Shares of Reddit (RDDT) are down 11% in the pre-market to $205 from $230.
The drop came after OpenAI revealed a new video model. The company also indicated that it's wading into social and short-form video content as it aims to take a larger share of mindless internet traffic.
There are also rumores that OpenAI has cut down on using Reddit as a source. That latter makes sense as companies (and governments) have been aggressive gaming Reddit to reframe conversations and promote their products. There is some irony here as they're using LLMs like ChatGPT to do it.
There is also something reminiscent of Goodhart's Law here that states: “When a measure becomes a target, it ceases to be a good measure.”
Reddit's anonymity was once a great feature but now it underscores the likelihood that users aren't regular people but bots. This is a big problem for training and using LLMs as only data from the pre-LLM era is anything close to 'pure'. It's also a problem for new and news content as it can be abused by bots.
The whole ecosystem presents a problem for monetizing ChatGPT and other similar products as they're likely to rely on referral traffic to products. But if those product recommendation are gamed, then the system won't work for consumers and ultimately fail.
For now, this is a recognition that Reddit isn't real, which is abundantly clear to anyone who has tried to use it. Gaming it and spamming it is elementary with LLMs.
In terms of stock trading, this looks like a head-and-shoulders top with a target near $150.
