Reddit stock drops 6% after Meta launches standalone app for online forums

Shares of Reddit took a hit on Friday, dropping approximately 6% amid growing concerns over Meta's newly launched app, Forum. This app, currently in testing on Apple's iOS, aims to provide users with an alternative platform for discussions and community building. Analysts from Truist commented that Meta's Forum represents a significant challenge to Reddit's dominance in the online forum space. They noted that the introduction of this app could threaten Reddit's appeal, particularly for casual users seeking quick answers without a strong loyalty to the platform. Despite a robust performance in its online advertising sector, Reddit's stock has plummeted by nearly 40% this year. The company reported a remarkable seventh consecutive quarter of over 60% sales growth back in April. In contrast, Meta has seen a revenue increase of 33% in its latest quarter. The Truist analysts remarked, "If Forum proves successful, we could witness a slow decline in Reddit's attractiveness for users who are less committed to the community and merely in search of information." They maintain a recommendation to buy Reddit stock, emphasizing the potential impact on more casual users rather than dedicated, regular contributors. As of now, Reddit has not provided any official response regarding the launch of Forum. For context, Meta previously attempted to create a separate app for Facebook Groups over ten years ago, which was discontinued in 2017. However, the Group functionality remains integrated within the Facebook platform, hosting various discussion topics similar to those found on Reddit.