• by Laurie Sullivan , Staff Writer @lauriesullivan, November 12, 2024

Reddit has become more mainstream -- emerging from the dark corners of the internet to become a space where users can speak freely, within reason, and engage with one another in an instructive sort of way.

That interaction has “detoxified” the platform -- a word The New Yorker used in the past decade -- in a positive way by giving more people an opportunity to engage in constructive conversations that grew its user base. Now it’s time to grow its ad monetization and provide advertisers with a better media-buying experience. 

Reddit has experienced successful spikes in revenue during the past quarter, driven less by user growth and more by “better than expected” ad monetization, according to analysis.

Based on an actual $3.58 advertising average revenue per user (ARPU), per Reddit's earnings statement, vs. NewStreet Research’s $2.74 estimate for the third quarter in 2024, analysts decided to watch the first two installments of Reddit’s Performance Webinar series. The first focused on signals and conversions, and the second on targeting and measurement.

Reddit says in the performance series to use as many keywords as possible to extend the reach of targeting, and set budgets based on the audience advertisers are trying to reach. Group similar keywords and enable dynamic audiences.

NewStreet Research identified the three most important monetization drivers highlighted by Reddit, including the “primacy of keyword targeting and CAPI for measurement, as well the heavy emphasis on dynamic audience expansion.”

Keyword targeting, which Reddit introduced in June 2023, has become a very effective native method to target ads on Reddit.

“We believe traction has been significant, owing to the very easy starting advice offered on the webinar," NewStreet Research wrote in a note. The firm added that advertisers should begin by using the same keywords they use on Search, "making it a straightforward concept" for advertisers that has used Google.

Advertisers can upload 2,000 keywords per ad group. Reddit provides keyword suggestions to further expand the advertiser’s list, Reddit explains in its online performance-based video.

The assumption is that keyword targeting has been as effective as ads in Reddit conversations.

“While the majority of [Reddit] ad revenue falls in its Feed, the growth of ad load in Conversations helps tap into the nascent research and commercial intent on the platform, and keyword targeting is vital to tying that activity to advertising,” analysts wrote.

Search ads, which Reddit is exploring to monetize conversations and interactions, will support the company’s monetization plans.

Reddit’s other forms of targeting include customer lists, lookalike, website retargeting, community, and interests.

Conversions API (CAPI) was one of the most interesting and important measurement tools pointed to for Reddit -- described as “a server-to-server technology that connects an advertiser’s data directly to the ad selling platform.”

It is more “resistant to privacy changes, like those impacting cookies,” the company said. It doesn't rely on browsers or operating systems. If a call to a Pixel fails, Reddit can use data from CAPI instead.