What Reddit’s S-1 reveals about its ads business

In late February, Reddit filed its official registration with the SEC ahead of its bid to go public, revealing new details about its ambitions as an ad platform.

“Advertising is our first business, and advertisers of all sizes have discovered that Reddit is a great place to find high-intent customers that they aren’t able to reach elsewhere,” co-founder Steve Huffman wrote in a letter contained in the filing. With that said, he added, “advertising on Reddit is rapidly evolving, and we are still in the early phases of growing this business.”

By the numbers:

• Ninety-eight percent of Reddit’s 2023 revenue of $804 million came from its ads business.
• In Q4 2023, the platform counted 267.5 million weekly active users globally, 131 million of whom are in the US. (For comparison, TikTok shared last March that it had reached 150 million monthly active users in the US.) In its S-1, the company also described two other revenue opportunities, including licensing its data, like its recently announced deal with Google, as well as commerce opportunities, although the company shared few details about this in the filing.
• But Reddit, which has never turned a profit, posted a net loss of nearly $91 million last year—perhaps surprising for a company that’s been around since 2005.

Reddit’s been selling ads since around the time that Sean Paul’s “Temperature” burned up the charts, but, according to its S-1 filing, it didn’t start to “more meaningfully” invest in its own ad business until 2018.

Pulse check

So how is Reddit’s advertising business doing in the eyes of marketers and experts? Buyers and analysts told Marketing Brew that they see the platform as nice-to-have, but that it is not an essential part of their media plans, like Meta or Google are.

“They’ve always been solidly in the second or third tier of social networks,” alongside Snap, Pinterest, and X, Brian Wieser, a former GroupM exec who’s now author of the industry newsletter Madison and Wall, told Marketing Brew. “They’re all relatively small.”

When it comes to its advertising business, Reddit is also a little top-heavy: Just 10 advertisers represented more than a quarter of Reddit’s ad revenue in 2022 and 2023, according to the filing—“a huge concentration,” Wieser said.

Carly Carson, head of integrated media at PMG, told Marketing Brew that the platform has “a ways to go,” especially compared to some of the more dominant platforms.

“They’re going against the strongest machine learning algorithms that exist, going head to head with a Meta, a YouTube, even a Pinterest,” Carson said.

Pros and cons

While Reddit is a relatively cost-efficient platform, it’s struggled to drive ad spend results compared with Meta or Google, multiple buyers told us.

“Based on some of the campaigns we ran, we haven’t seen a lot of really strong down-funnel results,” like conversions or sales, Ryan Schuster, director of paid search at the agency Exverus, told Marketing Brew.

A few years ago, while in a former role, Avi Ben-Zvi, now GM of North America at the media agency Winclap, said he brokered a deal with Reddit in part because of a need to diversify on social due to Meta’s saturation and prices at the time. Page takeovers then, in 2021 or 2022, were being sold for anywhere between $7,500 to $20,000 a day, he said, which was less expensive than other platforms and more accessible for smaller businesses. (In addition to takeovers, Reddit offers advertisers traditional in-feed ads, keyword “targeting,” and contextual advertising.)

Audiences on Reddit can be targeted contextually, Ben-Zvi said.

“You can target people based on those exact communities, or the broader interest of those communities, from information that they've offered,” Ben-Zvi told us.

Reddit explicitly states in its S-1 that its advertising is built around “context and user interest,” a category that’s expected to grow as targeting signals continue to disappear, whether because of a loss of third-party cookies or privacy legislation.

Those audiences may be as broad as r/food, which has 24 million members, or as specialized as r/edmproduction, which has 752,000 members. These are also more engaged audiences than on other platforms, buyers told us.

“People are going not just to necessarily read but to learn something or be entertained by something or to find something out, and I think that is appealing to advertisers,” Carson said.

Hills to climb

Reddit—like many other social networks—still faces brand safety concerns, and has grappled with moderating hate speech and cracking down on inappropriate content on its forums. In 2022, it also announced a partnership with the brand safety company DoubleVerify. That same year, though, Marketing Brew found that Reddit had categorized subreddits in a way that appeared to reflect inconsistent advertising and brand safety standards.

“It’s one of the first things we’ll ask a Reddit rep,” Schuster, who noted that his agency temporarily paused Reddit campaigns when Reddit users protested the platform’s decision to charge for access to its API last summer, said. “How can I ensure these ads are showing in a brand-safe environment?”

“Honestly,” he added, “it’s never going to be bulletproof—like any platform, really.”