Core Insights - Reddit's third-quarter earnings show a significant revenue increase of 68% year-over-year, reaching $585 million, surpassing analyst expectations [2] - Advertising revenue, which constitutes 94% of total revenue, surged 74% to $549 million, driven by new ad formats and improved targeting [2] - Daily active users increased by 19% to 116 million, with U.S. growth at 7%, and average revenue per user rose 41% to $5.04, indicating stronger monetization [2] Revenue Breakdown - Advertising revenue accounts for the majority of Reddit's income, reflecting the effectiveness of its ad strategies [2] - The "other revenue" segment, primarily from content licensing with AI firms, grew 7% to $36 million, indicating diversification in revenue streams [2][6] - Partnerships with AI companies, particularly Google, contribute significantly to revenue, with the Google deal alone generating $60 million annually [6] User Engagement - Initial concerns about user engagement were based on slower growth of logged-in users compared to logged-out users, which was thought to limit advertising interest [4] - Recent data shows logged-in user growth has improved to 30%, indicating enhanced engagement and effectiveness of Reddit's personalized feeds and recommendations [5] - The increase in logged-in users suggests a stronger ad value proposition, countering previous skepticism about user engagement [5] AI Revenue Potential - Content licensing was initially underestimated as a minor revenue source, but it has become a significant contributor, now approaching 15% of total revenue [6] - Reddit's content is highly utilized in AI training, with the platform cited in 40% of AI responses, showcasing its value in the AI landscape [7] - The growth in AI-related revenue diversifies Reddit's income sources, reducing reliance on advertising cycles [7]
Here’s What I Got Epically Wrong About Reddit