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The Rundown: Everything you need to know about Reddit as the platform goes public

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Reddit finally went public on Wednesday and achieved its long-awaited IPO, but its advertising game hasn’t exactly shifted into high gear. It’s still seen as this quirky niche platform to most people including advertisers, but that’s OK — or at least it should be. 

Advertisers aren’t exactly turning up their noses at the idea. To them, having a niche platform with broad appeal sounds like a pretty neat addition to the roster of scaled platforms they already buy from. Even so, based on conversations Digiday has had with numerous advertisers over the past 18 months, it’s clear they still have a lot to wrap their heads around when it comes to Reddit.

For starters, there’s targeting; it’s not done on the same behavioral data other platforms use. Instead, advertisers use contextual and interest-based signals that come from the users within its communities.

Feeling a bit puzzled already? Don’t sweat it — Digiday’s got your back. Check out our rundown on everything you need to know about Reddit.

So what is Reddit?

Reddit is a text-based social platform full of communities — more than 100,000 of them to be exact, which are known as subreddits, that each follow their own rules and culture. 

Communities (called subreddits) can be anything from breaking news, fandom, lifehacks, sports — you name it, there’s probably a subreddit for it. Think of it as a platform with thousands of message boards or forums. But the key difference between Reddit and other social platforms is that users remain anonymous.

OK, why is that different to other platforms?

Unlike other social media platforms, Reddit gives advertisers the opportunity to target what it believes to be high-intent users (those who have a strong intention to purchase) who might be challenging to reach elsewhere. According to comScore, 41% of U.S. users aged 18 and above belong to the 18 to 34 demographic, with 50% being male and 64% having a household annual income exceeding $75,000.

What’s more, a significant proportion of Reddit users are not active on other major social media platforms. For instance, over 50% of Reddit users do not engage with platforms like Pinterest, Snapchat, and X.

Does that mean Reddit is like an amalgamation of every other social platform out there?

Pretty much. Think of it like this: Reddit encompasses information, which is what people typically use Google, Amazon, YouTube, Wikipedia and even X for — and Reddit itself saw as much as 35 million daily search queries in December 2023.

The platform is also used as a form of entertainment, which is typically what most people associate with Meta, YouTube, Snap and TikTok.

Furthermore, many of its communities revolve around users’ passions and hobbies, mirroring the dynamics of Facebook groups, Discord, and even Pinterest, although the latter leans more toward visual content.

And let’s not forget the core of what Reddit is: peer to peer commerce and recommendations, which is what people tend to rely on the likes of Facebook Marketplace, Nextdoor, and Craigslist for.

How do people actually use Reddit? 

A user (or redditor) makes a post to start the conversation. To give an example of how many exist on the platform, as of December 2023, Reddit hosted more than one billion posts and more than 16 billion comments.

And while most posts have often been text based, they can also include pictures, and even video has been growing on the platform, as a nod to the increased interest in the format.

But it doesn’t just stop at posts. Redditors can interact by leaving a comment, which in turn builds a thread and a dialogue, and/or by voting on those comments.  

Is that how Reddit users play a part in determining the relevancy of content?

Yes. Redditors can choose to upvote or downvote content. An upvote means redditors think that post is positively contributing to a community, while a downvote indicates that the content is viewed so poorly that it shouldn’t even be part of the conversation. The more upvotes a user receives, the more karma they receive — effectively a public score of how much their contributions mean to the community.

What about moderators?

Reddit has always prided itself on being community-first and part of what distinguishes it from other information-based and social media platforms is that some redditors choose to moderate and curate content to keep it on track.

Isn’t that a bit like internet policing?

Sort of. These moderators are more like community stewards on the platform. They volunteer their free time for the role, and as part of that, they create rules, start conversations and essentially ensure that it remains on-topic and a safe space for users to interact. As such, if a redditor breaks those rules, moderators have the power to remove content either manually or with automated tools.

Given the size of Reddit communities, subreddits often have more than one moderator, and as of December 2023, there were an average of 60,000 daily active moderators. So while most social media platforms only rely on their teams of content moderators, a lot of the heavy lifting on Reddit is done by the users themselves.

How big is Reddit?

Reddit’s S-1 form highlighted that the platform currently has a total of 73 million daily active users (DAUs).

But let’s break that down. According to both company reports and analysis by New Street Research, last year the company observed about 31 million U.S. DAUs and 34 million DAUs for the rest of the world.

Projections suggest that the company will increase these to 44 million U.S. DAUs and 43 million DAUs for the rest of the world in 2024, and 53 million U.S. DAUs and 52 million DAUs for the rest of the world in 2025.

So, while the platform is indeed growing, it’s not experiencing significant or rapid growth compared to its peers.

OK, so how does Reddit’s size compare to other platforms?

During the last earnings window for the social platforms last month, Meta recorded 3.19 billion daily active users across its family of apps, Snap highlighted its 414 million DAUs and Pinterest claimed having 498 million monthly active users (MAUs). 

And even though TikTok and X are both private companies, Statista recorded TikTok having 1.6 billion monthly active users as of January 2024, while X CEO Linda Yaccarino suggested at The Code Conference last September that the platform has 225 million DAUs and 540 million MAUs — though actual figures have yet to be seen.

Simply put, when compared to its public (and private) platform counterparts, Reddit operates in a different league altogether.

How is Reddit going to grow its user base? 

One way the business plans to tackle this is by getting more users to create an account and actually log in. In other words, get them to convert from logged-out users (those who might land on a subreddit from a search engine, but don’t necessarily have an account), to logged-in users.

Why does this matter? 

Logged-out users spend less time on the site, and as a result they don’t monetize at the same rate as logged-in users. By comparison, logged-in users are more engaged, and spend far more time on the platform overall.

Closing this gap so there’s fewer logged-out users is a big opportunity for Reddit. As of December 2023, logged-out users comprised 75% of the incremental users added since July 2023, according to New Street Research.

What does all of this do for Reddit’s share of the ad market? 

Right now, it’s a bit top heavy, given that its top 10 advertisers represented 26% of the platform’s total revenue last year. That said, New Street does expect that if they attract more business from SMBs and retail, this will naturally improve its diversification. 

Does Reddit have plans to diversify those ad revenue streams? 

When Digiday caught up with Reddit’s COO Jen Wong and evp of business marketing and growth Jim Squires earlier this year, they mentioned that 2023 taught them a lot about the needs of the SMBs, as they go after that market.

Not to mention, last year saw the platform post job postings for commerce-related roles, indicating that lower funnel is a focus area for the business moving forward.

Added to that, its S-1 form noted exploring ways for redditors to make money on the platform via a contributor program, which in turn incentivizes those users to continue creating content and keep the platform chugging along.

What does advertising on Reddit look like?

Reddit’s ad model is different from its platform peers because it relies on contextual and interest-based signals that come from the users within each subreddit. 

Of course, that comes with its own limitations.

For Reddit it means that there’s more of a gamble. Advertisers are essentially relying on the chance that redditors might be interested in buying a product, such as camping for example, based on the fact that they’re in a subreddit which is talking about camping as an activity.

Compared to its peers, this method is considered less accurate and efficient, because on other platforms, they’re targeting individuals who have shown actual intent about buying a product, such as by leaving a product in a basket on a store’s website, or by regularly searching for a specific item.

If those plans to grow audiences and advertisers alike gain traction this year, what impact will that have on ad revenue in 2024?

Should it all go according to plan, New Street Research estimates Reddit’s advertising revenue will grow 32% this year, and a further 21% in 2025. Naturally, these projections hinge on the platform being able to accelerate DAU growth for the first half of 2024, and broaden its monetization avenues.

What has Reddit’s path to monetization looked like so far?

Reddit initially started selling ads in 2006, but didn’t properly start investing in ad tech and its related tools for another 12 years, in 2018.

From 2018 to 2019, the company installed its ad server, mobile ads, CPM/CPC/CPV bidding, an app install objective, interest targeting, interest/community lookalikes, Reddit conversion pixel and API, operating system targeting, as well as community category/front page takeovers.

Then during 2020, the company added its pixel retargeting, third-party brand and conversion measurement as well as promoted its Ask Me Anything (AMA) format.

A year later saw Reddit include AAPL SkAdNetwork SDK, bid recommendation, carousel ads, conversation placement as well as advanced tooling.

Then in 2022, the platform included engagement retargeting, custom audience V2, pixel onboarding and troubleshooting, its conversion API, brand lift, video spotlight and mobile app install ad format along with its ads API partner network.

And last year, 2023, Reddit introduced automated ad creative, contextual/behavioral keyword targeting, maximize conversions/installs, promoted community post and use content, lead generation, a catalog manager, plus product ads, as well as business tools and an official badge.

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