Reddit posts strong revenue results as data sales take off

The social media platform Reddit, which went public in March 2024, experienced significant traffic disruption in late 2024 due to Google search algorithm changes. This development comes as Reddit continues to expand its revenue streams through AI partnerships and advertising innovations.

The traffic impact: Google’s algorithm update affected Reddit’s visibility in search results, particularly impacting non-logged-in users browsing the platform.

• Daily active unique visitors grew 39% to 101.7 million in Q4 2024, falling short of analysts’ expected 103.3 million
• The platform’s growth rate showed a sequential slowdown
• CEO Steve Huffman reported that search traffic has started recovering in Q1 2025

Financial performance: Despite the traffic challenges, Reddit demonstrated strong financial results and provided optimistic revenue guidance.

• Q4 2024 revenue increased 71% to $427.7 million, exceeding analyst estimates of $405.3 million
• Earnings per share reached 36 cents, surpassing the expected 25 cents
• Global average revenue per user grew 23% to $4.21
• The company forecasts Q1 2025 revenue between $360-370 million, above market expectations

Strategic initiatives: Reddit’s revenue growth is being driven by multiple strategic partnerships and advertising innovations.

• The platform has secured AI data licensing deals with Google and Microsoft-backed OpenAI
• Conversation placement ads in subreddits are proving successful
• CEO Huffman indicated ongoing discussions with “big players” regarding additional data licensing opportunities

Market reaction: The news triggered a significant response from investors and industry analysts.

• Reddit’s shares dropped 15% in extended trading following the announcement
• The stock had previously achieved nearly five-fold gains since its 2024 IPO
• Industry analyst Jeremy Goldman from eMarketer maintained optimism about Reddit’s potential to become a “digital advertising heavyweight” through international expansion and AI advantages

Looking ahead: While the Google algorithm change created short-term challenges, Reddit’s diverse revenue streams and strategic positioning suggest resilience in its business model, though the platform will need to address its vulnerability to search engine algorithm changes to maintain stable user growth.