Reddit COO Say Investments Are Paying Off

Key Concepts

• Advertising Revenue Growth
• Geographic Expansion (US & International)
• Active Advertiser Growth
• Lower Funnel Conversion Objectives
• Brand Advertising
• Reddit Answers
• Destination Search Experience
• Data Licensing
• Generative AI/Large Language Models (LLMs)
• International Expansion
• AI for Machine Translation
• Local Community Growth

Q2 Performance and Growth Drivers

Reddit experienced a strong Q2, exceeding expectations of investors and analysts. Key highlights include:

• Revenue Growth: Broad-based strength across all verticals.
• Geographic Growth: Both the U.S. and the rest of the world grew over 70%.
• User Growth: 21% increase in users.
• Advertising Revenue Growth: 84% year-over-year increase, considered "truly differentiated."
• Active Advertiser Growth: 50% year-over-year increase.
• Contribution of Ad Types: Both lower funnel conversion objective ads and brand advertising significantly contributed to the results.

This performance is attributed to investments made over the past couple of years to improve the value of each impression for marketers, particularly focusing on lower funnel objectives. The expansion of the sales team across verticals and geographies has also supported this growth.

Reddit Answers and Destination Search

Reddit is developing a distinctive destination search experience by integrating Reddit Answers with core Reddit search.

• Reddit Answers: Leverages real perspectives from real people, providing context and details beyond simple summaries. Examples include detailed reasons for recommending specific running shoes based on individual experiences (e.g., trail conditions, running distance).
• Integration with Core Search: Aims to create a more comprehensive search experience.
• Monetization Potential: Many search queries are naturally commercial, involving decision-making and resource allocation. Monetization will follow the growth in usage of the destination search.

Data Licensing and AI

Reddit has been exploring data licensing deals with generative AI and large language model (LLM) developers.

• Early Commercial Relationships: The first deals were established a year to a year and a half ago.
• Learnings and Openness: Reddit is open to conversations and learning from these experiences.
• Value of Reddit Data: The importance of Reddit's contribution to LLMs is becoming increasingly evident, with frequent citations and its role in providing unique perspectives.
• Focus on Internal Opportunities: Reddit is prioritizing building its own products around its extensive conversational data, such as Reddit Answers and search, and growing communities.
• Increasing Value: The value of Reddit and its conversations is increasing in the context of AI.

International Expansion

International markets are a significant growth driver for Reddit.

• Revenue Contribution: International revenue accounts for approximately 20% of total revenue.
• Growth Rate: International advertising revenue grew over 70% in the quarter.
• Key Regions: Europe and India are particularly active.
• AI for Machine Translation: Using AI to facilitate global conversations by removing language barriers.
• Local Community Growth: Partnerships in sports and entertainment are stimulating the growth of local communities (e.g., telenovelas in Brazil, football in Germany).
• Monetization Opportunity: User growth in these local communities creates further monetization opportunities.

Synthesis/Conclusion

Reddit's strong Q2 performance was driven by a combination of factors, including investments in advertising capabilities, geographic expansion, and growth in both user base and active advertisers. The development of Reddit Answers and the integration of search functionality represent a significant opportunity for future growth and monetization. While data licensing remains a consideration, Reddit is increasingly focused on leveraging its unique conversational data to build its own products and enhance user experience. International expansion, particularly in Europe and India, is also a key area of focus, with AI-powered translation and local community partnerships driving growth. The company is optimistic about its strategic direction and the increasing value of Reddit's content in the age of AI.