Reddit’s recent AI marketing tool has been driving widespread advertising growth. The company reported yesterday (July 31) that in the latest quarter ended June, social media companies’ revenues rose 78% year-on-year, with 93% of them coming from advertising. CEO Steve Huffman One major advertiser plans to showcase Reddit’s AI tools in Super Bowl ads next year, and another said the tools have discovered previously untapped customer segments.
New products that launched in June (Reddit Insights) track user engagement across posts and comments and conversation summary add-ons (incorporating real user comments into ads) have been enthusiastically accepted.
Reddit Chief Operating Officer Jen Wong rang an optimistic bell on yesterday’s revenue call. “We are happy to see their adoption and impact on them.” Wong added that Reddit’s advertising account number grew by 50% in the April-June quarter.
In addition to advertising, Reddit mainly received $35 million from AI license agreements, including a partnership with Google. The deal signed last year that allowed Google to use Reddit’s massive human-generated content archive to train its Gemini AI model. In return, Reddit gained access to the Google Vertex AI platform, which improves visibility of Reddit posts in Google search results.
Reddit has also been building its own AI-driven tools. Last year, it launched Reddit Answers, a search assistant that uses Vertex AI to summarize community discussions to answer user questions. By the end of June, Reddit’s answer had grown to 6 million users per week – more than a year ago.
This growth also helped Reddit better understand the depth of its content and the opportunities it provides. “With our own products, we’re seeing the corpus getting deeper and deeper, and I think we realized it even before we built the Reddit answer,” Hoffman said. “There is a huge opportunity to give users a broad and diverse perspective on subjective questions, which I think is an important category that users encounter on the internet.”
To make Reddit answers more important to the user experience, the company plans to replace its existing interest box with a dedicated Reddit answer search bar on the app’s homepage. “The purpose we will be building this year is to have a product that starts instant personalization, removing as many obstacles as possible, and allowing new users to start finding their own homes on Reddit,” Huffman said.
While Reddit’s AI tools and advertising business is achieving short-term success, some analysts remain cautious. Reddit’s reliance on Google could ultimately limit its growth potential, including its ability to attract new users, Redburn Atlantic warns.
At present, the platform’s user base is growing. At the end of June, Reddit had 110 million active users, a 21% increase from the same period last year.
