“We’re sharing [daily active users] for the first time as a more accurate reflection of our user growth and to be more in-line with industry reporting,” said Jen Wong, chief operating officer of Reddit. “We’re focused on daily usership and increasing this number as we continue to grow our community and scale our advertising business.”
Reddit’s number pales compared with that of Facebook Inc., which said it averaged 1.82 billion daily active users on its namesake social network in September, and is less than a third that of Twitter Inc., which said it averaged 187 million monetizable daily users in the third quarter.
But Reddit said growth in the ranks of its users has coincided with growth in its advertising business. The company’s ad revenue totaled more than $100 million in 2019 and is on track to rise by more than 70% this year, according to Ms. Wong.
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A throttling of ad spending caused by the coronavirus pandemic hurt Reddit’s business in the second quarter—when year-over-year direct-ad revenue growth fell to 27%, from 40% in the first quarter—but it has since rebounded, growing by 83% year-over-year in the third quarter, Ms. Wong said. Direct ad revenues are based on deals conducted by Reddit’s sales team and don’t include revenues from advertising bought and sold through outside automated platforms.
“Like with everybody in the ads business, it’s been a volatile year,” she said, adding that while Reddit isn’t profitable it is making significant investments.
Reddit is in the experimental bucket of budgets for advertising by companies in such categories as gaming, technology, entertainment, finance and beauty, said Susan Schiekofer, chief digital investment officer for ad-buying giant GroupM, which is owned by ad-holding company WPP PLC.
“If we are comparing them to the big ones—Snap, Twitter, Facebook, Instagram—they are not anywhere near that scale,” she said. “But the upside for them is really big.”
GroupM has more than 10 clients currently advertising on Reddit, and that number continues to grow, Ms. Schiekofer said.
Reddit’s big challenge will be in bringing more advertisers across categories to come on board and feel comfortable advertising on its platform, she added.
Like Twitter and Facebook—which recently faced a boycott from some advertisers over its policies for handling hate speech and misinformation—Reddit has hosted unwelcome content posted by some of its users.
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“Would I necessarily advise clients to lean right away into their top-10 fastest-growing categories?” Ms. Schiekofer said. “It’s a similar story to other platforms—their tried-and-true communities are generally safer than something that’s up-and-coming that we have not vetted yet. With these platforms, if you want to look for something that’s brand-unsafe, you can find it.”
Ms. Wong said Reddit has taken efforts to ensure ads don’t appear next to content or conversations that advertising clients may deem objectionable, including by hand-selecting which communities serve ads.
Reddit also offers three tiers of ad inventory—expanded, standard and limited—that advertisers can choose from to suit their comfort level, and offers clients the option to disable comments on their ads and to keep the ads away from certain keywords and communities.
“More advertisers want the expanded and standard inventory than the limited inventory, despite how important brand safety is,” Ms. Wong said.
Ms. Wong said Reddit’s future revenue growth will come partly by expanding the company’s ad business to new international markets. Reddit announced an operations team in London in September, and will seek to open offices in three to five countries every year, initially targeting countries in Europe, the Middle East and Africa, she added.
The company also aims for its sales force to employ around 300 people world-wide by the end of 2020, with plans to grow head count by 75% over the next year, Ms. Wong said.
“For building this business, it’s trying to explain what Reddit is about, which is a big mission around community and belonging, and explaining Reddit’s role in the future of the internet, which I think is really big, but it’s not always as top of mind with people as if you had a big, shiny new thing,” she said.