Hipster internet favorite Reddit may have to lose its edge to go public

It's currently valued at almost $2 billion, but in this interview with NBC News, Chris thinks Reddit's offbeat, quirky feel might be an impediment to a successful IPO.

Questions about the social news aggregation site Reddit going public have been swirling for years — but the move seems more definite than ever, after CEO Steve Huffman saidit could happen by 2020. Now the questions is: What does the company need to do to get IPO-ready?

Reddit, which declined to comment to NBC News, is clearly prized by some major investors. It scooped up $200 million earlier this year, reaching a valuation of $1.8 billion, and is beloved by users: Analytics service Alexa rated it as the eighth-most popular site in the world. Plus, it’s shown it can stand the test of time, at least by internet standards, having been around since 2005. But the bare bones site has always been a bit of an outlier, and it’s been a hotbed for controversies (like the 2014 celebrity photo hack, six months after which Reddit enforced its photo sharing guidelines).

The 'front page of the internet'

The site's user-driven, niche feel is exactly what makes Reddit so appealing to so many people. It’s been slow to roll out a mobile strategy and still fosters an old-school, text-based vibe you may have recognized from 2005, which makes it feel almost like the secret basement of the world wide web.

“The culture of the site, even as they have scaled their user base, remains offbeat, quirky, and anti-establishment,” said Daniel Gulati, a partner at Comcast Ventures. “It's almost entirely user controlled, including on the user acquisition front. Anyone can start a subreddit and build their own community. To date there has been very little company-driven moderation of content (in contrast to what's happening over at Facebook now).”

Community first, money later

Reddit has a couple of key methods of monetization including Reddit Gold, a subscription service to allow users special access. It also has sponsored posts. But Brad Hines, a startup adviser, investor, and personal finance writer, opines that Reddit hasn’t wanted to risk losing its “cool factor,” and as such has remained “focused on continuing to stoke brand loyalty, and roll out methods of revenue slowly.”

“Reddit’s monetization is still well below where it would be needed to achieve a spectacular IPO," which is what would be expected of one of the most popular sites in the world, Richard Beale of Mindshare North America told NBC News. “As this improves with their new ad products and redesign, you can expect the conversations around an IPO to become more serious.”

A crucial pain point around monetization, as Greg Portell, lead partner in the consumer and retail practice of A.T. Kearney, sees it, is in the community aspect. That may seem ridiculous in considering that Reddit is all about community, but it’s really more like a collection of very disparate communities. This presents a challenge for advertisers.

“How can Reddit create stickiness among their users, when everyone has a different view?” asks Portell. “You and I may overlap on 20 percent of our content, but 80 percent is going in different directions. It's just not a very developed revenue model. Honestly, I just don’t think they have tried to monetize their audience to the greatest extent.”

Safe for free thinkers — but what about shareholders?

“Reddit can count big numbers in users — but that doesn't mean it's conducive to brand advertisers, which is generally a key monetization metric,” Chris Cunningham, CRO at Unacast and founder of C2 Ventures, told NBC News. “In addition, advertisers like safe and predictable content and Reddit is not that, which puts its ad business at risk.”

Would Reddit have to part with its user loyalty in order to please its shareholders? If so, that would pretty much defeat the whole venture of going public.

“If Reddit goes public, will its growth stop?” said David Mawhinney, associate teaching professor of entrepreneurship at Carnegie Mellon's Tepper School of Business. “It’s a worthy debate, but it’s not fair to frame it as an either/or situation. As long as Reddit has a quality product, it will keep growing. And that [$200 million in] funding probably wouldn't have come in if they weren't expected to keep growing.”

There’s also the idea that seasoned investors are often looking to diversify their portfolio with younger companies. Reddit stock could be the perfect opportunity.

“After a while, investors tire of investing in Apple or Netflix or Amazon because they fear their best growth days are behind,” said Mark Hamrick, senior economic analyst at Bankrate.com. “They’re asking, ‘What will the next growth story be?’ That's where a company like Reddit could come into play. And plenty of [shareholders] want to get into the ground level of a good story.”

But still, Reddit will have to make some concessions — or at least, more modifications.

“Implementing greater brand safety controls for users and brands alike whilst accelerating their shift to mobile-first would be two key initiatives for Reddit pre-IPO to mitigate the risk of undesirable headlines and subsequently shareholder shakes,” said Beale.

Reddit’s goldmine of data

Reddit may not have the strongest monetization game (yet), nor the slickest, cleanest platform, and it may be all over the place with its users in a way that seems to counter the cohesiveness that advertisers desire when targeting consumers. But Reddit also has a very precious ball in its court: data. So much data.

“What Reddit can do to really differentiate themselves is figure out what unique elements of people’s behavior they identify from their datasets that other competitors can't,” said Portell. “That's really the cornerstone to getting them out of selling eyeballs. Digital advertising is very simple and there’s no scarcity of it, but if Reddit can say to brands ‘We can show you this type of person in this phase of the purchasing funnel and make them more likely to convert,’ then that becomes something differentiating. Facebook and Google are pretty close to doing this, so Reddit needs to come up with something unique.”

Something’s gotta happen

It’s true that Reddit could still bail on an IPO, especially if there’s a bad turn in the stock market. It could even sell to a bigger company, though that seems unlikely. Or perhaps it could simply decide against dealing with all the invasive pressures of going public.

“You could generate income until the cows come home as a private company and not be bothered by the regularity and exposure that comes with being public,” said Professor David Brophy, director of the University of Michigan’s Center for Venture Capital and Private Equity. “That's the biggest argument for staying private.”

It’s not a bad argument. Alas, it’s not so simple. Though currently private, Reddit has a lot of investors counting on it — and watching the company like hawks. Some kind of liquidity move may be necessary in the near future.

“All these people have put something in and at some point Reddit has to return on that investment,” said Portell. “The most certain way to get that ROI is with an IPO.”

However, Reddit doesn’t want to end up like Zynga, the video game developer that went prancing to its IPO only to get candy-crushed.

“Zynga was a shooting star, went public, then its growth rate stopped because it didn't have the next hit game,” said Mawhinney. “It’s not that the company will die, but it can be crippling in that they can't ever get their mojo back. People are asking whether Snapchat can rebound. Even Twitter struggled, though to a lesser degree. Reddit has teams both internally and externally asking, ‘How do we avoid that?’”

Sounds like we’ve got a few years to find out — and in the meantime, we’re sure to see plenty of innovations come Reddit’s way. Hopefully, its devout users, aka redditors, won’t take offense — or if they do, they won’t stay away for long.

“When Facebook introduced its News Feed everyone hated it, so without a doubt whatever [Reddit does], a segment of users will be upset,” said Gulati. “News Feed was [detested at first], but now no user can imagine Facebook without it, and it added great utility to the experience.”

How I'll use two new board seats to give back

I believe finding time to give back is one of the most important and rewarding things we can do in life. But sometimes it takes a little time to figure how to do so in a way that invokes meaningful change in our community. Recently, my own purpose came into focus.

Over the last few weeks, I have announced through social media that I have joined the Board of Advisors for Build.Org NYC. Founded in 1999, BUILD.org is dedicated to proving the power of experiential learning through entrepreneurship. For me, serving the community by working with youth to advance their goals through technology and product just makes sense.

In the past, I was introduced to Build.org several times, but it was Baratunde Thurston, to whom I owe a huge thanks, who pushed to get me in front of the group’s leadership team a few months ago. As our conversation evolved, I knew Build.org and I were a fit.

Through this responsibility - this honor - I give my time to students to support their potential, raise awareness of the Build.org brand through marketing, and help this excellent cause raise money to develop presence in local schools and communities. I know my fantastic friends and generous network will offer your support for our upcoming fundraisers in NYC and Westchester.

I'm also excited to announce that I have recently accepted the role of Co-Chair of the iTrek Mentor Program at Cornell Tech. The iTrek is a highlight of the Cornell Tech MBA program and one of the most distinctive and challenging startup engagement experiences there is.

Born of a 2010 competition started by the Bloomberg administration, the iTrek program, which is a partnership between Cornell University and the Technion-Israel Institute of Technology, is supported by $100 million in funding. Student teams will fly to Tel Aviv early next in 2018 to work with Israeli startups in solving specific business problems.

As a Co-Chair, along with Alex Blum and some incredibly talented NYC based mentors. We aim to serve this year's students by advising and supporting business ideas of their counterparts in Israel, and build bridges and relationships that span borders and business sectors.

Thanks for reading friends! I share this post in hopes of gaining your support for both organizations and hope you may consider getting involved by donating money, or your own very valuable time.

5 Things I Need To See Before I Consider Making an Angel Investment

The original version of this article by Brad Micklin and Yitzi Weiner appeared on HuffingtonPost.com

Huffington Post recently had the pleasure of interviewing Chris Cunningham. Chris is the Chief Revenue Officer at Unacast, the world’s largest network of beacon and proximity data, connecting the physical world to the digital for online retargeting and attribution. Chris is an active tech start up investor and founder of C2 Ventures, a privately-held investment firm with a focus on consumer, data and financial techs that provides seed capital to early stage digital media companies. Chris has been named one of the “Most Important People in Mobile Advertising” by Business Insider, as well as being an Ernst & Young Entrepreneur of the Year Finalist 2 years in a row. He’s been a featured speaker at International CES, Cannes Lions, IAB’s Annual Leadership Meeting, dmexco, and f.ounders. He is a contributor to CNBC and Bloomberg TV via on-screen appearances, and is former co-chair of the IAB Social Media committee and Native Advertising Task Force.

Yitzi: It is a pleasure having you with us, Chris. What is your “backstory”?

Chris: Serial entrepreneur from the tech and advertising world who has experienced all facets of building companies that scale, introducing new products into market and team building. Pioneered ad products centered around widgets, apps, and location data. Took those experiences and started C2 Ventures understanding first time founders need real time in the trenches support of their business. The core goal of C2V is close the gap between founders and VC’s to avoid classic start up mistakes.

Yitzi: Can you share a story of your most successful Angel or VC funding? What was its lesson?

Chris: I was the first investor and only advisor into Arbor.io a data company driving net new revenue for apps and publishers leveraging used data assets. I worked very closely with the founders for more than a year leveraging my network to fast track their commercial efforts. Arbor sold for over $150MM to Acxiom two years later bringing a 30+X return to shareholders. I learned that there is no match for the power of top tech and the teams that support it. Arbor had a world class CTO out of Google and supporting team that build products and pipes which drove huge value in the publisher ecosystem.

Yitzi: Can you share a story of an Angel or VC funding failure of yours? What was its lesson?

Chris: After having three exits in my first two years I had my first failure. Unlike the other 12+ companies I invested in in which I was in constant communication with the CEO had constant communication and the CEO wanted advice and support I invested in a founder who did just the opposite. Did not share with me or other investors, tried to do everything himself and when it came down to raising more money he made the classic mistake of only having one option on the table vs multiple and that crushed us in the end as the potential investor pulled-out and now they are on life support.

Yitzi: Which person or which company do you most admire and why?

Chris: Elon Musk. Yes he is an obvious choice as far as star power but he is solving two very complex problems at the same time in auto and space. I appreciate the fact he does this in parallel and blows up the perception that people can only do one thing well. Founders invest, investors start companies, people advise the more you see and do the better you become and Elon is the rule. I also love that he is always first to make the right call with his customers when things go off the rails like offering extended power for tesla owners post the hurricane.

Yitzi: How have you used your success to bring goodness to the world?

Chris: I love this question and in short C2 Ventures along with Unacast have been the best things that have happened to me career-wise as I’m allowed and asked to give back. I’ve been told countless times by start-ups I invest in, advise or just friends with I had a positive impact on their business and there is no better feeling.

As you get older I think it’s your responsibility to give back to the ecosystem that gave you an opportunity and to the next crop of founders who can avoid classic pitfalls if you just spend the time with them, listen, ask questions and truly invest in their success.

I give time to anyone that wants it no matter where I met them in my personal or professional life. People go through ups-and-downs and that’s life, but supporting one’s low is a gift.

Yitzi: What are your “5 things I need to see before making a VC investment” and why?

Chris: The C2 Ventures formula is as follows:

  1. Does it hit my thesis which is mobile first: Consumer Tech or Data. You can’t invest unless you have a thesis you understand and are passionate about. You need focus and can’t invest in everything. On the flip-side, if someone brings me an esports deal, drone company or something else, I instantly pass because while I might think it’s going to be huge and successful, I can’t support it the way I can of those in my thesis.
  2. Is the founder that 1% type that has the hit, how do I feel within 5 mins of meeting them. Is there chemistry. In addition are the founders tech savvy, I think this is a massive advantage. The Founder is everything! That’s almost 75 percent of the call. I know the founder has the it within 5 mins of meeting him/her. They have to be willing to run through burning buildings to do what it takes and evolve/pivot their business which will naturally happen along the journey. I met the founder of Zenrez at SXSW four years ago and decided on the spot he was special. Fast forward today and the company is growing fast. I’ve participated in all his rounds and have an active advisory position.
  3. Can I provide instant value through my network and relationships. Part of the Arbor success story I mentioned earlier was the speed of which they could go to market through my network and relationships. In this game speed is everything and so is getting to the right person.
  4. Do I clearly understand the space and the opportunity, does the pitch come easy, can I digest it quickly. The deals I invest in I understand with one go, no slides or follow ups. I had this one company in the AI space that I had to have four calls with and I still didn’t get it. I had to shut down the conversation right away.
  5. God forbid if the CEO had to step down or got hit by a bus could I step in and run the company.

Yitzi: I have been blessed with the opportunity to interview and be in touch with some of the biggest names in Business, VC funding, Sports, and Entertainment. Is there a person in the world, or in the US whom you would love to have a private breakfast or lunch with, and why? He or she might read this, or we might be able to introduce you.

Chris: I would love to have breakfast with Richard Branson . He strikes me as someone I could chat with for hours and also learn a great deal from given he has had so much experience launching new ventures against the odds and not caring what the public eye thinks. The reason its Richard is he has defied so many odds over his years of launching Virgin and takes so much risk to get there. Almost dying risk! Taking risk, not caring about adversity or being told he can’t do that are some of the biggest attributes of being a winning founder and Richard exemplifies that.

Yitzi: Chris, it was such a delight learning from you. Thank you!

Source: http://www.huffingtonpost.com/entry/chris-...

Location: Visit data is the market of the future

Pre-packaged segments are giving way to the free flow of location data pipes

The history of location data has been largely written by a market that buys audience segments for look-back re-targeting. That means a DSP, DMP or agency trading desk, can buy a segment for their commercial use. Keep in mind, this data has already been prepackaged by the location provider, so it has little use other than for re-targeting — and there’s the opportunity.

Based on what smart buyers of location data are doing, there are excellent applications for this data for both verification of location, and attribution (the holy grail of digital advertising).

The key question every advertiser wants answered is: Did someone turn around and walk into my store to buy my shit?

Perhaps the best-known tech company moving aggressively into this space is Foursquare, which in 2016 introduced its Attribution product, which has since implemented by TGI Fridays, Flipboard and even programmatic advertising companies such as Drawbridge to connect digital and mobile ad experiences to store visits. The results have been eye-opening: clear evidence of a 12% lift in store visits as a result of a consumer’s interaction with ads.

Combined with the rise of simplified Audience Sharing connectivity via companies like mParticle, this has opened the floodgates for a new breed of ‘piped’ data, allowing brands to easily share specific audiences and locations data with each other while bypassing traditional data exchanges, cutting out the middleman, and improving ROI. But that’s really just the beginning.

As the pipe continues to open-up and near or real-time data becomes increasingly easier to share, the use cases for location data are growing quickly, setting-up a seismic shift in the marketplace.

Evolving use cases for location data

Brands can now leverage these location data pipes to create interconnected experiences that leverage consumer predispositions across the digital and physical worlds in new ways to drive in-store revenue and improve omnichannel customer satisfaction.

Online publishers, who have struggled to make their data meaningful to these same brands, are now positioned to offer them ideally-suited mobile audiences with a history of specific mobile behaviors, making it easier to foster partnerships that demand a superior market valuation from traditional bricks and mortar operations.

This has created a brave new world for marketers seeking to engage mobile consumers with creative experiences that are at once personalized, scalable, and friendly to the LTV of both parties customers.

“The use cases for location data go much further than simply re-targeting users by buying off the shelf, pre-packaged data segments.”

One scenario gaining momentum is using location data for modeling purposes (e.g. a buyer of location data using it to conduct matches and/or complete an in-house analysis of what they know about a user). A specific use case could involve mobile gaming apps offering retail brands high-value interactions with committed gamers who, for example, would be happy to watch a retailer’s rewarded video ad at a key moment in the game loop in order to advance to the next level of their favorite game.

Predicting tomorrow’s location data market

These new applications for location data share the common trait of being able to inform decision-making at the top of the funnel, greatly impacting how and who marketers target based on how many times a user has entered a physical store, and what they’ve done while there.

This will create a future where location data markets are built around buying and selling visits data like a commodity, and NOT on the simplistic exchange of pre-packaged segments. The result will be a tremendous shake-up that takes money and control out of the hands of trading desks whose business models may make them may slow to respond, and tilts the balance of power in the location data ecosystem towards brands and marketers.

That said, actually aggregating and making sense of the minutiae of the visits data — including things like Device ID, latitude-longitude coordinates, relational context for places and dates, IP addresses, dwell time, etc. — ain’t easy. So, while each of these data sources has great value as an individual commodity, extracting that value is very technically complex, leading to a surge of location-data based technologies and techniques.

In Conclusion

By ingesting and applying visits data at-scale, clients are free to manipulate it like putty to form new market opportunities. As the business cases for doing so continue to prove themselves out and gain acceptance, the value of the data will grow, and visits will become firmly established as a commodity in the information economy.

Every company I speak to — Oath, Pandora, Pinterest, Blis, Ground Truth, etc. — have unique goals or challenges, it’s never ‘one size fits all.’ With raw visit data, they are free to use location as they please (and can do so because they have some smart fucking people that know what to do with it).

If you are not already thinking about visits data and how it fits into your location strategy, or you’ve yet to bring the people in-house to support that strategy (think: data scientists), you’d best get on it, because this is going to be the biggest, most critical shift in the young history of location data markets.

5 reasons I’m invested in Embrace.io

A few weeks ago, I shared the news on my investment in Embrace.io and their raise of $2.5 million from investors including Eniac Ventures, the Chernin Group, Techstars Ventures and BoxGroup.

After spending a year in stealth mode, listening to their market and building, Embrace.io launched with a clear mission: helping developers better understand how their apps are performing. Having lived the challenges of building, releasing and managing enterprise-scale apps from my days as CEO of appssavvy, I totally got this value proposition.

A large percentage of an app’s performance issues have nothing to do with crashes, though they tend to get treated that way. So, when something goes wrong, engineers are forced to crawl through the muck of issue discovery and diagnosis using a bunch of disconnected tools that weren’t even made for mobile. It’s a waste of time, a pain in the ass, and app teams hate it.

So, when I saw what Embrace.io has to offer (basically, a single tool to identify, visualize, diagnose and fix app performance problems), and the layer of detail they’re able to get to on the individual user level, I knew I was looking at a winner on the tech side. But what makes a company really worth investing in for me goes way beyond their tech. In the case of Embrace.io, here’s everything I saw that convinced me this one was going to be a winner:

Founders who’ve had success. Eric Futoran (cofounder of Scopely, which just raised another $60 million) is a winner, period. So are Eric’s cofounders, Maggie Shih and Fredric Newberg. As people who have built, taken to market and performance-managed some of the top grossing game apps of all time, including Walking Dead and Yahtzee, they’ve experienced first-hand the problems they’re trying to solve. Intimacy with a market's pain, combined with the talent and partnerships to solve it, provides a superb launch pad for any startup.

The mobile app ecosystem is exploding. As of this writing, there’s more than 5 million apps between Apple’s App Store and Google Play, with maybe 2,500 per day being added. More apps, means more performance problems, which means more need for tools like Embrace that make apps easier to manage. In the same way that BlueKai used cookies to create better profiles, Mopub made monetization easier, mParticle solved for central data piping, and Unacast is aggregating and harmonizing location, Embrace.io is solving app performance for a growing and fragmented mobile marketplace.

Licensed products vs. ad businesses are refreshing. In my article on selling data, I talked about the tangible benefits of a licensed revenue arrangement as compared to always getting stuck on the likes of CMP models. Embrace.io gets a similar nod of approval for having a SaaS business that scales and provides revenue predictability. This the route we go at Unacast, and I’d encourage more founders to factor this type of ‘investor think’ into their own pitches and revenue models. It’s a real difference-maker.

Visibility (this is huge). For the first time, by using Embrace.io’s platform, app teams have the ability to see all the in-app data for a given user's session, including network calls, memory, CPU usage, SDK interaction, clicks and screenshots. When there’s a problem, the engineer can dive-down into each user’s individual timeline, quickly diagnose an issue, and correlate it to a specific outcome (e.g. loss of an IAP, voluntary app closure, or an uninstall). Bridging that gap between a technical performance issue and a specific user experience, or business outcome, is a massive evolution for the apps business.

The power to change an industry. When apps can be more efficiently produced and managed, they will run better. When apps run better, user experiences improve. When user experiences improve, brands, advertisers and marketers will be able to create more compelling native engagements in those apps, improving monetization. When all this happens at-scale, we have a more efficient apps industry. Publishers are making better product (and have more time to focus on making cool stuff, rather than fixing broken stuff). Enabling techs and other businesses will rise up to bolster the industry and claim their piece of the pie.

Consumers will consume, companies will grow, mergers/acquisitions/exits will abound and we’ll be well on our way to the next big thing. Embrace.io is one of those rare companies that has the people, partners, vision and technical know-how to lead us there.

- Chris