Reddit Spies Future Revenue from Search, Data, Shopping
May 8, 2024—Reddit stuck the landing in its first quarter as a public company. And AI is already having an impact on its business. Here's what the company said about current and future revenue sources in its very first earnings call:
AI data licensing revenue is adding up.
"Other" revenue (primarily from data licensing for AI) accounted for 8.4% of Reddit's $243 million in revenue in the quarter. Most of it came from Google, though execs said that they're exploring additional partnerships, hinting that both larger AI companies and smaller ones will be on the consideration list.
Humans are important (even if data is too).
Reddit's leadership emphasized the importance of the platform in the AI era, reminding investors that there is premium on content from real people. The company said it's trying to strike the right balance between being open and fair and respectful of its users.
Search and video are future revenue sources.
Reddit's on-platform search is a huge opportunity, with over 1 billion queries per month, executives said on the call, and the potential to monetize search pages in the future. The company is working to improve search functionality to unlock the value of past content, including answers, reviews and advice.
Video represents another revenue stream, but Reddit remains firm in its stance that video is just one of several content formats that Reddit users like. Images and text remain very important, so don't expect to see an Instagram-like shift to video on Redit.
Social commerce is coming.
The company is laying the groundwork for shopping on Reddit, testing dynamic product ads. It also recently launched "free-form" ads that look like Reddit posts. Purchase-related discussion is common on Reddit; the company says an average of 40% of new conversations are related to purchase decisions and product categories.
Source: Reddit
More on Reddit’s Q1 2024 in the investor letter here.
