Company Profile
The foundind of Reddit
In June 2005, Reddit (ticker: RDDT) was founded in Medford, Massachusetts by two University of Virginia students, Alexis Ohanian (husband of tennis star Serena Williams) and Steve Hoffman. In November 2005 Christopher Slowe joined the team.
Between November 2005 and January 2006, Reddit merged with Aaron Swartz’s company Infogami, making Swartz a co-owner of the resulting parent company, Not A Bug. Condé Nast, owner of Wired magazine, acquired Reddit on October 31, 2006, and the team moved to San Francisco. In January 2007, Swartz was fired.
Services provided
Reddit is basically an electronic bulletin board system that aggregates posts from registered users. After registering and logging in, users can post and leave comments.
Famous Investors
Y Combinator initially funded the startup. In addition, it has raised multiple rounds of funding from A16Z, Tencent, well-known rapper Snoop Dogg, etc.
In October 2014, Reddit launched a new group of founders, moderated by Sam Altman and including Marc Andreessen, Peter Thiel, Ron Conway, Calvin Cordoza Broadus Jr., and Sheila Leto. Received $50 million in a round of investment. This brings Reddit’s valuation to $500 million.
In February 2019, a $300 million round of financing led by Tencent valued the company at $3 billion. In 2021, Fidelity Investments provided financing to the company.
Initial Public Offering
On March 21, 2024, Reddit went public on the New York Stock Exchange with the stock trading code RDDT.
Current operation status
Successful evolution
As the world’s oldest community, news website and content aggregation platform, Reddit’s design is actually very similar to Tieba 20 years ago, with everything from hot news headlines to various niche topics. While other social media platforms focus on binding users with social relationships, Reddit has chosen a more difficult path – creating a unique sense of belonging based on interest communities that is difficult for other platforms to replicate.
What’s interesting is that, nearly 20 years after its founding, Reddit seems to be truly entering its golden age. Google Trends data shows that Reddit searches continue to rise, compared to the fluctuating trends of other competing searches.
Business metrics
Reddit is home to a host of the most popular message boards, and overall it is one of the most visited sites on the internet. In fact, in the most recent quarter (three months ending September 30), Reddit reported more than 97 million daily active unique users (DAUq), a 47% year-over-year growth.
As of August 2024, according to data provided by Similarweb, Reddit is the ninth most visited website in the world. Reddit is currently the fifth largest website in the United States, with traffic second only to Google, YouTube, Facebook and Amazon, and 330 million monthly active users.
Business Model
Like other social media platforms, Reddit’s main source of profit is advertising. In addition, it has also explored user paid subscriptions, API licensing fees and other methods.
Advertising accounts for the largest portion of Reddit’s revenue, but the company didn’t launch an automated advertising platform until 2020, 15 years after its founding. Reddit sells ads in two main ways: Providing hosting services to large advertisers. Advertisers using Reddit Ads have access to a dedicated Reddit sales team, full suite of tools, and platform; an auction-based system. Advertisers bid using a CPC model, and the company with the highest bid wins the better placement.
Compared to other social platforms, Reddit advertising is relatively cheap. This is mainly due to the fact that Reddit has too little user information and low positioning quality, while platforms such as Instagram and Facebook collect more detailed user information. Its advertising platform is relatively new and the ecosystem is not yet saturated, so its competitiveness is relatively weak.
In short, Reddit has huge potential for growth. Advertisers love it because they can micro-target ads to specific interest groups on their platform. In turn, Reddit could carve out a meaningful and profitable niche in the rapidly growing digital advertising ecosystem.
Important Customers
In February 2024, Reddit announced a partnership with Google worth approximately $60 million per year, licensing its real-time user content to train Google’s artificial intelligence models. The partnership also gives Reddit access to Google’s “Vertex AI” service, which will help improve search results on Reddit.
On May 16, 2024, Reddit announced an agreement with OpenAI that would allow OpenAI to access the Reddit API to train its models, and Reddit would gain access to certain AI tools for moderators and users.
2024 Q3 Financial Result
Additionally, the company is increasingly focusing on improving its financial fundamentals. Third-quarter revenue hit a record high of $348 million, up 68% from the same period last year. Likewise, the company reported a small but symbolic profit of $29 million.
After Reddit reported third-quarter results in October 2024, its stock price rose 42% and recorded its first quarterly profit. The surge is partly due to increased revenue from AI content licensing and advertising, as well as approaching 100 million active users.
A promising future
AI and traffic lead to rapid growth in users
In his Q3 2024 shareholder letter, CEO Steve Huffman cited the new AI translation feature as the main driver of the company’s latest performance growth.
The rapid growth of Reddit’s user base is inseparable from the contribution of AI. Previously, most of its users and ads were served in English, primarily targeting users in the United States. But it has been using AI to improve its machine learning capabilities and translate website content into other languages, which has greatly helped its development outside the United States.
In 2022, Reddit was still working to expand its user base, with the annual growth rate of daily active users being only in the single digits that year, and by the second quarter of 2023, that figure was only 7%. But since then, growth has begun to accelerate, and as of Q2 2024, its DAU has surged by more than 50% year-on-year. Meanwhile, Reddit has more than 365 million users worldwide. Two years ago, the number was less than 209 million.
Enhanced advertising monetization
This inefficiency in monetization has historically been due to the Reddit platform’s inability to generate a high return on investment for advertisers. Therefore, improving the return on advertising investment and attracting more advertisers to join have been its key goals since its listing. In the third quarter, Reddit announced that many new high-profile customers had begun using Reddit Pro, the company’s market intelligence and advertising platform for enterprises, including key customers such as the NFL (National Football League) and MLB (Major League Baseball).
The combination of advertiser diversification, use of Reddit Pro, and more efficient ad load resulted in a 56% year-over-year increase in advertising revenue in Q3 2024, which is a key advancement that the market is expecting and a core factor that will drive Reddit’s continued growth in the future.
Decades of accumulated data is a gold mine
Given that Reddit is a massive repository of high-quality, easily accessible real-user text content, it has a huge opportunity to grow in the data licensing space. For AI training, this is a gold mine. In May this year, Reddit signed an agreement with OpenAI, allowing the latter to access Reddit content to train its AI model. Reddit shares surged 15% following the news.
The third quarter financial report of 2024 showed that Reddit’s net profit for the quarter reached US$29.9 million, far exceeding the loss of US$7.4 million in the same period last year. Reddit’s stock price soared 40% the next day due to better than expected results.
The increase in net profit is obviously inseparable from the many structural reforms implemented by Reddit’s management. In addition to continuing to improve its traffic monetization capabilities, the company is also seeking a number of new sources of revenue, including content licensing agreements with Google and OpenAI (allowing the two tech giants to train AI models based on user content), as well as other data licensing partnerships.
Capital market Performance
Market Cap
As of December 13, 2024, Reddit’s market value is US$30.31 billion, making it a mid-sized listed company.
Price-to-Earnings Ratio
As of December 13, 2024, Reddit’s P/E ratio is 0 as EPS is still negative.
Stock price performance
As of December 13, 2024, Reddit stock:
- From the beginning of 2024 to December 13, 2024, it increased by 242.29%.
- Since the company went public, it has risen by a total of 275.33% (please note that Reddit went public in March 2024).
Risk
Reddit’s fourth-quarter 2024 results already provided a clear sign of this. The company’s stock price has fallen sharply since 2025 due to a significant slowdown in user growth. Reddit’s user growth has hit a bottleneck due to substantial changes in Google’s algorithm. In the past few years, Google has accounted for 50% of Reddit’s daily traffic.
A large part of Reddit’s user growth and the revenue it earns from its users is a gift from Google. But Google’s algorithm can change at any time, which will directly determine Reddit’s traffic, and thus the fate of Reddit.
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