Reddit, the thematic message board company, has become one of the best stock market successes of 2024. Since the IPO in March, shares have quadrupled, with an increase of two-thirds alone since October after Reddit announced its first breakeven point.

The key to Reddit's success lies in the use of unpaid labor. The so-called "subreddits" – specialized niche communities – are built and maintained by volunteer moderators (mods). They ensure that content is created, discussions are moderated, and rules are followed. For investors, this represents immense value creation, as the platform directly benefits from this free labor.

The figures support the upward trend: In the third quarter, revenue rose by 68 percent year-on-year, with Reddit generating 4 cents per user per day. In comparison, Meta Platforms, the company behind Facebook, earns 13 cents per user per day. Reddit's growth potential remains substantial.

To further increase revenue, Reddit is experimenting with new ad formats that appear directly in user comments, as well as AI-powered translations to tap into international markets. However, this growth depends on a delicate balance: keeping mods happy is not free. Reddit is investing in tools and technologies to ease the work of moderators. However, conflicts do arise. Last year, many mods went on strike, putting pressure on the company a few months before the IPO.

Another critical factor is Reddit's reliance on external traffic. More than half of the visitors come to the platform via search engines like Google. If Google were to lower Reddit's visibility, it could jeopardize the constant stream of visitors.

With a price-sales ratio of 13, Reddit's valuation is based on high expectations. The challenge is to maintain the loyalty of the mods and their communities while the platform grows and monetization is advanced. However, given its previous success, a certain valuation premium seems justified: Reddit has shown how passion and community work can be converted into financial success.