$RDDT Reddit Alternative Data Overview | TickerTrends.io

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Ticker: $RDDT
Sector: Social Media

Company Description: Reddit, Inc. operates a website that organizes digital communities. It organizes communities based on specific interests that enable users to engage in conversations by sharing experiences, submitting links, uploading images and videos, and replying to one another. The company was founded in 2005 and is headquartered in San Francisco, California. Reddit, Inc. operates as a subsidiary of Advance Publications, Inc.

Reddit’s Strategic Expansion: Licensing, AI Development, and Growing Advertiser Interest

Reddit, the popular social media platform known for its vibrant sub-communities and user-driven content, has been quietly yet significantly expanding its business operations in several compelling ways. Since the IPO, Reddit appears to be more focused on providing advertisers with more analytical tools to encourage advertising on the platform, a positive development for investors. They also are leveraging their massive amount of user-generated data with licensing deals. As the company continues to evolve from a simple forum to a major player in the tech and advertising industries, Reddit has been capitalizing on its unique position in the digital world. Here’s a closer look at the company’s recent strategic moves, including search improvements, licensing deals, AI development, and the increasing interest from advertisers.

Positive User Social Trends

Reddit has been at the forefront of identifying and shaping social trends. Reddit’s unique subreddits have inspired users to form niche connections with anything they are passionate about, and have a community of like-minded individuals surrounding them. This unique social media platform has continued to grow in popularity as people seek these niche communities. We see Website Traffic, Google Trend, and Mobile App trends all pointing towards continued user growth.

Lucrative Licensing Deals with Tech Giants

One of the most strategic moves by Reddit has been entering into licensing agreements with tech companies like Google. These deals allow companies to use Reddit’s extensive data trove to train their AI models. This is particularly valuable as Reddit’s data is rich with diverse, nuanced human interactions, making it a perfect dataset for developing more sophisticated and context-aware AI systems.
By licensing its data, Reddit not only opens up a significant revenue stream but also places itself at the center of AI research and development, influencing how machine learning models understand and process human language and social dynamics.

It is important to note that Reddit currently only has $804M in Trailing 12-Month Revenue, so an incremental $70-$100M/year from just this one deal is quite significant, especially because it presumably would cost them very little in Cost of Goods Sold to generate this revenue. Thus, the revenue would essentially all drop to the bottom line of their income statement, immediately growing profitability.

It is also very likely that Reddit can continue to strike lucrative deals like this with their massive set of user data.

Increasing Advertiser Interest

As Reddit continues to grow its user base, it’s becoming an increasingly attractive platform for advertisers. The platform’s unique community-driven content and highly engaged subreddits provide a fertile ground for targeted advertising. Advertisers are particularly drawn to Reddit’s ability to offer niche marketing opportunities that are not as readily available on other social platforms.

In preparation for its IPO a few months ago, Reddit unveiled a suite of new advertising tracking analytics on their “Reddit Pro” tab. Reddit Pro is a free suite of organic business analytics to help businesses engage with Reddit’s communities and conversations. Over time, we believe that the more tools and ROI analytics advertisers have on Reddit, the more they would be comfortable with advertising in greater quantities. This Reddit Pro feature just launched within the last few months.

Moreover, Reddit’s recent public listing has only heightened interest from advertisers. With more transparency and the potential for increased regulatory scrutiny comes a greater confidence in the platform’s stability and longevity, making it a more appealing option for long-term advertising partnerships.

Below, we track some Website Traffic trends for some of Reddit’s advertiser/business websites.

Although there is more year-over-year growth in the Reddit platform themselves, tools like Reddit Pro and existing advertisers paying more for ads over time is a likelihood as long as the user base continues to expand.

Strategic Monetization and Future Prospects

Around the timeframe of the Reddit IPO, the company also announced a different ad format altogether, called “Free-form ads”. These types of ads are designed to feel similar to normal user content. The user may not even know they are scrolling through an ad! Ads that look like a normal Reddit post are likely to receive a lot more engagement and click-through than a traditional ad, a win-win for users who see better quality advertising and advertisers who see a faster monetization. This creates a positive feedback loop for advertisers on the platform, encouraging them to spend even more dollars on advertisements.

Reddit’s monetization strategies appear to be well-timed and strategically sound. By diversifying its revenue streams through data licensing, enhancing its platform capabilities, and attracting more advertisers, Reddit is not only increasing its profitability but also solidifying its position in the competitive social media landscape.

As the company continues to make these calculated moves, it will be interesting to see how it leverages its vast data and engaged user base for further growth and innovation. Whether through further AI advancements or new advertising analytics tools, Reddit seems poised for a promising future.

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