Reddit shares fell up to 6% on Friday after Meta announced a new standalone app for Facebook called Forum. This platform aims to provide an alternative for internet users to convene and create discussion groups, according to analysts.
The company’s stock has dropped almost 40% this year despite an expanding online ad business. In contrast, Meta reported revenue growth of 33% in the latest quarter.
Truist analysts suggest that if Forum is successful, it could gradually erode Reddit’s 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 previously created a standalone Facebook Groups application over a decade ago but closed it in 2017. Community discussion features still exist within both Facebook and Reddit on various topics.
Reddit’s stock reaction may be exaggerated if Forum remains a niche testing product. However, if Meta commits real resources and begins an expanded release, the 6% drop could signal the start of a longer repricing of Reddit’s competitive risk profile.