Photo Source: Brett Jordan
Reddit’s fourth-quarter revenue skyrocketed by 71%, reaching $428 million, as the platform capitalised on its expanding advertising business. New offerings, improved ad targeting, and enhanced analytics tools all contributed to this growth.
With daily active users climbing to 101.7 million, the bulk of this increase came from international markets, signalling a shift away from the U.S. user base. However, Reddit’s success may be tempered by challenges, including the declining U.S. user numbers and risks tied to Google’s AI-powered search changes.
Reddit’s Expanding Audience and Its Influence
Reddit may be smaller than other major social platforms, but it still plays a significant role in consumer decision-making, with 40% of internet users trusting its recommendations more than expert reviews,
“Which seems high, but the point is Reddit provides real, human, knowledgeable insight into a range of topics, including products, and that can make it a valuable outreach tool for brands, when used right,” observed Andrew Hutchinson of Social Media Today.
Reddit saw its U.S. user base decline in Q4, a concerning trend given that the platform’s ad revenue is still heavily reliant on the U.S. market, despite this influence, to continue growing, international expansion will be key.
Ad Business Expansion Fuels Revenue Growth
Reddit has seen a sharp increase in revenue, driven by a series of new advertising features designed to attract more brands. The Reddit Pro dashboard is at the forefront, offering marketers detailed insights into trending discussions and ad performance, which has resulted in a 12% rise in brand content creation.
“Reddit Pro provides data on your post and comment performance, while also giving you easy access to trend insights, so you can tap into the latest, most relevant discussions in the app,” the platform stated.
The introduction of the “Ask Me Anything” (AMA) ad format and AI-powered targeting improvements have further fuelled this growth.
Global Expansion and Platform Enhancements
Reddit’s international user base experienced substantial growth, driven in part by enhanced language translation tools. Machine translation played a key role, contributing to 40-50% of the platform’s international growth.
“We made meaningful progress improving our ML models to make the home feed and search results more relevant and translating content for global audiences with Machine Translation (‘MT’)… MT drove between 40-50% of international user growth in Q4 and our international playbook is driving community engagement in our focus countries,” Reddit explained.
This expansion highlights the growing importance of international markets in Reddit’s long-term strategy, though further investments in localised content and regional ad offerings will be needed to maintain this momentum.
Google Search Volatility and Potential Risks
Reddit faced challenges in Q4 with fluctuations in search traffic caused by a Google Search algorithm update.
The company acknowledged the volatility but reassured that traffic has since recovered. “Later in Q4, we experienced some volatility with Google Search triggered by a periodic algorithm change, but traffic from search has recovered so far in Q1, and we’ve regained momentum,” Reddit
Users may access Reddit content without actually visiting the platform, with Reddit discussions being integrated directly into Google’s AI results,.
“That kind of seems to suggest that Google is restricting searches that include the term ‘Reddit,’ and it’s worth noting that Google does have a deal in place to incorporate Reddit data into its Search and AI results,” said Andrew Hutchinson.