RDDT vs. META: Which Social Media Ad Stock Has an Edge Right Now?

Core Insights - Meta Platforms and Reddit are significant players in the social media sector, with Meta serving over 3.4 billion daily users and Reddit having 108.1 million daily users, both primarily generating revenue from advertising [2] - The global social media advertising market is projected to grow from $228.18 billion in 2024 to $406.64 billion in 2029, reflecting a CAGR of 12.25% [3] Company Performance - Reddit is experiencing strong user engagement growth, with expectations of Q2 2025 revenues between $410 million and $430 million, indicating a year-over-year growth of 46-53% [6][9] - Meta Platforms has seen a 7% increase in time spent on Facebook and a 6% increase on Instagram over the past six months due to AI integration [8] AI Integration - Both companies are investing heavily in AI to enhance advertising capabilities and user experiences, with Meta AI reaching nearly one billion monthly users [3][8] - Reddit's AI-powered features, such as Reddit Answers, are enhancing content discovery and personalization, with over one million weekly users engaging with this feature [5][6] Advertising Strategies - Meta's Ads Manager now integrates across WhatsApp, Facebook, and Instagram, optimizing advertising spend with Advantage AI [9][10] - Reddit is improving its advertising technology and tools for advertisers, but it still lags behind Meta and Google in this area [7][9] Financial Metrics - Reddit's stock trades at a forward Price/Sales ratio of 12.62X, while Meta's is at 9.06X, despite Meta's broader reach and diversified advertising tools [9][16] - The Zacks Consensus Estimate for Reddit's 2025 earnings is $1.21 per share, while Meta's is $25.35 per share, indicating a 6.24% increase over 2024 [18] Competitive Positioning - Meta Platforms is viewed as having better growth potential due to its diverse business model, proven AI implementation, and multiple revenue sources [19] - Reddit's unique community-based model presents challenges for rapid growth and revenue diversification [7][19]