Rephrase and rearrange the whole content into a news article. I want you to respond only in language English. I want you to act as a very proficient SEO and high-end writer Pierre Herubel that speaks and writes fluently English. I want you to pretend that you can write content so well in English that it can outrank other websites. Make sure there is zero plagiarism.:
- Reddit, which loses money, is currently worth around $8.15 billion.
- The New York Times, which makes money, is worth around $7.2 billion.
Pop quiz!
Which media company is more valuable: One that generated $800 million in revenue last year and lost $90 million?
Or one that brought in $2.4 billion and made a $232 million profit?
Pencils down: For now, the winner is the money loser. That would be Reddit, the message board that went public last week and currently has a market cap of $8.15 billion.
Meanwhile, the media company that actually makes money is The New York Times. As I’m typing this it’s worth $7.2 billion.
The obvious caveat here is that Reddit’s stock is subject to all kinds of price swings. Last Thursday, when the company went public, its shares soared nearly 50%; on Friday, they sank 9%. On Monday, they zoomed up again, gaining 17%. It’s going to take some time for the market to reach a consensus about what Reddit is really worth.
This is also not the first time some dimwit has compared the value of the Times to a tech-driven upstart competing for readers’ time and advertisers’ money: Back in 2009, I noted that content farm Demand Media was supposedly worth at least $1.5 billion when the Times was worth $1.3 billion.
Turns out that the Times, whose future seemed very much in doubt back then, ended up thriving. Demand, whose business model was crushed changes in Google’s algorithm, went the opposite direction.
But if you’re running a media business, you understand precisely why investors are more excited about Reddit than the Times: The Times spends lots of money to make the content that readers and advertisers pay for. Reddit gets all of it for free, from its users.
That shows up in the companies’ financials when you compare their cost of revenue: Last year, the Times spent $1.25 billion — 51% of its total revenue — producing and distributing all of the stuff you can find via its website, apps, and its print edition. By the end of last year Reddit’s cost of revenue was just 12% — mostly money it paid other people for hosting its site and app.
And while the Times has done an admirable job of transforming its business model — it now relies on paying readers instead of fickle advertisers, and has diversified beyond news to new products like recipes and games — it’s always going to have to spend more to make more stuff.
But Reddit’s pitch is that its flow of free content will always be there and that it will get better at selling ads. And that, for the moment, is a pitch investors want to hear.