Reddit wants to be an advertising platform. What if it has better options?

Reddit wants to be an advertising juggernaut, but it may have better options for monetizing its user base.

In September, Reddit announced it was looking for advisers to help prep for a $15B IPO (and no doubt create the hottest new meme stock).

As part of its IPO preparation, Reddit has honed its advertising business, which makes up the bulk of its revenue. But unlike other social media platforms, Reddit has better options for monetization.

Reddit’s biggest asset is its ability to foster community

In a recent post from the Every newsletter bundle, Rohit Kaul broke down why advertising is a bad fit for Reddit. Here’s the rub:

  1. Advertisers look for 2 things:
    1. Awareness at the beginning of the buyer’s journey
    2. Conversion at the end of the buyer’s journey
  2. For awareness, Facebook and Twitter offer better reach than Reddit
  3. For conversion, Google and Amazon are already firmly established in the consideration stage of the buyer’s journey

Reddit’s biggest asset is its ability to foster deep engagement within its communities. Rohit has a simple suggestion to tap into this asset: Build products that enable its communities and creators.

First, communities…

… Reddit has 500+ subreddits with over 1m followers but few ways for those communities to make the experience unique.

Some products that Reddit could introduce to drive monetization within its communities are live events, in-app marketplaces, and premium content.

To enable creators…

… Reddit could do 2 things:

  • Offer customization options on profile pages so creators can showcase their best posts
  • Add a dedicated creators’ section to the homepage to help creators grow their audience

Not all is bad on the advertising front

Reddit is on track to double its advertising revenue this year to $350m. While that’s impressive growth, it still pales in comparison to other social platforms (e.g., Pinterest did $1.1B through the 1st half of 2021).

Another concern? If it becomes too saturated with ads, Reddit may ruin some of the magic of the platform.

That gives all the more reason to build a better product for its communities and users, who may reward them by pumping the stock to the moon.

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