Reddit surprised Wall Street yesterday (May 7) when it reported record user and revenue growth in its first quarterly earnings release as a publicly traded company. Co-founder and CEO Steve Huffman said on the earnings call Reddit’s vast corpus of authentic, user-generated content is going to be increasingly valuable in the era of A.I. Reddit shares popped 18 percent in yesterday’s after-hour trading before clawing back this morning. The company is currently valued at $8.16 billion.
In the January-March period, Reddit’s total revenue jumped 48 percent to $243 million. Advertising revenue, which came at nearly $223 million, grew 39 percent in the quarter, surpassing its larger social media rivals such as Meta (27 percent) and Alphabet (13 percent), which reported earnings recently. Reddit reported a quarterly net loss of $575 million, but said it could become profitable (on an adjusted basis) in the second quarter.
Analysts noted that Reddit benefited from an overall robust digital ad market in the first quarter, ‘buoyed by some ‘free’ IPO marketing, alongside increased traffic courtesy of their new favorite A.I. partner Google,” Bernstein analyst Mark Shmulik wrote in a note yesterday.
Reddit’s user count grew 37 percent in the first quarter from a year ago. At the end of March, the site had over 80 million daily and 300 million weekly users.
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Reddit had a few key milestones in the first quarter, including a deal with Google in February to license its content for training Google’s A.I. language models. During the Q&A session of the earnings call, a Reddit user (the company took questions from both analysts and its community members) asked Huffman what other A.I. deals are under talks. The CEO said, “we’re being considered and selective with our partners, especially for the larger scale search and training deals. We need to be very considerate of where our data goes and what it’s being used for.”
Huffman, who co-founded Reddit with Alexis Ohanian in 2005, said the site’s better-than-expected growth was “really driven by improvements to product quality,” adding that his primary focus this year is to continue to make the site “faster, easier to use and safer.” Specifically, Reddit will continue to use its own machine learning algorithms to help users discover communities they’ll love and moderate content in accordance to community guidelines.
“Reddit is one of the largest places for authentic connection and conversation online, and more and more people are discovering and appreciating this,” Huffman said. “The paradox I see is that as more content on the Internet is written by machines, there’s an increasing premium on content that comes from real people.”
“And we have nearly two decades of authentic conversation, unique perspectives, earnest advice, honest reviews and answers to questions about every topic imaginable,” he added.