Reddit’s Focus on Partnerships, Dynamic Product Ads Drive Surge in Ad Revenue, Daily Users

Reddit, the digital forum renowned for its diverse user-generated content, is advancing its presence in the advertising sector through a strategic focus on its community dynamics. Its second-quarter results show the company’s digital advertising strategy is enhancing revenue growth and transforming brand engagement practices on social media.

During the second quarter, Reddit reported a surge in both user engagement and ad revenue, the latter rising 41% year over year, to $253.1 million. The platform’s user base soared to more than 342 million active users, with daily active users reaching 91 million—an increase of more than 50% year over year.

This surge is attributed to the growing appeal of Reddit’s varied content and its role as a trusted source of information and community interaction. With user numbers increasing, company officials are evolving their digital advertising strategies.

Reddit COO Jen Wong noted during the earnings call the growth reflects not only a recovery in the digital ad market, but also the company’s strategic enhancements in its advertising technology and market reach. Reddit has made significant strides in scaling and diversifying its ad offerings, she noted. The platform has broadened its partnerships, expanded into new verticals, and enhanced its ad technology to drive efficiency and performance.

“We continue to diversify our business across channels, verticals and geographies,” Wong explained. “The global scale channel, including mid-market and SMB, grew over 50% year over year, driven by both new advertiser activation and by deepening existing relationships. Strength in our verticals was led by retail, pharma and financial services, which each grew over 50% year over year.”

Performance objectives, Wong said, “drove more than half of our revenue in the quarter, and we more than doubled the number of clicks again as we continue to enhance the lower funnel capabilities of our full funnel advertising business.”

Reddit is ramping up its ad revenue by partnering with top sports leagues, including the NFL, NBA, MLB, NASCAR, and PGA Tour. The deals will enhance Reddit’s sports content with exclusive video highlights, player AMAs, and behind-the-scenes footage. This move aligns with Reddit’s strategy to attract advertisers by leveraging its growing sports communities, which increased 26% year over year.

Reddit’s recent test with the NFL saw increases in brand metrics, showcasing the platform’s potential for targeted ad campaigns. Since going public in March, Reddit has pursued partnerships, including a May deal with OpenAI. The agreement allows OpenAI to use Reddit content for training its AI models, while OpenAI will also become a Reddit advertiser.

This collaboration aims to enhance Reddit’s ad offerings by incorporating advanced AI-driven tools and models. “We are adding AI foundational models to our ad stack to help optimize creative,” Wong explained.

Reddit’s advertising strategy features the introduction of dynamic product ads (DPA), which aim to provide highly personalized ad experiences. “Dynamic product ads operate with their own objectives, models and workflows,” Wong noted. These ads manage everything from catalog ingestion to detailed measurement and targeted feedback. Early adopters have reported a return on ad spend nearly twice that of other conversion campaigns.

“Our goal for this year is to test with a handful of partners and really build the foundations of DPA,” she added, with expectations for DPA to contribute to revenue by 2025.