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Reddit’s getting more popular [arstechnica.com]:

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In May 2023, Reddit announced that its API would no longer be free, signaling the demise of most third-party Reddit apps [arstechnica.com] and the start of a new Reddit era. Reddit was always interested in making money, but the social media platform’s drive to reach profitability intensified with its API rule changes, which was followed by it going public [arstechnica.com] and other big moves. With Reddit reporting this week that it has finally turned its first profit, we can expect further evolution from Reddit, whether old-time Redditors like it or not.

In its fiscal Q4 2024 results announced on Tuesday [PDF [arstechnica.net]], Reddit said that in the quarter ending on September 30, it made a profit of $29.9 million. This is significant growth from fiscal Q3 2024, when Reddit lost $7.4 million. Revenue, meanwhile, was up 68 percent year over year, going from $207.5 million to $384.4 million. Reddit is expecting $385 to $400 million in revenue for fiscal Q4.

More Redditors

During the Reddit app-ocalypse [arstechnica.com], many Reddit users and moderators [arstechnica.com] said they would quit the platform because they were disgusted with how Reddit treated third-party developers and moderators [arstechnica.com], particularly during user protests against the API rule changes.

Still, Reddit’s results show it averaging 47 percent more daily active unique users in Q3 2024 (97.2 million) than it did in Q3 2023 (66 million).

Reddit CEO Steve Huffman told shareholders [PDF [arstechnica.net]] that “machine translation drove 4x incremental" daily active unique users in Q3 compared to Q2. Huffman's letter says that Reddit plans to launch machine translation in more countries in Q4 and in 2025.

“Large-language model ... driven machine translation is showing early traction in breaking the language barrier and driving millions of incremental users to the platform,” Huffman said.

Successful ad push

Of course, more users give ads sold on Reddit the chance to gain more eyeballs, something that can help drive ad sales. Reddit’s ad revenue has grown alongside its daily user base. In Q3 2024, Reddit made $315.1 million in ad revenue, a 56 percent year-over-year increase.

Reddit has historically made the majority of its revenue from ad sales. Huffman has long claimed that Reddit started charging for its API in order to prevent big companies [arstechnica.com], like Google, from using Reddit content for free AI training. However, the high pricing killing third-party apps also fed Reddit’s goals of getting users onto its native website and apps—where Reddit sells ads.

Reddit is expected to continue its aggressive ads push, including by exploring new ways to incorporate ads into the user experience. For example, Reddit has previously discussed exploring the addition of ads in Reddit search [arstechnica.com] and in comments. It also added ads to conversation pages and made personalized ads [arstechnica.com] mandatory this year.

Big AI deals

With Reddit now charging for API access, though, data licensing has become a significant part of its business. Reddit has AI training deals with Google [arstechnica.com] and OpenAI [arstechnica.com] that are expected to be worth tens of millions of dollars annually. Reddit lumps data licensing revenue into the “other revenue” category (without specifying what else the “other” category includes). Reddit’s “other revenue” grew 547 percent year over year to $33.2 million.

Huffman also pointed to Google's appreciation for the traffic that comes to it by way of Reddit, particularly people clicking through to Google to find shopping recommendations. Demonstrating that Reddit views this as a business opportunity, an April Reddit blog post [arstechnica.com] described Reddit communities as “naturally commercial” [arstechnica.com] and as a place “where people come to make shopping decisions." In his letter this week, Huffman also pointed to commerce opportunities driven through Reddit:

Looking ahead, improving the search experience on Reddit is a key part of our strategy. … This includes users coming to Reddit from external search and those searching directly on Reddit looking for recommendations on what to buy, what to watch, or which products or services are the best.

Huffman also claimed that Reddit is the “sixth most Googled word in the US,” underscoring the two companies’ mutually dependent relationship [arstechnica.com].

Money talks

Reddit may have lost some users during last year's protests and Reddit's subsequent evolution. But financially, Reddit appears to be right where it wants to be. This means that we can expect more efforts from Reddit centered on driving its user base and ability to grow revenue.

While its approaches may perturb some users, the 19-year-old company has a financial incentive to continue with what can sometimes be controversial business strategies. That points to a high likelihood for things like more ads, more effort to make Reddit part of consumer purchasing decisions, and more deals with companies like Google and OpenAI. More disruptive ideas, like paywalled Reddit content [arstechnica.com], may come to fruition in the future, too.

With Reddit finally making money, anyone who doesn’t like this side of Reddit will either learn to accept it or leave.

Advance Publications, which owns Ars Technica parent Condé Nast, is the largest shareholder in Reddit.

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