For the first time in its almost 20-year history, reddit has reported net profits in its third quarter earnings report. With a profit of $29.9 million and a turnover of $348.4 million, the platform managed to surpass a milestone it had been pursuing for decades, driven in large part by a considerable increase in its user base.
According to the company, In recent months, there have been days in which the number of daily users exceeded the 100 million markwith an average of 97.2 million users, which represents an increase of 47% compared to the previous year.
User growth and increase in advertising revenue
The impressive increase in Reddit’s user base has been attributed to several innovative strategies, including the implementation of an artificial intelligence (AI)-powered translation feature.
Since this feature was introduced to allow French translations, the company has expanded its reach to Spanish, Portuguese, Italian and German. Now, they plan to bring this tool to more than 30 countries by 2025. According to Steve Huffman, CEO of Reddit, this expansion has been key to attracting new users and keeping them active on the platform.
This increase in users has also had a direct impact on the platform’s advertising revenue.. Reddit reported that its advertising division generated $315.1 million dollarswhile the rest of its revenue, which includes data licensing deals with companies like Google and OpenAI, totaled an additional $33.2 million.
These agreements, in which Reddit allows these companies to use their data to train AI modelshave represented a new income stream for the company.
Monetization strategies: advertising, data licenses and subscriptions
To achieve profitability, Reddit has implemented various monetization strategies throughout the year. One of the main ones has been the signing of advertising contracts with professional sports leagues, which has increased the presence of ads within its platform. Additionally, Reddit has improved its popular post format, such as “Ask Me Anything” (AMA), to attract both users and sponsors.
Likewise, the company has tightened its policies against scrapingor unauthorized data extraction, which some third-party bots performed to feed their own algorithms or AI models. By blocking these practices, Reddit has managed to protect the exclusivity of its data and give greater value to licensing agreements.
Regarding subscriptions, CEO Steve Huffman has raised the possibility of allowing the creation of paid subredditswhere users could have exclusive access to content of interest. This move could further diversify the company’s revenue and take advantage of the large base of active users it already has.
Changes to Reddit’s growth strategy
For Reddit, 2024 has been a year of consolidation and significant changes that seek to improve the user experience. One of the biggest advances has been the optimization of its internal search engine, which is now more intuitive and easier to use. According to Huffman, the goal is to make the platform more accessible and relevant to users, something that has also contributed to the increase in its daily use.
Reddit’s influence has expanded to such an extent that, in 2024, the word “Reddit” was the sixth most searched word on Google in the United Statesreflecting the popularity of the platform as a source of answers, advice and topical communities. This notoriety has been a key factor in attracting both new users and advertisers interested in benefiting from the diversity of subcultures and audience niches found on Reddit.
From loss to profitability: Reddit’s path in the stock market
Reddit, which went public earlier this year, faced significant losses in its first quarters on the market. In the first quarter after its IPO, the platform reported a loss of $575 millionalthough this deficit was reduced to $10 million last quarter. With an optimized cost structure and increased advertising and licensing revenue, Reddit has finally managed to reverse this trend, reaching a long-awaited financial milestone.
Looking to the future, Reddit plans to continue expanding its translation function and improve its search engine to increase its user base and remain profitable. Additionally, the management team is looking to explore new monetization opportunities, including paid subreddits and the potential expansion of data deals with other AI companies.
Reddit is now in a unique position within the digital landscape, where its communities and authentic content give it a competitive advantage over other social networks.
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