Meta’s new ‘Forum’ app triggers 6% drop in Reddit stock

Reddit shares reportedly fell up to 6% on Friday, following Meta’s announcement of a new standalone app for Facebook called Forum, which aims to provide an alternative platform for internet users to convene and create discussion groups.

For those unversed, Forum has launched as a test app on Apple’s iOS. In line with analysts on Friday: “It’s an attempt by the company to compete against reddit as an online forum for public discourse and represents a new threat.”

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It has been observed that Reddit’s stock has fallen down almost 40% this year despite an expanding online ad business. 

The company reportedly posted its seventh-straight quarter of sales growth surpassing 60%. Conversely, Meta reported revenue growth of 33% in the latest quarter.

Truist analysts reads: “The risk from this move, if successful, is a gradual erosion of Reddit utility for casual users who have less community loyalty to Reddit and simply want answers.”

“This would affect non-core Reddit users more than directly logged in-habitual users.”

Meta and Facebook previously created a standalone Facebook Groups application over a decade ago but closed it in 2017.

Notably, these community discussion features still exist within both Facebook and Reddit on all sorts of topics.

Meta has a long history of identifying successful models from rivals and building its own versions. Reddit’s stock reaction may prove to be hyperbole if Forum stays a niche testing product. 

However, if Meta commits real resources and begins an expanded release, the 6% drop would be like the opening act of a longer repricing of Reddit’s competitive risk profile.