Reddit is positioning itself to take advantage of several trends to maximize their ad revenue. Reddit’s user base is particularly young compared to other social networks; 87% of their users are under the age of 35 (Fisher 2019). This makes the platform particularly interesting to marketers trying to reach millennials. As you can see in the graphic above, in spite of having nearly as many monthly active users as Twitter, Reddit hasn’t done as good of a job of monetizing those users. However, Reddit is in a great position to maximize their ad revenue, perhaps by avoiding the data privacy implications that have plagued Facebook, Google, and Amazon’s ad businesses over the last year.
In a recent round of fundraising, they raised $300 million at a $3 billion dollar valuation (Fisher 2019). Over the past year, they have worked on regulating hate speech, piracy, and harassment. These problems have plagued Reddit for years and have made brands less willing to advertise on the platform. Their site has been redesigned to incorporate more video. Since the design was implemented, video posts have grown by 50% (Fisher 2019). Reddit claims their beta video advertisers are seeing better brand favorability and conversions than industry averages for video advertising (Cassis 2018).
Because of privacy concerns, more people are using messaging and community-based apps than social media. Facebook is working on ways to monetize Messenger and What’sApp as users are spending more time on those platforms (Fisher 2019). Reddit can capitalize on this shift by making their platform more accessible to new users. Formats like “Stories” and “Moments” are appearing across all social networks, providing a respite from endless scrolling through feeds. These formats pioneered by Snapchat are promoting material that is relevant and personal to users. Reddit users have already encountered video ads from beta advertisers Audi, Nintendo, and Netflix in some subreddits (Cassis 2018). Recently, Kamala Harris, Toyota, and Charles Schwab have turned to Reddit to reach voters and consumers (Boorstin 2019). These ads feel much more relevant because they are aligned with user’s interests and less intrusive because they fit in with the platform design.
This shift towards a “Story” format means marketers will have to think about the ways that short, ephemeral video can be produced and released quickly without sacrificing the quality of the message. Instead of planning for a campaign that can stand the test of time, we will have to think about ways that we can produce more timely, relevant, and authentic messaging for smaller groups, rather than for a mass audience (Fisher 2019).
Public perception of tech companies has also turned over the last year; now 55% of American’s don’t believe the government will do enough to regulate tech companies (Hart 2018). A platform like Reddit could fly under the radar of such regulations since their platform isn’t known for stalking users around the internet or tracking user’s location data through a mobile device in the same way as Google and Facebook. Reddit’s CEO Steve Huffman said in an interview with CNBC, “When we are talking about competing for ad dollars, of course we are talking about Facebook and Google, who take up the vast majority of ad spend.” (Boorstin 2019) Last week, Germany took steps to stop Facebook from forcing its users to comply with the broad data collection Facebook has become infamous for. It’s an interesting moment for data privacy, and 2019 feels like a year when meaningful regulation may occur.
Reddit could gain a lot by becoming a platform that is “a friendly home for users and brands alike.” (Boorstin 2019) Its young user base could provide years of potential revenue. If Reddit takes this moment to clean up the platform, re-imagine how marketers can target consumers without being intrusive, and build on the number of users who come to them for news while controlling misinformation, they stand to become a much larger player in online content.
- Boorstin, Julia. “Reddit Raised $300 Million at a $3 Billion Valuation – Now It’s Ready to Take on Facebook and Google.” CNBC, CNBC, 11 Feb. 2019, www.cnbc.com/2019/02/11/reddit-raises-300-million-at-3-billion-valuation.html.
- Cassis, Christine. “Video on Reddit.” UpVoted, Reddit, 2 Oct. 2018, redditblog.com/2018/10/02/video-on-reddit/?utm_source=newsletter&utm_medium=email&utm_campaign=sendto_newslettertest&stream=top#_ga=2.218223449.1599358058.1550264344-1454396949.1536595130.
- Fischer, Sara. “Reddit’s Rising Popularity as a News Platform.” Axios, 11 Sept. 2018, www.axios.com/reddit-rising-popularity-news-twitter-facebook-2a979468-0ab1-4851-bd89-f4c2fa01af6e.html.
- Fischer, Sara. “Reddit Raises $300 Million, Is Now Valued at $3 Billion.” Axios, 12 Feb. 2019, www.axios.com/reddits-exponential-valuation-17295eb2-28e5-47bf-a2db-caa5d488e3af.html.
Fischer, Sara. “People Are Using Private, Group-Based Platforms as Privacy Concerns Mount.” Axios, 12 Feb. 2019, www.axios.com/privacy-concerns-push-people-to-private-group-platforms-f8561226-4cb4-4def-b11a-031edf590dba.html.
- Hart, Kim. “Tech Privacy Regulations Are No Longer a Pipe Dream.” Axios, 26 Dec. 2018, www.axios.com/privacy-regulations-no-longer-pipe-dream-3b1691eb-9614-400e-84c1-67095a61b385.html.