Reddit's Jen Wong Has a Plan to Juice Post-IPO Growth

Newly public Reddit has to level up its performance-driving products, and—after 20 years—figure out how to more fully monetize its signal-rich chat-based content. Reddit’s long-awaited IPO values the platform at $6.5 billion on 2023 revenues of $804 million (98% driven by ads), with a loss of almost $91 million. While it’s growing, it missed its 2021 goal to hit the $1 billion mark in 2023. And its revenue is dwarfed by rivals like Snap (roughly $4.6 billion in 2023, per earnings), let alone giants like Meta (roughly $135 billion in 2023, per earnings). “We have a lot of opportunity for growth,” COO Jen Wong told ADWEEK shortly after Reddit’s grinning mascot Snoo rang the opening bell at the New York Stock Exchange. “We’re always focused on the long term; we’re continuing to invest in the roadmap.” On paper, Reddit looks to be in an optimal position to grab ad spend from X and TikTok—whose future in the U.S. could be shaky. Reddit has a contextual-based ad business that is safe from the tremors of cookie deprecation, and it’s making aggressive inroads with automation to make buying ads on its platform more efficient. But ad buyers have often seen the platform as seasonal spend, and squeamish brands historically wary of appearing next to unsuitable content have stymied a flow of ad dollars. To get over those brand-safety fears and get that recurring spend, Reddit must prove its ads work throughout the funnel. Exclusive: Reddit Debuts Organic Social Tools Ahead of IPO The growth roadmap Reddit began this quest in earnest last year when it started offering pay-per-click ad products and got more competitive returns on click traffic. But Reddit still has a lot of work to do to catch up to powerhouses like Google and Meta. Reddit has historically been stronger in driving mid- and upper funnel activity, said Elizabeth Keefer, director of growth at Winclap, which helps brands attract users. Clients, however, are pulling back their spend on these activities in favor of ads that drive more direct action from consumers. That’s pushing more ad spend to search channels and Meta, whose popular AI-powered Advantage+ shopping tool is sustaining marketer interest. To catch up, Reddit is now building performance-driving formats and post-click actions, like app installs, purchase or add to cart. While it has developed some of these features, it's early days, and advertisers are clamoring for more. Incremental audience attracts repeat business About 70% of Winclap’s clients active on Reddit continue to spend with the platfrom year-over-year, said Keefer. But these are largely relegated to special occasions like product launches, seasonal moments and holidays. “Brands overall are a little bit more hesitant to commit to joint business plans with Reddit because it is such a new platform, [but one that has] a lot of promise,” she added. But for some ad buyers, Reddit has already proven itself ready to move out of the experimental ad spend bucket. Ad agency Tinuiti’s client Liquid IV saw a 41% improvement in conversion rate and a 69% improvement in retargeting conversion rates on the platform. Another health and wellness client saw Reddit’s promoted ads drive more than a 13% lift in unique conversions. That performance convinced Tinuiti to invest up to 15% of total media spend there for some clients. “They figured out how to tap into an incremental audience that's beneficial,” said Jack Johnston, senior social innovation director at Tinuiti. More typically, advertisers who see success are scaling closer to 5% in the second year, he added. Wong wouldn’t share how many advertisers renew each year, instead saying that a good litmus test is its growing number of annual partners. “That’s a strong indication that we are partners at that point, setting annual strategy together year after year. We have a strong retention rate in advertisers,” said Wong. The search opportunity Reddit is also working to make its ad placements more relevant to consumers. It plans to add more contextual and interest-based signals to its ad platform, beefing up existing placements in the home feed and conversations, plus adding more formats like video and ads in comment threads and on search pages. It's working on building out its search capabilities, as a large amount of intent-based search queries start with Reddit. Monetizing that is not yet in reach. “There’s a big opportunity on the advertising side—search is driven by keywords and biddable traffic. We already have the foundations of that,” said Wong.