Reddit’s ad business is expanding—but it’s still small compared to other platforms

Reddit can’t stop building shiny new advertising tools. First it was dynamic product ads, then it was AI copy tools. Now, they’re premiering custom “Ask Me Anything”-themed ads. 

The changes have accelerated Reddit’s sales, with most analysts predicting the company reached $1 billion in 2024 ad revenue. That figure has been elusive for Reddit, which only began meaningfully investing in their ad business in 2018. But it’s also far off from the competition, with companies like LinkedIn, Snapchat, and Pinterest more than doubling their ad load. 

Reddit’s advertising innovations

Reddit is on an advertiser courting spree. In their Q3 2024 earnings call, COO Jen Wong pointed specifically to advertising revenue as a point of growth, noting that the company brings on thousands of new advertisers every quarter. She called them “seeds that are planted for the future,” where current smaller investments in Reddit ads beget future, bigger ones. (Reddit declined to comment.) 

At CES, Reddit debuted two new products for brands, on top of the litany of other 2024 features meant to sweeten the ad deal. One was a fully integrated, customizable “Ask Me Anything”-type ad. The second was a new Pro Trends tool, where businesses can see rundowns of what’s being talked about on Reddit’s forums. Jeremy Goldman, senior director of client briefings at eMarketer, was most excited about the latter. 

“You get brands to spend more time on the platform,” Goldman says. “When TikTok launched things that were similar, it helped brands that were on the fence get more comfortable with the platform, and then they started to spend money.” 

The tools have been working; in that Q3 report, Reddit noted 56% year-over-year growth in advertising revenue. EMarkerter reported a growth rate of 50.5% for Reddit last year. This year, that number is projected to tick down to 30.9%. Goldman still finds that demoted rate impressive, and thinks Reddit’s smaller status could actually be a boon for advertiser growth. 

“Advertisers are getting a little bit wiser to know that they don’t necessarily care about, ‘Am I getting the most impressions possible?’” Goldman says. “They want to have a consumer that they can convince to do something. When you have a really strong contextual ad like Reddit has been really focused on, you might get it in front of fewer people, but one of those people is going to take action.”

Can Reddit catch up to the competition? 

While Reddit’s projected $1 billion in ad sales is internally significant, it pales in comparison to its competitors. Pinterest cracked $3 billion in 2023, while LinkedIn neared $4 billion. Snapchat pushes past $4.5 billion annually. Reddit regularly has more monthly active users than all three of these apps, but pulls less than half of their ad revenue. 

Some of that may have to do with cultural caché. Goldman contends that the platform is “niche,” and that they struggle to turn infrequent visitors into long-term users. Reddit also has some sustained brand safety worries, with most online forums being stained by the mark of seedier platforms like 4chan. Many remember Reddit as the platform that spurred off the term “incel”—even if they’ve since taken the subreddit down. 

But most of the advertising gap has to do with timing. For years, Reddit’s ad programs were entirely self-serve. They only added display ads four years after the company’s founding, and added in-app ads two years after the app itself premiered. Relatively speaking, Reddit’s ad business is still nascent. “You’re not going to be able to [grow] 300% year-over-year, no matter how amazing your advertising is,” Goldman says.

But Reddit needs revenue, both to sustain the company and to keep the stock price up following their 2024 IPO. For this, they’re finding creative ways to bring in additional funds, like a sprawling, $60 million content licensing deal with Google. While Goldberg worries what will happen to Reddit’s stock price when these AI deals dry up, he recognizes their value. “The more they can do that, the less pressure they put on their ad business to grow,” he says.  

https://www.fastcompany.com/91258228/reddits-ad-business-is-expanding-but-not-fast-enough?partner=rss&utm_source=rss&utm_medium=feed&utm_campaign=rss+fastcompany&utm_content=rss