AI Licensing Deals Now Account for 10% of Reddit’s Revenue
Content licensing agreements now account for about 10% of Reddit’s total revenue, the company’s COO Jen Wong told ADWEEK in an exclusive interview Wednesday.
“It’s a small part of our revenue—I’ll call it 10%. For a business of our size, that’s material, because it’s valuable revenue,” Wong said.
The social platform—which on Wednesday reported a 71% year-over-year lift in fourth-quarter revenue—has been “very thoughtful” about the AI developers it chooses to work with, Wong said. To date, the company has inked two content licensing deals: one with Google for a reported $60 million, and one with ChatGPT parent OpenAI.
Reddit has elected to work only with partners who can agree to “specific terms … that are really important to us.” These terms include user privacy protections and conditions regarding “how [Reddit is] represented,” Wong said.
While licensing agreements with AI firms offer a valuable business opportunity for Reddit, advertising remains the company’s core revenue driver.
Much of Reddit’s $427.7 million Q4 revenues were generated by the ongoing expansion of its advertising business. And its ad revenue as a whole grew 60% YoY, underscoring the platform’s growing appeal to brands.
The company, which IPOed last March, has focused on expanding its ads business. In January it debuted AMA Ads and Pro Trends to woo mainstream brands. AMA Ads lets brands host Q&A sessions with built-in RSVP and reminder features, while Pro Trends enables businesses to monitor brand mentions and viral discussions on Reddit.
Reddit has also invested significant resources into machine learning and AI to enhance ad targeting and user engagement. It acquired Memorable AI in August, a startup that predicts user engagement with ad creative, to bolster ad effectiveness on Reddit.
The efforts are paying off. The company has doubled its click volume and its conversion volume YoY and recorded significant growth across channels, geographical regions, and verticals in 2024. A particular bright spot has been small- to medium-sized advertisers, which drove “outsized growth” during Q4, according to Wong.
Reddit is focused on logged-in users, and more automation
Helping to accelerate ad revenue growth is Reddit’s rising traffic. While Reddit’s Q4 user growth came in under Wall Street projections, causing shares to dip, its weekly active uniques grew 42% YoY to over 379 million visitors. Average revenue per unique visitor was $4.21 during the quarter, up 23% from the prior year.
While Google is “nicely reinforcing” Reddit’s growth in traffic, Wong said, she added that the site’s logged-in users, which have grown 27% year-over-year, are “the bedrock of our business.”
In the coming months, Reddit plans to expand its own machine learning and AI capabilities—efforts that Wong believes will help sustain its ads business growth.
“We’re exploring end-to-end automation, especially for performance objectives, that just make it easier to activate on our advertising platform,” she said.
