Get in Touch

    April 2, 2024
    Reddit’s Promising New Ad Format

    With Reddit’s much-anticipated Initial Public Offering (IPO) announcement last week, big
    things are in store for the company’s future. For example, Reddit launched a new
    “free-form” ad format that blends with user-generated posts—a potentially
    groundbreaking tool for advertisers.¹ Let’s discuss how these changes are reshaping the
    advertising realm, offering a fresh perspective on engaging with one of the internet’s
    most dynamic communities.

    Revitalizing Reddit: Community Evolution & Strategic Growth

    Reddit is a platform where users can explore different types of communities, called
    subreddits, each dedicated to a specific topic or interest. These subreddits are the heart
    of Reddit, functioning as individual forums where members create content, share
    insights, and engage in discussions.² Users can contribute by posting content,
    commenting, and voting, influencing the visibility of submissions. Exploring into the
    subreddits, users discover niches they are passionate about, learn the distinction of
    each community, and actively participate in shaping the conversational landscape.

    In Reddit’s newest ad format—free-form ads—they blend directly into user-made posts,
    offering a seamless look to boost engagement. Tailored for advertisers, these ads mix
    images, videos, and text, mirroring the popular megathread style for quick info grabs.
    Marked with a “Promoted” tag, these ads are not just about blending in; they’re about
    standing out, showing a 28% higher click-through rate in early tests, and now available
    globally for all advertisers on Reddit.³

    The introduction of this ad format coincides with Reddit’s IPO, offering a significant
    shift, especially in light of its $91 million loss last year. This move has proven to be
    fruitful, as seen when the company’s share price hit $50.44 at market close, significantly
    up by nearly 50 percent from its IPO price of $34 per share. By going public, Reddit has
    not only boosted its market presence, but also opened new avenues for revenue,
    particularly through its innovative ad formats that resemble user-generated content.
    This strategy aims to enhance profitability while preserving the platform’s core identity.
    The success of this approach will be crucial for Reddit, as it seeks to balance the
    essentials of financial growth and maintain an authentic community experience.

    Reddit’s User Base: Insights for Advertisers & Market Opportunities

    Reddit maintains an incredible user base of over 73 million daily active users that dive
    into its sea of content. This platform is much more than just a community; it’s an
    enormous collection of specialized groups, over 100,000 of which are actively
    exchanging content and having discussions. With viral meme chains and specialized
    forums covering every topic all under one roof, Reddit’s large and diverse user base
    encourages engagement and connection. The Search Engine Journal article claims that
    Reddit’s advertising platform has special benefits for marketers, including better
    engagement rates—especially for the 18–35 age group, lower costs than other social
    media advertising platforms, and the ability to target specific niches across more than 3
    million active subreddits.

    Advertisers now have a fresh approach to audience engagement with the new Reddit ad
    format, which emphasizes real connections over self-promotion. This strategy increases
    advertising effectiveness while building trust. It’s important to choose subreddits that
    appeal to your target audience, taking into account factors like industry significance,
    user engagement, and acceptance to advertising. Reddit’s EVP of Business Marketing
    and Growth, Jim Squires, noted that the new free-form ad format gives advertisers a
    valuable tool for expanding their businesses. This format allows advertisers to create
    ads of any length and incorporate multiple media types, promoting brand integration
    with the platform’s content. By leveraging Reddit’s unique communities and user
    engagement, advertisers can tap into the platform’s strengths.

    Predictions & Takeaways

    Reddit’s IPO and new free-form ads are game changers, offering advertisers innovative
    ways to engage with a diverse audience. These ads, blending with user content, promise
    higher engagement and deeper connection with users. However, the blending of ads and
    content might raise concerns about transparency and user trust, as ads could become
    too identical from organic posts.

    Despite this, the opportunity for targeted advertising in Reddit’s niche communities is
    immense, allowing for precise and effective marketing campaigns. Advertisers should
    navigate this new landscape carefully, balancing innovative engagement with
    maintaining user trust and clarity.

    Written By: Jessica Carrasco, Josue Saldana, Ryan Distaso