Reddit, the social news aggregation, content rating, and discussion platform, topped $100 Million in ad revenue in Q2 this year. In addition, the platform announced plans to raise $700 million from investors. This all comes on the heels of the April platform update, retiring programmatic display as an option in ad buying.
Third party exchanges are no longer accepted and instead Reddit changed to a direct-sold model. Ads appear on user home feeds and within whitelisted community pages called Subreddits. The change brings Reddit into the fold of “walled garden” social ad platforms like, Facebook, Twitter, and LinkedIn.
How does this ‘walled garden’ help advertisers?
The number one benefit of a closed platform is the cookieless environment. Targeting is based on using profile information and allows for niche targeting, specifically in the case of Reddit, targeting subreddit communities.
Having “access” to this level of targeting without using an expensive data partner is extremely beneficial, given that about 70% of the current digital advertising ecosystem is a “walled garden” set up.
Are there disadvantages to these walls?
The main disadvantage to a ‘walled garden’ is the lack of transparency into ad performance. Measurement often cannot be audited and, because of data privacy concerns, user information cannot be shared with advertisers.
Cost is another disadvantage. Reddit saw a 192% increase in ad revenue from Q2 last year and will likely continue to see exponential growth without the use of programmatic display. One fewer hand in the auction means more competition and higher prices. It’s likely we’ll see CPMs begin to rise during prime holiday season.
Why does Reddit need another round of funding?
The additional funding Reddit is seeking will be used to focus on new advertising offerings within the platform, as well as other community improvements that will ultimately benefit both users and advertisers. More focus on platform offerings will likely increase average monthly users making Reddit a prime ‘new’ platform to reach audiences with hyper-focused interests.
Reddit has 350MM monthly visitors and saw a 44% year-over-year user growth, rivaling Twitter, Snapchat, and LinkedIn for monthly active users (MAUs). 86% of users come to the platform to learn about new products, compared to 58% and 66% on Facebook and Instagram, respectively.