know, the logged out traffic is going to be under pressure because as search shifts to AI, you're not going to get referrals and that it's going to be harder to get people to go from logged out to logged in. And that's sort of symptomatic of what you're seeing. And so you're buying back a lot of stock. You don't seem concerned or you and Jen seem very confident. You, Jen, Andrew, all seem very confident. I guess what gives you so much confidence that you're going to grow to, you know, a 100red million logged in users in the US and one billion globally versus the slight kick down this quarter because there's obviously a big disconnect and it's obviously impacting your stock.

And then just the second piece of that to follow up on Ron's question, do you see any world where you're not licensing data to Google and OpenAI next year?

Uh, okay. Um thanks Rich. So look let me start with the end first. We are confident because our product work is working. Uh Reddit is communities and conversation. Communities are universal and so we think we have in the US content for everyone and it's a matter of revealing that and we're making progress towards that end. moving new user retention in the app um this significantly in a quarter is uh something that we're very proud of and that sort of improvement in retention drives growth and that is work that we're in control of. Yes, search is external search is volatile particularly logged out web but that's not where our business lives and we will make sure that we uh get as much value from that traffic as we can and so that's where we've been driving conversions from web to app and that's become more effective as well. So long term we are as confident as ever that we're going to get to those milestones that we've set. Um but the work does take time and we do have a lot of work to do in the product. Um but driving that direct growth is in our control and we're seeing some progress.

Companies like Hermittly and Reddit do show you that you really have to understand the earnings power of a business.

And so if I don't want to own remittly and and Kyle doesn't either, then we can theoretically still add it to the intrinsic value portfolio as long as you have a meaningful stake in it, Daniel. And so it wouldn't be a full position if we don't have consensus among the three of us, but it could be a one or 2% tracking position as we handled it with Reddit after I unwisely didn't want to make it a full position immediately because again I lacked the vision that you saw.