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Reddit shares fell about 6% on Friday on concern that a new app from Meta called Forum could create an alternative avenue for internet users to congregate and create discussion groups.
Forum, launched as a test app on Apple’s iOS, is part of Facebook Groups. Analysts at Truist wrote in a note on Friday that it’s “an attempt by the company to compete against Reddit as an online forum for public discourse” and “represents a new threat.”
Reddit’s stock is now down almost 40% this year despite a strengthening online ad business. In April, the company reported its seventh-straight quarter of sales growth topping 60%. Meta, meanwhile, reported revenue growth of 33% in the latest quarter.
“The risk from this move, if successful, is a gradual erosion of Reddit’s utility for casual users who have less community loyalty to Reddit and simply want answers,” wrote the Truist analysts, who recommend buying the stock. “This would affect non-core Reddit users more than directly logged-in, habitual users.”
Reddit didn’t immediately respond to a request for comment.
Meta, or Facebook as it was then known, created a separate Facebook Groups app over a decade ago but ended it in 2017. The service still exists as part of Facebook and, like Reddit, hosts discussion groups on all sorts of topics.
