Reddit CEO Steve Huffman Discusses Platform's Unique Position and Future Growth

Reddit CEO and Co-Founder Steve Huffman (spez) Talks About What's Driving Growth for the Platform | The Motley Fool

You might use Reddit, but is it also worth a look for your portfolio? In this podcast, Motley Fool host Dylan Lewis caught up with Reddit CEO Steve Huffman for a conversation about: To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our beginner's guide to investing in stocks. A full transcript follows the video. This video was recorded on Sept. 21, 2024. Steve Huffman: But I will point out far and away the most common user-written rule on Reddit, community-written rule, is some form of be nice. Be nice, be civil, be respectful, and they write that for themselves and they enforce it for themselves Ricky Mulvey: I'm Ricky Mulvey, and that's Reddit CEO Steve Huffman. Reddit is a social networking site. If you haven't visited, it's broken up into communities or sub-Reddits for just about anything you can imagine. News, sports, local food, hobbies, memes. It's more focused on conversation than other social networks, though. My colleague Dylan Lewis caught up with Huffman for an interview about the state of Reddit now that it's a public company. They discussed its ad business, what's driving Reddit's user growth and artificial intelligence, what the company can do with one of the largest corpuses of human conversation. We played a part of the interview on Friday's syndicated radio show. It offers a higher level view of the business, and that's a great place to start if you're unfamiliar with Reddit. Today's show is a bit of a deeper dive. Both pieces work together, and neither show is a replay of the other. Dylan Lewis: I do want to dig into some of the company numbers a little bit and talk through some of that. I was impressed as a long time follower of the business to see the growth that you guys put up in 2024. Because platform has been around for a very long time. The revenue growth of 50%, to me, not crazy, surprising for where you guys are at in the modernization story. The user growth story of 50% was a surprise. What was behind that growth? Steve Huffman: There's a couple specific things which I'll get to, but the big picture idea is, this goes back to what I said when I was describing Reddit. Everybody's got a home on Reddit. Then that raises the question. If everybody has a home on Reddit and Steve, if you say the content so great and it's so unique and it's such a great experience, then why isn't everybody on Reddit ready? I think there's two possible answers for that. Well, actually three. The first, they haven't heard of Reddit. Well, certainly in the US, that's increasingly less likely. Number 2, they tried Reddit, and it didn't work for them. That's the group we've really been focused on is making it so the new users who are coming to our front page or opening the app for the first time are either primed to experience Reddit as opposed to coming from search or something like that. Make sure they find a community that speaks to them. We made sign up much easier. The community on-boarding helping you find your home on Reddit much more effective. We made both the website and the app much faster. We just redesigned it in a lot of little ways, so it's easier on the eyes, there are fewer bugs, and our home feed has gotten much better at making recommendations of communities that you might like. Really getting people into their home on Reddit and then finding all of their interests much more effectively. That's been working very well. Then at the same time, we made our website substantially faster, 2-5 times faster, and we launched this in May of 2023. Google Bot likes speed. Faster pages rank higher, and faster pages also get indexed faster. The Google search works in mysterious ways, and as close a partner as we are with Google, we have no idea how search works. Dylan Lewis: Nobody does. Steve Huffman: Nobody does, but speed matters. When our website got a lot faster, we started ranking higher. Then combine that with the product improvements, users are having better experience on Reddit. Now it creates this flywheel that we're really benefiting from as we see a lot of new and core users coming from search, and we're much more effective at getting them into their home on Reddit. I said there's two things, either you haven't heard of Reddit or it didn't work for you. That number two we're really focused on. There's a third one, which is you don't speak English. That's the next frontier of Reddit. Reddit's corpus today is still mostly English, but growing outside of the United States, outside of English, that's a part of the next chapter of Reddit unlocking that. Dylan Lewis: What does tackling that look like? What are some of the challenges and things that you guys are working through to make Reddit localized to some of the other big international markets? Steve Huffman: Sure. All the things I just mentioned around speed, performance, all that, all that matters. That's the foundation. There's other parts of the foundation. Safety is a big part of it as well. The foundation helps everybody, but on top of the foundation, there's a chicken and egg problem. You need content to attract users, and you need users to create content. We come at this from two ways. One is just program work. We target a market, and then there are users in every market. We're not starting from zero anywhere, so we go to the communities there, we reach out to the mods, we figure out, what communities probably should exist that don't? Like cities, sports teams, local passions, things like that, and we work with Mats to try to bring those communities to life, make sure they're in discovery, make sure everything's humming there. The second thing we're doing, which is working very well, at least off to a great start is machine translation. New technology here with large language models. We can actually translate the existing Reddit corpus into other languages at human quality. Now, not all the content is relevant, but a lot of it is. We have been testing this in French in the first half this year, and it's gone very well. Now we're adding on more languages. We're doing German, Portuguese, and Spanish. That will get us just a bigger content foundation. Then from there, we need to see the next step which is organic growth, or call it native organic growth on top of that. International, it's real work. One of the difference between Reddit and social media is Reddit's communities. People don't just join communities overnight, let alone create them. We can't force it. What we try to do is really create the conditions for growth. But we can't actually force anything. We're getting a little bit better at that, but there's a lot of, I think, finesse required to get that right. Dylan Lewis: On that note of getting people to join communities, you mentioned people finding Reddit via Google Search. I find that particularly true when it's around stuff like product reviews or information or something where you really want a human's perspective on something. I know you guys have a split when it comes to your active users. You have the logged in users and the folks that are not logged in. I imagine some of those folks are coming in through Google Search. What does the process look like for turning somebody like that into an active logged in user? Or how important is that for you guys? Steve Huffman: First, it's interesting. Something I learned just last week. If you go to Google Trends in 2024 in the US, you can actually literally go to trends.google.com and see this. The Reddit is the sixth most searched word on Google in 2024 in the US last year. I think it's like number 5 is news, and maybe number 8 is Maps. It's a thing people are going to Google looking for Reddit. A lot of those users are already logged in. They're actually core Reddit users. They're using Google navigate Reddit, but then if you're also just searching on the Internet, there's a good chance you end up on Reddit, but my point is, there's broad consumer demand for Reddit's content. Now, in that moment, if a user visits from Google, we used to be more aggressive about hey log in, download the app. We found that, that worked in the short term, but long term this was just annoying, and because in that moment, that person probably has a question and Reddit likely has the answer, but they're not looking to be on Reddit in that moment or screwing around on the Internet. They're trying to do something. I'm trying to buy this thing or I'm trying to get an answer to this question, and so our attitude now is give the user what they want. Give them the answer, let them see all the content, let them go about their day. Trust that, we'll see them again on the front page or opening the app when they're more primed to have the community experience, but every time they come to Reddit and get the answer, they're learning. Reddit has the answer to my questions. That alone, I think is really valuable. I think across the Reddit product, our goal is to give the user what they want. We have this joke, but it's not really a joke. I used to say people come for the cats and stay for the community. In this case, they're coming for the answers, and then they'll come back for the community, but we understand there's this bimodal, different ways of using Reddit, and that's OK. Dylan Lewis: Knowing that advertising such a large part of the business, in terms of ad targeting, how important is it to have a logged in user versus a logged out user? You're getting a certain amount of intent when someone is looking at information from a specific community. You're getting some information about them, but it's not maybe as robust as they would be if they were logged in. I would imagine. Steve Huffman: Our ad server doesn't care if you're logged out or logged in. They both have a user ID. The main difference between a logged in user and a logged out user is logged in users spend more time on Reddit. We'll have a more fulsome view of what your interests are because over time. People join more and more communities on Reddit. Those accounts, when they're as old as yours, you might have 100 subscriptions or more, and a logged out user doesn't have any. They may have just visited a few sub Reddits. The main difference in value to us between a logged in user and a logged out user is time spent of the logged in accounts. They just have more inventory. But we monetize logged out users as well. Now, there's broadly two ways that we'll target an ad. One is based on your explicitly express interests on Reddit. If you join the skiing sub Reddit, you're likely to see outdoor ads, things like that. Then the other is the context of what you're looking at. If you're on a comments page, we call them post detail pages now. If you're on one of those specific pages, that page is likely mentioning a company or companies by name and often specific products, and so we can target an ad based on the context as well. Big picture, we think targeting based on your explicit interests or the context of what you're looking at, are I think healthy and explainable and not creepy ways of targeting ads. What we don't do is we don't target ads based on your personal information, your Internet browsing habits, anything like that. It's really, what are you subscribed to? What are you into? What are you doing on Reddit, and what are you looking at right now? The math behind that targeting is much simpler than maybe what's required elsewhere. That's been working for us as well. Dylan Lewis: I know in the grand scheme of the ad monetization story, it's still probably early innings for you. One of the places we look when we're looking at a business like yours is average revenue per user, stacking it up against some of the other players in the space, and just trying to get a feel both for where you are and also where the opportunity is, a lot of the revenue growth we're seeing is driven by user growth, not necessarily average revenue per user growth right now. How are you feeling about the way that you're monetizing user time, balancing ad load with the experience, things like that? Steve Huffman: Look, I think we're in great shape. Last quarter, we grew users 51% and revenue 54%. We'll be happy of those numbers in any quarter. Nobody manages RPU at Reddit. We try to grow revenue and we try to grow users, and then RPU is just revenue divided by users. That number can move. The way we think about it is, are we growing users in the right way? Are they finding their home on Reddit? Are they making more community connections? Are they joining communities? The primary way we grow inventory is by creating happy users. Better user retention equals more users, equals more subscriptions, equals more time on the platform or inventory. Then on the advertising side, it's also similar line of thinking. Are our customers happy? Are our customers returning? Are the ads performing? Are we meeting their needs? If we're accomplishing both of those things, we feel great. Now, you mentioned ad load. Every investor asked about ad load. Steve Huffman: We grow revenue by creating more inventory, so more users. We can also create inventory by putting ads in places that don't have ads. Now we've got ads in the comments. It's something we've been testing. There's a couple of opportunities down the road. We create inventory by users coming back more often, by logging in more, all of these things. Ad load is just not the first thing we go to. It's just not high on the list. I think that's just a healthier way to grow. Because advertisers they'd much rather show 100 people, one impression than one person, 100 impressions. We're not trying to get people to go deeper and deeper for ads. I want you to have a great time and read it and make the connection. But I also really in the answer, and it's in our mission, community belonging empowerment for everyone in the world. The last phrase for everyone in the world, we're trying to go broader. That's how we create more inventory and ultimately create more revenue as well. Dylan Lewis: On the advertiser's side, when they are thinking about their spend, they're looking at you guys, but they're also looking at digital channels, Facebook, Instagram, YouTube, Google search and often ad budget dollars are mutually exclusive. There's a little bit of a trade off. You spend some money in one place. You don't have it for the other places. What do you feel the pitches for advertisers spending on Reddit versus some of the other platforms? What's unique? Steve Huffman: Well, sure. There's a couple of angles we can come out it from. One, your customer is very likely uniquely on Reddit. Thirty to 60% of our users are not on the other platforms and so unduplicated reach is one. Two. Because Reddit is so broad, every interest, passion, hobby. A lot of hobbies boil down to what should I buy? The most fun part about picking up a new hobby, I think is noting out and acquiring the new gear. Dylan Lewis: It's all about the gear. Steve Huffman: Like 40% of conversations on Reddit are actually about products or about product recommendations, people talking about that. It's naturally commercial and so we can go to companies and say, look, your customers are on Reddit, talking about your brand, or maybe talking about your competitor's brands or making a purchasing decision in your space. What should I watch? What should I listen to? What should I wear? Where should I go on vacation? What cars should I buy? What's the best video game this and that? Those are commercial conversations. There are also normal human conversations. There's a natural fit there. With advertisers, we also get into just how the platform is different. Like how we think about safety? We're not trying to make Reddit addictive. We're trying to bring people into conversations. We try to be proactive about safety and having good fun experiences. They appreciate all of this. I think one of the other just interesting things about Reddit is the way a user may age out of social media. You actually age into Reddit. We start to pick users up. I call them late state teenagers. They finish high school, start going to college. Emerging adults. Literally when you picked me up. Dylan Lewis: And me. Steve Huffman: For that matter. I was 21 when we started Reddit. Then we just keep them. You can. Certainly, I have, and many users they've gone through life on Reddit. Your sub Reddit subscriptions today I'm willing to bet are very different from what they were 10 years ago. Some of them are your hobbies, some of them are your interests, and some of them I'm guessing are what you're going through right now. People's life can play out on Reddit. That's something I didn't appreciate, obviously, two decades ago, but now we've seen it. Dylan Lewis: While we're talking advertisers, I do want to ask. We have seen advertisers be a bit more careful about where placements are going to and the trust in a platform. I think this has been very prominent and very in the news with a platform like X or Twitter. Big brands having some concerns about having their ads next to what they would view as objectionable content. Reddit has perfectly benign communities, but there are some controversial ones. There are some political ones. There's adult content on Reddit. I'm curious how you find the middle ground on something that's good for users, good for the company, good for advertisers, when it comes to moderation, content policies, things like that. Steve Huffman: Sure. First, we should just talk about how moderation works on Reddit. User cement to content. Every content starts at zero points. Human beings have to vote on a piece of content up and not down to make it popular. Stuff that's out of alignment with the community or if you're being just like a jerk in the comments is likely to get voted down. In that sense, every user is a moderator on Reddit because every user can vote. But then we have users called moderators. They're not employees. These are the users who create communities on Reddit. They write the rules that can be as strict as they want for their communities. But I will point out far and away the most common user-written rule on Reddit, a community written rule is some form of be nice. Be nice, be civil, be respectful. They write that for themselves and they enforce it for themselves. That gets you a sense of the tone of conversation on Reddit. Of course, we have our own safety team. Those are our employees. We enforce our policies at scale. We have all fancy tooling for doing so. By the way, we expose much of that tooling, all the AI stuff to the user moderators as well. They have all filtering and this and that. By and large, Reddit is a really safe and welcoming place because it's organized by community. We organize advertising by community. In order for a community to have ads on Reddit it has to be approved by Reddit for advertising. A chunk of our content on Reddit there's just no ads at all. Then we also go further and classify some of our communities as super safe, rated G. We can go to a customer and say, you've got these options of where you are in Reddit. You want to be in that squeaky, clean, G-rated area. We've got that. You want to be on the broad middle of Reddit, which is where most people are. We've got that. If you want to be over here, sorry, we don't sell ads there. Look, we're not in the business of putting customers where they don't want to be at the end of the day. We want happy customers. Again, we try to make sure everything is intentional, transparent, predictable. Look, when I came back to Reddit, we were not as good at a lot of these things and so every conversation with advertisers started and ended with brand safety. Today, that's not the case. They may ask, we'll explain it, but they can see the results and then we spend much more time just trying to find the right home for them on Reddit and try to help them be successful and take the right tone with communities. I think brand safety and safety in general is now a home field advantage for us. Dylan Lewis: Outside of the ad business. I know it's a small piece of the pie for you guys right now, but you do have a data licensing business. I think it was about 28 million in the recent quarter. That is, as I understand it, allowing other companies to use platform data for LLM training, for AI applications. What was the decision there and what are you guys seeing there? Steve Huffman: Reddit is one of the largest corpuses of human conversation on the Internet. For better or for worse, but I think overwhelmingly for better, Reddit has been an open platform. Reddit's content was used for training these AIs. Now, our terms of service are Reddit open. You can use content for non-commercial use but for commercial use you need a license. I want Reddit to stay open. I also want to be practical. Reddit's content is useful for these things. Look these AIs, these large language models. They help our business. I think they advance humanity. It's one of the most important technologies of the last generation. Help us make Reddit safer, help make the whole Internet safer. We like these technologies existing. We're proud that Reddit's content can be used to create these technologies or advance them. I think just as a matter of business practicality, commercial use of Reddit's public content requires a commercial agreement and so that's what we've been working on. We still do non-commercial agreements, so we'll give Reddit count on away to researchers or other non-profits like Internet Archive. Now, there's terms on all of these things. We created a public content policy. We released this earlier this year. Every platform has a privacy policy. That basically says, this is what we do with your private information. We have one of those two. Now, we don't have a whole lot of private information, but what we do have, we don't share. It doesn't leave Reddit. The public content policies basically says, this is the content that you put on Reddit. In a public community, it's on the public Internet. You should know that. If you don't want it on the public Internet or in search indexes or showing up in research potentially or potentially being used for training, don't put it on Reddit. We want the terms of engagement to be clear there. Then we said, look, if you have any agreement, you have to use this content, you have to have agreement with us. To use it, you can't do certain things, like reverse engineer the identity of our users, or use it to target ads against users, things like that. I think under those terms, and under those policies, we've been able to strike a few deals that I think are important. Google and OpenAI are the other biggest ones on the training side and then we've done others like with Sisson and Sprinkler on the social listening, like what are people saying about these brands, that thing. It's a new business for us. It's off to a good start but I'd say we're still in early days in what is quite frankly a developing market. Dylan Lewis: We were talking a little bit earlier about Google search as a path for users coming onto the platform. Search engine pages look a little bit different now than they did a couple of years ago, and part of that is AI. We see Google experimenting with the AI overviews, sourcing things from the web. There is a risk there in how they're featuring information and how that may affect downstream traffic for you guys. What are your thoughts on that? Steve Huffman: Look, we'll see how it evolves. We have been a beneficiary of Internet search for a long time. As we discussed, it's a super helpful way for even our core users to navigate Reddit so there's a lot of value there for our users, and it's how new potential users discover Reddit and learn that Reddit has content and communities for them. We'll keep an eye on things. We have partnerships with both Google and OpenAI. Obviously, they're going to evolve their products but at the end of the day, the point of their products is to help people find information. A lot of that information is on Reddit. We start from the position of, let's advance the state of the art, let's see how this ecosystem evolves, let's help people find what they're looking for. So far, I think it's been going great. You can see it in our numbers. We're growing faster than we have a long time. Google algorithm changes and product changes. Sometimes they help, sometimes they hurt, but we don't live or die by them by any means. Dylan Lewis: I'm curious how AI fits into the picture for Reddit itself, and the product, the app, the site experience that users interact with. Steve Huffman: It's very exciting. There's so much hype around large language models but one thing that is undeniable is they are very good at jobs involving texts and words. Reddit has a lot of texts and words. I think some things I'm most excited about we've been playing around with this idea of post guidance so if you're a new user, you've grown up on social media, you've come to Reddit and you're submitting your first post, but you've never submitted to Reddit before. Maybe you don't understand that this is a community space and this community has very specific rules. What used to happen is you'd submit this post and then a moderator would be like, oh, this violates a rule. In the science community, no joking allowed, for example. Then you get banned. That's not a good user experience. Now we can use things like LLMs to detect, hey, this is a joke, and you can tell the user. They click submit and say, hey, too funny. Funny is not allowed here. We know you mean well, but try again. Much better experience. The user can adapt their post to something that should be a better fit for the community. The community gets a new user, Reddit gets a happy customer or a happy user, so I think that sort of thing is really, really powerful. Obviously, for safety, things like harassment and bullying, or whatever idiosyncratic rule someone have, I was just give you another example, LLMs can help detect. I think that's really powerful. I was a moderator for a little bit last year. We have a program called Adopt and Admin, where our employees guess moderate sub Reddit, and so I did it with [inaudible] It's a large community on Reddit. Dylan Lewis: Have you explained the community? Steve Huffman: You submit a post as a user. I wore, a cream colored dress to my, sister's wedding, and everybody got mad at me, am I to pick a real example for my wife, and then the community debates and gives you feedback. Yes [inaudible] no, you're not. It's a really interesting community of people basically debating these social situations. But they have a rule. You can't use the word Karen, and you can't use the word Man child. Now, I've been thinking about rules on the Internet for a long time. I don't like word rules. You can't say this word because I think they're too brittle. Because there's always this context. Indeed, on that sub red, we'd spend a lot of time adjudicating uses of the word Karen. Were they saying it meanly, or are they correcting somebody else, or is this the story literally about a person named Karen? This is like so much time spent on that rule. Now, they eventually convinced me, it's an important rule because it sets a tone for the conversation and a tone for that community. I came around to their viewpoint, this is important and it's had a good effect on this community. But I'm looking forward to when an LLM can do that work so that the human moderators can do something else because some of the rules are really complex. I think LLMs will make reddit safer. Honestly, for that matter, the whole Internet safer. I think that's very exciting as well. Dylan Lewis: I don't want to take too much of your time. I have just a couple more questions for you here. One of them is taking a step back on the business as a whole. We talked through some of the different components of it. Recent quarter, loss has started to narrow for you guys. You have a very high margin business at core, when you look at the gross margins. What does the path to profitability look like for you guys? Is that a near term priority? Or are you happy with what you're seeing and you want to be able to continue to invest in the business, even if it means running out a little bit of loss? Steve Huffman: I like the progress we've made. Last couple of quarters, we've been profitable on an adjusted EBITDA basis. We've been positive cash flow last couple of quarters, and so the next milestone for us is GAP profitability, and we're getting closer to that. It's an important milestone. We're also a growth company. I think one of the most important levers for us over the last couple of years has been we've been very disciplined on headcount growth. Reddit is like the simplest business you'll ever see. Add revenue comes in. We're 89% gross margin last quarter. We basically spend money on two things, computers and people. If we're disciplined about how many people we have, we can control costs that way, and so our management goal has been to grow revenue twice as fast as costs. Now we've been able to do quite a bit better than that the last couple of quarters, and so we're getting closer and closer to GAP profitability. I wouldn't say it's a direct goal for Reddit on any particular timeline. But I do think it's important to get there. It's a sign, I think of a healthy, sustainable business, something we've been working toward for a long time. But Reddit's business model is truly advantaged. We basically have no CAP X on top of that. If we can continue to grow users and grow revenue and be disciplined about headcount, I think we're in a great shape, and I think it puts us in a from a business point of view, a unique position in the market. Dylan Lewis: Here at the Fool, we're long term buy and hold investors. We're typically looking at businesses with a five plus year time horizon. I'm curious with that setup. For a multi-year outlook, what type of thing would you like to be graded on? Or what would you want the rubric to be for Reddit itself and for yourself a CEO? Steve Huffman: When we set goals internally at Reddit, I like to use both words and numbers. The numbers are important. I'll tell you what the numbers are. We want to grow users, DAU, we want to grow revenue, dollars. But not all users are the same. There's social media stuff we could do to grow that we've not done. Not all dollars are the same. You get into short term, long term, sustainable or not. The answer is in our mission. Community belonging and empowerment for everyone in the world. We know if you speak English, everybody has a [inaudible] Can we grow users in English by making the product better by making on-boarding more effective? Then can we grow outside of English using machine translation and some of our program work? Then on the revenue side, we like having direct relationship with advertisers, and we try to make our ads, more and more relevant, more and more effective for the advertiser. You should grade us on users, you should grade us on revenue. There's all sorts of input metrics that we don't necessarily report, but things that I think about are new user retention, what we call our good visits. Like when a user visits Reddit, we call it a good visit if they find a post, they spend more than 30 seconds, and headcount is another one that we report. Hopefully you see high revenue growth, good user growth, you see us building products in harmony with Reddit and its mission and disciplined headcount growth, those would be the things that I would watch. Dylan Lewis:To wrap us up here, on Reddit, you are Spez and for folks that haven't used it and want to check it out, what's a sub Reddit community that you think they should check out to get a good feel for what Reddit is at its best. Steve Huffman: When I demo Reddit, and this is what I do for investors a lot, I think. Broadly speaking, our investors can and should be users, and of course, the inverse is something I was very excited about for our users to be investors. That's one of the reasons we went public. When I'm showing somebody Reddit for the first time or talking about Reddit for the first time, I often just pull it up, so I show them Ask Reddit because on Ask Reddit, you'll see people asking all these funny or interesting questions. A typical ask credit post might be, like, what's your funniest memory from elementary school? Then you'll have thousands of people telling stories. They've probably literally never told before, and that's one post out of thousands every day. I do Ask Reddit. I often pull up science just so you can see a serious side of Reddit, and then I'll show them data. Data is a sub Reddit for dads. I have a couple of kids, and what I like about data is you usually see like a funny post like a serious post asking for advice. Maybe next to like a profound post. Somebody grieving something very difficult that's happened or relationship challenges as a result of having kids, things like that. Like really stuff that you wouldn't talk about on social media, and then similarly, I might pull up like Photoshop request, which is a subreddit where people pay $5-$10 to alter photographs. But again, you can pull it up almost any time. You'll see something funny, you'll see something that'll make you cry, you'll see something sentimental, and it really, I think captures this idea that this is how humans are, that they spend their free time with no other incentive than like it feels good, supporting each other, helping each other, sharing a few laughs, just going through life's journey together. I think that's really incredible, and I think it's not a Reddit thing. It's a people thing that Reddit, I think uniquely reveals. Dylan Lewis: Steve, I have to thank Photoshop request for the birthday gift I gave my father last year because I had found a picture of his father at a store that he ran when he was younger, and there was a famous person who had come and visited the store, and it was this great picture, but there were, like, all these random people in it, and I wanted to just give a photo of my grandfather and this NFL player, and sure enough, the photoshop request community delivered, and I wound up being a great son for my father's birthday, and it cost me, I believe, $10. Steve Huffman: That's what it's all about. That's super cool. What a great example. Dylan Lewis: Steve Huffman, thank you so much for joining me. Really appreciate the conversation. Steve Huffman: Thank you. My pleasure. Ricky Mulvey: As always, people on the program may have interests in the stocks they talk about, and The Motley Fool may have formal recommendations for or against so don't buy or sell anything based solely on what you hear. I'm Ricky Mulvey. Thanks for listening. We'll be back tomorrow.

CEO Steve Huffman on How Reddit Stands Out in the World of Social Media | The Motley Fool

We've also got a look at Nike's CEO change, the Fed's rate cut, and other interesting topics for investors. In this podcast, Motley Fool analysts Ron Gross and Asit Sharma and host Dylan Lewis discuss: Reddit hit the market in 2024, but it's been around as the front page of the internet for almost 20 years. At the 19:50 mark, CEO Steve Huffman joined us to talk through how the company stands out in the world of social media with its focus on community, where it has been, and where it is heading. To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our beginner's guide to investing in stocks. A full transcript follows the video. This video was recorded on Sept. 20, 2024. Dylan Lewis: Rates are down and markets are up. Motley Fool Money starts now. It's the Motley Fool Money Radio Show. I'm Dylan Lewis. Joining me over the airwaves. Motley Fool senior analysts Ron Gross and Asit Sharma. Fools. Great to have you both here. Dylan Lewis: I'm doing great because we have plenty to talk about. We've got another CEO change at one of the world's biggest brands. Got a rundown on one of the bigger IPOs of 2024 straight from their CEO. We also have stocks on our radar, of course. But really, we are kicking off this week with a look at the big macro, because, Ron, how could we not? The Federal Open Market Committee this week decided to cut the core rate for the economy by 50 basis points. We knew going in what direction things were gonna be heading. We did not necessarily know the magnitude or what the market would make of it. Ron Gross: Oh, boy. Big big, big day. We were waiting. It's the first rate cut from the Fed since it began hiking in March of 2022, marking a pretty big, and I would say, long-awaited shift in monetary policy. Fed Chairman Powell, to you and me, categorized the Fed's latest cut as recalibrating policy down over time to a more neutral level. Now, that word recalibrating, is a word that the markets have really focused on, as one analyst put it, using the word calibration allows Powell to push this narrative that this easing cycle is not about us being in a recession, it's about extending the economic expansion. A little nuance, a little slanting there. But then we got weekly jobless claims that fall 12,000, and that was far below estimates, reassuring people that we look like we're actually maybe have achieved the soft landing that we have been talking about for so long on this show and on every other show out there. It is an exciting time. The Fed projected lowering interest rates by another half point before the end of 2024. They have two more policy meetings to get that done. And then through 2025, their forecast interest rates landing at 3.4%. Then through 2026, rates are expected to fall to 2.9%. So at least the pundits and the Fed, they're signaling lots more rate reductions to come. They increased their expected unemployment rate this year to 4.4% from 4%, and they lowered their inflation outlook to 2.3% from 2.6%, which is approaching that 2% target that they talk about so often. When this all happened on Wednesday, stocks were mixed, they eventually turned negative. Everybody got a good night's sleep, decided, you know what? Things are perfectly fine. Stocks shot up on Thursday. All is well, Dylan. Dylan Lewis: Before the announcement, we'd had a little mini pool going just for fun. Ron, Asit, you guys both had a 25 basis point drop. We had different ideas about what the market reaction could look like, and I think just goes to show how difficult it is to anticipate these things. But as all the dust settles, Ron mentioned, the market reaction, very strong. Asit, we're looking at the S&P setting a new all time high on Thursday afternoon. Asit Sharma: Yeah Dylan, and what's a little surprising in this is the breadth of the market was very strong. Or maybe that's obvious to market watchers. The Fed has changed its posture. Everyone should participate. We had an amazing day on the NASDAQ as well. So the NASDAQ rose 2.5%. This surprised me a little bit because typically you'd expect what's leading the market forward to take a breather. It's not to say we didn't see the other sectors you'd expect come into play. Housing was strong, consumer good stocks were strong. But this is the interesting thing when we think about how the market moves forward from here. Tech is still going to participate and the reason is that lower interest rate environment is going to free up capital among lots of companies to make those investments in technology, be it artificial intelligence, the Cloud, or other initiatives they've been holding back on a little bit because capital has been tighter. It's been more expensive. As the cost of capital decreases, some of these big balance sheets that are associated with tech companies are going to unleash. Then enterprise businesses, which buy stuff from the big tech companies, they're also going to unleash their balance sheets. That helps prime the economy. I think investors, as Ron said, initially, a little ecstasy on how to interpret this woke up the next day thinking, wow, this is the beginning of a new posture, and we can see those smaller 25 basis point cuts in the future. This is going to be good for business, and we're going to go ahead and invest. So the market took a really, I think, positive interpretation of the result. Ron Gross: I think one thing we can learn from the predictions that we made for fun on Tuesday and got completely wrong, at least in my case, was that you don't really need to focus on a minutia, 25 basis points, 50 basis points. Is the market going to be up on one day versus down on one day? If you're going to take the macroeconomy into account when you look at investing, think of it broadly. Do we seem like we're on good footing? Is the economy growing? Is inflation coming down? Our interest rates, at least, over the last 10 or 20 years, have they been historically low and then perhaps historically high, and we need an adjustment. You don't need to be so hyper focused. It can get fun, and we like to talk about it on the show. But general directions are much, much more important than being hyper focused on any one metric or any one day. Asit Sharma: I'm just going to disclose here our actual predictions. You said the market would not have that grade of a day because you expected a 25 basis point cut. I said to be cute. Well, I also expect a 25 basis point cut, but the market, by the end of the day, is going to finish in positive territory. I draw two things from us, both being wrong. Number 1, on a personal level, I'm not that great at predicting the Fed's moves. [laughs] Number 2, I think there's a virtue in staying mostly like business focus versus shifting to too much of a macro focus as investor. If you choose wisely, you're going to invest in companies that can withstand the stresses of a rising rate environment, and they'll benefit on the back end when interest rates start to ease up. Dylan Lewis: I agree with everything you guys said. I'm going to do a mix here of focusing on the minutia, to quote, Ron, [laughs] and also taking that broader view. If we look back, 25 basis points has generally been the Fed's preferred denomination for moving things around. The times that we have seen a 50 basis point move in recent memory, early 2001, 2007, and then March 2020 with COVID. Ron, I look at those times, and I think about right now, talking about perhaps a soft landing. This feels like a comparatively calm period, relative to some of those other ones. Do you feel like the magnitude of what we're seeing here is more of a response to how quickly rates went up? Ron Gross: Yeah, the relatively calm is the soft landing. It's almost synonymous. If it really does happen. I think we have to call it pretty soon because if six months from now we go into a recession, you can't say see, we had a hard landing because that's so far in the future. But right now, with inflation coming down, economic growth continuing, unemployment going up a bit, but still being what, at least in the past, would have considered full employment still at these levels. Things look pretty good. The market's not cheap, but history tells us that when if you look back 40 years, JP Morgan did a study, finding the Fed has cut rates 12 times with the S&P 500 within 1% of an all time high, the market was higher a year later, all 12 times with an average return of around 15%, not too shabby. I'll take 15% all day long, Dylan. Asit Sharma: Not to be too much of an optimist here. But there's a scenario that we had in the mid '90s, where we didn't start with such a big rate cut, but long term rates were about where they are now in that 6-7% range. Alan Greenspan had a series of 25% basis point cuts, and that was really stimulative to the economy. The stock market had a pretty good rise during that time, so we could see a scenario like that as well, potentially. A either week on a positive note or trying to. Dylan Lewis: Coming up after the break, we've got a major CEO change, another one. Will it get this iconic brand back on track? Stay right here. This is Motley Fool money. What will the AI Revolution mean for jobs, for our kids, for our relationships and daily lives. A new podcast, Pioneers of AI is your trusted guide to this emerging technology. Host Rana L Kalbe is an AI scientist, entrepreneur, author, and investor, exploring all the opportunities and questions AI brings into our lives. Listen to Pioneers of AI with new episodes every Wednesday, wherever you tune in. Welcome back to Motley Fool Money. I'm Dylan Lewis here on air with Motley Fool analysts Ron Gross and Asit Sharma. A couple of big bellwether companies reporting this week, and we've got a CEO shakeup to sort out. The Greek goddess of victory will have a new chief executive to try and return it to its winning ways. This week news out that John Donahoe will be stepping down as Nike CEO. He'll be replaced by Elliott Hill, who'll be coming out of retirement to rejoin the company, where he spent over three decades. Asit we have spent a lot of time documenting the troubles over at Nike on this very show. Are you surprised to see Donahoe out? Asit Sharma: Not really, Dylan. I think that Nike has some self inflicted problems that it's recovering from, even though that got masked coming out of COVID, where it looked like they were firing on all cylinders. Donahoe did two things that were really critical to Nike's future when he took over in 2020. First, he favored this more data driven approach to new products in favor of using analytics to design, new shoes, technical clothing, etc., versus all this human knowledge that had been built up through decades of expertise. I'll note they walked back that decision late last year. The second thing that Donahoe did, which was really critical to where we stand today is Nike leaned into this direct to consumer model. So selling directly to us, driving consumers to Nike's website at the expense of its wholesale business. Now that wholesale business is what you or I would refer to as the retail side. So think athletic stores, department stores, and boutique running shops. When you combine these two things, that data driven product decision for making new products, and this willful deemphasizing of the wholesale relationships, two things happened. One, we saw a decline in the innovation that customers have always associated with Nike products and the Nike brand, and it opened up the door for smaller brands to forge these relationships with wholesalers and take up that shelf space that Nike was giving up. Just look at the all important running shoe business. Which is still, I think the economic core of Nike. It's the spiritual core of the company. We've seen an explosion in brands like Hoka, on Brooks and others. So you can see where this is heading. Nike's financial results have been deteriorating. In June, the company gave its worst quarterly outlook in years, so something had to give. I think it's still like a Sterling brand. They've got a lot of resources. Elliott Hill, who's worked at the company for decades before he retired, has a decent shot at getting back to Nike's original business model and rekindling that innovation, which might turn the ship around. Dylan Lewis: When Hill was last with the company, he was focused on marketing and commercial ops for Nike, and also focused on the Jordan brand. I'm going to put it to you with him coming out of retirement Asit. Are we getting Michael Jordan coming back to the bowls in the '90s? Or are we getting Michael Jordan coming back to the Wizards in the early 2000s? Asit Sharma: I'm going to put my money on the Michael Jordan of the 1990s. I think this is such a great metaphor you bring up, Dylan. Getting back to that storytelling that Nike was so renowned for, being able to inspire customers to want shoes, to want the clothes, and combining that with really great product is where they've always excel. That's their flywheel. In particular, I think Elliott Hill has seen this story before. He's seen it play out. He knows what to do. I think that's at least where they're going to head and where they're going to try to rekindle that magic. Ron Gross: I'll say, as an investment strategy, I love looking at iconic brands that are somewhat broken. It actually works quite a bit of time. Not always. You have to do your analysis and your research. But this could be one like that, a few weeks ago, a buddy of mine asked if I like Nike, and because I'm an investment professional, I said something very wise. I said, yes, if they can get their act together, which is a very deep analysis of Nike. This change at the top could be a first step toward that, but it's only a first step because they do need to walk back some of that multi channel strategy that they implemented years ago, get back into retail, as Asit said. But you know what? The shelves are now full with On and Hoka and others. So it's not going to be the easiest thing. It's going to take some time. But at 26 times earnings versus on at 50 times or Under Armour at 33 times. It's not the cheapest thing in the world, but if they can improve earnings, that multiple gets a little bit more reasonable, and I might be willing to wait and see what happens. Dylan Lewis: Over to the earnings beat. We have an interesting quarter from Darden Restaurants, Ron. Top and bottom line came in below expectations. The company reaffirmed its full-year outlook. The market didn't really seem to mind too much. Ron Gross: Exactly. That's exactly what happened. It was worse than expected, but the stock popped, which I think was largely due to a new deal with Uber Eats. They did reiterate full-year guidance to indicate maybe things aren't as bad as some might think based on this quarter. But the quarter was a bit of a mess. Total sales increased only 1%, and that was really driven by the fact that there were new restaurants, 42 of them. Because same store sales were down 1.1%, led by Olive Garden, which was down 2.9%, which is a pretty major disappointment. Longhorn Steakhouses was really the only division with same store sale increase at 3.7%. Management said the significant step down in traffic during July, which is what led to earnings being lower than expected. But Dylan, never fear, because Olive Garden is reviving all-you-can-eat, never-ending postible later this month as part of an ongoing effort to bring back customers. I think good things are on the horizon, adjusted earnings were down 1.7%. They do think things are looking up. This partnership with Uber Eats it's a test. If it works, it'll expand to more than 900 locations, Olive Garden locations next May, if the pilot is successful. We'll have to wait and see. They're still integrating their Chewy's acquisition. It's not actually in results yet. Ruth's Chris is actually completed, but it's not really in results yet as well. So we'll keep an eye on this one. A little bit of a messy quarter, though. Dylan Lewis: Bring us home and maybe bringing slightly fewer boxes to your home, FedEx, like Darden, missing the mark on expectations, Ron. Unlike Darden the company also lowering its expectations for the rest of the year. We look to this business for a sense of what is going on in the economy. What are you seeing? Ron Gross: There is some concern that this is an indication of a weak economic outlook. I'm not sure. This might be more FedEX related or cyclical than structural, but cyclical would not be great either, because that could speak to somewhat of a weak economic outlook for at least the time being. But in particular, this company, the results were pretty, pretty poor, at least significantly worse than expected with revenue actually down 0.5%. The Fed Express division, which is the merger of their ground, and their FedEX Services division, had lower operating results. There was a decrease in shipping volumes on US domestic priority packages. International did a little bit better offsetting that. But customers were trading down to cheaper options, which really does take a bite out of margins and profits. That's where people are saying, well, in a lack-luster economy, you don't need to have such urgency to get things quickly to where they need to be. Some people are extraplating that that could be an economic problem. I'm not necessarily sure yet. We'll see. CFO John Dietrich said recent pricing actions are expected to help offset weaker than expected demand trends. Another wait and see. I think my thesis here would be a lot to wait and see here. They did have to cut projections, trading only at 14 times the low end of that guidance versus UPS around 16 times. UPS also has its struggles. But they're really focusing on cutting costs, taking some of the fat out of the system. $2.2 billion of permanent cost reductions is what they are aiming for. Let's give this another quarter, even another six months and see what the trajectory looks like. Asit Sharma: I just found it interesting that FedEx had signaled to the market last year that we're not really this volumes growth story anymore, but we're going to be a great earning story. We're going to cut costs, as you mentioned, and we're going to be much leaner and more efficient on the operational side. I think that's a work in progress. But this quarter is just interesting in that it's again a volume story. So what if volumes are even weaker than you expect, then what kind of story are you? But I agree. In general, it's not something that can be solved overnight. Of course, as we've been talking about, an economy which maybe is going to lean a little bit more toward growth as we get into further rate cuts. Dylan Lewis: Ron Gross, Asit Sharma, I appreciate you being here. We're going to come back to you in a little bit on the show. Up next, we've got a rundown on a gross story, 20 years in the making, and one of more interesting IPOs, 2024. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Dylan Lewis. If you're like me, you know Reddit as the front page of the Internet, and if you don't, maybe you know it as one of the more interesting IPOs of 2024. The company debuted March and since has posted Soaring User and Revenue Growth. This week, Reddit CEO Steve Huffman joined me to talk through how the company stands out in the world of social media with its focus on community, where Reddit has been, and where it might be heading. It's a treat to talk to you because I'm a long time user of Reddit. Dylan Lewis: I first started using Reddit in college, and that was I don't date myself too much. That was over ten years ago. When I started using it, it was a mix. It was for the memes, but also I was learning how to dress myself. I was going to our male fashion advice and trying to pick up some tips there. I was going to school in Boston, and so I was trying to figure out what was going on in the city and what I needed to know about events, and so I was going to our Boston. I'm guessing that some of our listeners of the show are also longtime Reddit users like me. There are probably also some folks who are part of the 300 million plus folks who come to you weekly for folks that do not know Reddit very well. How do you describe it to them? Steve Huffman: Starting with the hard questions. Depending on what I sense their context is. I explain Reddit in a couple of ways. If I was explaining it from the ground up, I'd say Reddit is communities. These communities can be about anything and everything. Every interest, passion, hobby, whatever you're into, whatever you're going through, it's on Reddit somewhere. Then what I would say is, if you're pretty much between the age of 17 and 70, whether you're a nerd or nomi, you have a home on Reddit. There's something there for literally everybody. Other times I explain it in contrast to social media, and social media is powered by algorithms. Reddit is powered by people. Every piece of content that becomes popular in Reddit is made popular by people voting and voting in the context of a community. Users can make things popular, but they can also disappear things. By definition, polarizing content doesn't do as well on Reddit. What you get as a result is Reddit is the most human place on the Internet because it's powered by people. If you look at the conversations on Reddit, everybody has comments. But if you look at the comments on Reddit, if you look at the object of the sentences, you'll see that they're talking to each other about whatever it is. As opposed to social media where they're often talking at but past the poster. They're either super effusive or maybe the opposite but there's a lack of connection there. On Reddit, it's people organizing around things they love talking about those things like real human beings. Dylan Lewis: You were one of the co-founders of Reddit, and you launched it back in 2005. You sold it. You worked on other projects, came back as CEO, I think back in 2015. You've now successfully brought it public, and you've had a couple really strong quarters so far. What's that process been like for you and what's it been like to see the platform grow into what it has so far. Steve Huffman: Look, in 10 seconds there, you basically just described my entire adult life. It's been a 19 year journey. If I were to hit the high points when we started Reddit, it was 2005. The Internet was a different place. Social media didn't exist. The platforms didn't exist, let alone the word. The word influencer certainly didn't exist. We're born of the open Internet. Insensibly, we're starting a business. It really was more of a passion project or a labor of love, or really we were just building what would be fun and interesting for us. That was the first era of Reddit the first five years. Then I left for five years. I worked on a different company. I came back to Reddit with a new mentality that this thing is special. I didn't realize that at first, I mean, I loved it, but it was the only thing I ever worked on. I didn't appreciate how special something like Reddit was. It brought out, I think, in many ways, the best of people or at least a different side of people, really empowered people, grew on its own. While I was gone, Reddit went through some challenging times, I thought if Reddit doesn't survive, not even doesn't survive. If Reddit doesn't live up to its potential, that would be a huge missed opportunity. There's a risk that it might not even survive. That's the mentality or the thinking I had when I came back to the company. I've been back 9 years, the last 9 years I've really been trying to realize that potential. It's been a journey of the company growing up, us understanding the platform better and better. Sometimes I think of our job, not as product people. It's more like we're anthropologists, like studying this living organism and trying to be the best stewards of it as possible, and then realizing its potential both as a platform and then also as a business. The business side of Reddit is really starting to mature as well. Dylan Lewis: Where do you guys think you are in the grand scheme of Reddit's potential? I guess you can take that in the platform direction, you can take in the business direction, wherever you want to go with that. Steve Huffman: Such an interesting idea to contemplate because on one hand, Reddit has been bigger than I ever thought it would be since August 2005. By some measure, we're big now. We about 90 million people visit Reddit every day, 360 million people visit Reddit every week. That's big in terms of absolute numbers. But social media, the biggest platforms there have 1 billion 2 billion users every day. There is a I think huge opportunity there. Reddit, we're about 50 50 US versus none US. I'd say other major platforms are more 80 to 90% none US. I think a lot of opportunity to grow more users. Then on the business side, I think we've gotten out of the beginning phase, we're in the ads business. That's our primary business model. Though we license data and we do some other stuff as well. Primarily ads. It's growing in the last quarter reported, 50% growth, little more 50% growth. That's great. Our ads are working. Our customers are happy, we're continuing to deepen relationships there. We IPO in March. On one hand, I feel we've gotten to a certain level of stability and scale where this feels real and it's working. On the other hand, it almost feels we're at the very beginning. I have a lot of the same feelings today as I did almost 20 years ago, which is, we've barely scratched the surface of this thing, and it can be so special, and I think really great on the platform side and the business side. I'm really of two minds about it. The Jeff Bezos idea of day one is really something I feel we're living right now. It feels like the beginning. Dylan Lewis: Taking a step back on the business as a whole. We talked through some of the different components of it. Recent quarter, loss has started to narrow for you guys. You have a very high margin business at core. When you look at the gross margins. What is the path to profitability look like for you guys and is that a near term priority, or are you happy with what you're seeing and you want to be able to continue to invest in the business, even if it means running out a little bit of loss. Steve Huffman: I like the progress we've made. Last couple of quarters, we've been profitable on an adjusted EBITA basis. We've been positive cash flow, last couple of quarters. The next milestone for us is GAAP profitability, and we're getting closer to that. It's an important milestone. We're also a growth company. One of the most important levers for us over the last couple of years has been we've been very disciplined on headcount growth. Our costs Reddit is the simplest business you'll ever see. Add revenue comes in, or 89% gross margin last quarter. We basically spend money on two things, computers and people. If we're disciplined about how many people we have, we can control costs that way. Our management goal has been to grow revenue twice as fast as costs. Now we've been able to do quite a bit better than that the last couple of quarters, and so we're getting closer to GAAP profitability. I wouldn't say it's a direct goal for Reddit on any particular timeline but I do think it's important to get there. It's a sign, I think of a healthy, sustainable business, something we've been working toward for a long time. But Reddit it's business model is truly advantaged. We basically have no CAPX on top of that. If we can continue to grow users and grow revenue and be disciplined about headcount, I think we're in a great shape, and I think it puts us in a business point of view, a unique position in the market. Dylan Lewis: Here at the Fool, we're long term buy and hold investors. We're typically looking at businesses with a five plus year time horizon. I'm curious with that setup. For a multi year outlook, what type of thing would you like to be graded on? Or what would you want the rubric to be for Reddit itself and for yourself as a CEO? Steve Huffman: When we set goals internally at Reddit, I like to use both words and numbers. The numbers are important. I'll tell you what the numbers are. We want to grow users, DAU and we want to grow revenue, dollars. But not all users are the same. There's social media stuff we could do to grow that we've not done. Not all dollars are the same. You get into short term, long term, sustainable or not. The answer is in our mission. Community belonging and empowerment for everyone in the world. If you speak English, everybody has a home on Reddit. Can we grow users in English by making the product better by making onboarding more effective. Then can we grow outside of English using machine translation and some of our program work. Then on the revenue side, we like having direct relationship with advertisers, and we try to make our ads more and more relevant, more and more effective for the advertiser. You should grade us on users. You should grade us on revenue. There's all sorts of input metrics that we don't necessarily report, but things that I think about are new user retention, what we call our good visits. Like when a user visits Reddit, we call it a good visit. If they find a post, they spend more than 30 seconds on. Headcount is another one that we report. Hopefully, you see high revenue growth, good user growth, you see us building products in harmony with Reddit and its mission and disciplined headcount growth. Those would be the things that I would watch. Dylan Lewis: To wrap us up here, on Reddit, you are Spez, and for folks that haven't used it and want to check it out, what's a sub Reddit community that you think they should check out to get a good feel for what Reddit is at its best. Steve Huffman: When I Demo Reddit and this is what I do for investors a lot. Broadly speaking, our investors, can and should be users. Of course, the inverse is something that I was very excited about for our users to be investors. That's one of the reasons we went public. When I'm showing somebody Reddit for the first time or talking about read it for the first time, I often just pull it up. I show them ask Reddit because on ask Reddit, you'll see people asking all these funny or interesting questions. A typical ask Reddit post might be, what's your funniest memory from elementary school? Then you'll have thousands of people telling stories. They've probably literally never told before. That's one post out of thousands every day. I do ask Reddit. I often pull up science just so you can see a serious side of Reddit. I'll show them Data. Data is a sub Reddit for dads. I have a couple of kids. What I like about data is you usually see a funny post next to a series post asking for advice. Maybe next to a profound post. Somebody grieving something very difficult that's happened or trying to relationship challenges as a result of having kids, things like that. Really stuff that you wouldn't talk about on social media. Then similarly, I might pull up photoshop request, which is a sub Reddit at where people pay $5 to $10 to alter photographs. But again, you can pull it up almost any time. You'll see something funny, you'll see something that'll make you cry, you'll see something sentimental, and it really, I think captures this idea that this is how humans are that they spend their free time with no other incentive than it feels good, supporting each other, helping each other, sharing a few laughs, just going through life's journey together. I think that's really incredible. I think it's not a Reddit thing. It's a people thing that Reddit I think uniquely reveals. Dylan Lewis: Steve, I have to thank Photoshop request for the birthday gift I gave my father last year because I had found a picture of his father at a store that he ran when he was younger, and there was a famous person who had come and visited the store, and it was this great picture, but there were like, all these random people in it. I wanted to just give a photo of my grandfather and this NFL player. Sure enough, the photoshop request community delivered, and I wound up being a great son for my father's birthday, and it cost me, I believe, $10. This all [OVERLAPPING] . Steve Huffman: That's what it's all about. That's super cool. Dylan Lewis: Listeners, that was just a portion of my conversation with Steve Huffman. We'll be airing the longer form interview where we dive into the company's ad business, his thoughts on AI, and how Reddit prepared to go public this weekend over in our podcast feed. You can catch that and our daily Motley Fool Money episodes wherever you listen to podcasts. Coming up after the break, Asit and Ron return with a couple of stocks on their radar. Stay right here. You're listening to Motley Fool Money. As always, people in the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for or against so many personal thing based solely on what you hear? I'm Dylan Lewis, joined again by Motley Fool analysts Asit Sharma and Ron Gross. Ron, we were talking olive garden earlier in the show. In addition to the earnings update, you mentioned. The company is bringing back an all time crowd pleaser and cult classic. It's never ending pasta bowl for $14. Looking to get diners back in with some deals. My question to you, Is this a deal? I know that people love it, but can you really eat more than one bowl of pasta? Ron Gross: You're asking me [LAUGHTER] . First, I have something to say. The stocks up on the Uber Eats deal. But as far as I know, you can't eat all you can eat pasta or never ending breadsticks via Uber Eats. I don't think they're going to keep going back and forth for you. The two things a little bit negate each other. But if you give me a good meat sauce on a good bowl of pasta, I go back two, three times, absolutely. Dylan Lewis: Maybe Uber Eats will anticipate that second bowl of pasta and just put it in there for you so that they know it's waiting. Asit, what do you think? Do you really have two bowls of pasta in you? Asit Sharma: I'm great at rationalizing, so I tell myself, I can go for a second, I can go for a third. I'm taking a run tomorrow, and I never take the run. I can handle more than one bowl of pasta. Dylan Lewis: Maybe you guys are just more active than me. Maybe that's what it is. Ron Gross: Maybe not. Dylan Lewis: Let's get over to stocks on our radar. Our man behind the glass, Dan Boyd is going to hit you with a question. Ron, you're up first. What are you looking at this week? Ron Gross: Dylan, as I look for beneficiaries of lower interest rates, DR Horton, DHI caught my eye. They're the leading home builder in the industry over the past 22 years, a presence in 121 different metro markets spread across 33 states, concentrating on providing entry-level home opportunities for buyers. They also build and sell single family rental, and multifamily rental properties. They become the number one builder in over 50 major markets across the nation, including Houston, Austin, Dallas Fort Worth. It has been a good focus on the South, because the demographic trends work nicely with people moving toward that direction. It's paid off nicely. They're responsible for nearly 14% now of all single family new home sales nationwide. I think as interest rates come down, as people come back into the housing market, demand improves, I really think the fact that they're focused on houses at $400,000 or less in many circumstances, really be the beneficiary of it, and their metrics are great 17% return on assets over long periods of time, 22% return on equity. I think this really looks like a good one, especially for this macroeconomic environment. Dylan Lewis: Dan, a question about DR Horton, Ticker, DHI. Dan Boyd: Sure, Ron. What's our time horizon on returns here? Because if I know one thing about building houses, and I really do only know one thing about building houses, is that it takes a while. Ron Gross: It does take a while. But there are plenty of homes in certain pockets, but we need many more homes. It's a demand supply imbalance, which is why prices are out of whack. It will take some time, but you're only paying 12 times earnings here, Dan so you can wait. Dylan Lewis: Asit, what is on your radar this week? Asit Sharma: Well, Dylan, I'm a sucker for a turnaround story, especially the kind that people wouldn't touch with a ten foot pole. That would be Intel among major companies in the semiconductor industry. The stock has struggled because Intel is having trouble expanding its manufacturing business. It wants to get back into the business of making specialized chips on a big scale. But it's having trouble landing a Market customer. That foundry business, which is the name for this manufacturing business is killing the financial statements just last quarter. This segment lost 2.8 billion dollars. But Intel has been slashing costs. It's been pulling back from some of its more ambitious expansion plans such as opening a new manufacturing plant in Germany and US government just confirmed that it's going to fund another $3 billion for Intel to work on its domestic manufacturing plants in states like Arizona and New Mexico. It finally got that Market customer. This week, Intel announced that it's going to get further into a partnership with Amazon. The companies are going to co-invest in new chip designs. Intel will produce some artificial intelligence chips for Amazon web services using both its own technology and Amazon's technology. I think this has the beginnings of finally a company that has had trouble turning around, looking better as we go out. I will give you a time frame 3 to 5 years. Dylan Lewis: Dan, a question about Intel. Dan Boyd: Feels like we talk about chips and chipmakers all the time here on the show. I don't know. Asit I feel like Intel's got a uphill battle here. Asit Sharma: You're right. They do. We should throw some cold water on this. Be careful. If you want to follow my lead into the stock. Watch your position size. Dylan Lewis: Asit, Ron thanks for your stocks. That's going to do it for today's Motel Money radio show. Shows mixed by Dan Boyd. I'm Dylan Lewis. Thanks for listening. We'll see a next time.