Q4 2024 Earnings Summary
- Reddit's strong international user growth and potential for expansion, supported by initiatives like machine translation, is driving significant user base expansion outside the U.S. Reddit's international growth outpaced domestic growth, with countries like France growing 30% to 40% faster due to machine translation adoption. This creates new monetization opportunities worldwide.
- Successful initiatives to grow advertiser count, especially among mid-market and SMB advertisers, are increasing ad revenue. By focusing on ease of use in onboarding and leveraging AI tools like the gen AI Headline Generator, Reddit is attracting more advertisers. The scaled business in mid-market and SMB is growing nicely, with ongoing efforts to activate new advertisers and partnerships, which could significantly boost advertising revenue.
- Reddit's unique content and AI initiatives, such as Reddit Answers and AI-powered ad tools, are enhancing user engagement and creating new revenue streams. The company is leveraging its vast repository of user-generated content to build AI-driven products that provide value to users and advertisers. Reddit Answers is already showing early promise in improving user experience, which could lead to higher retention and monetization. , ,
- Reddit's user growth is vulnerable to changes in Google's search algorithm. In Q4, Reddit experienced volatility due to a periodic update in Google's algorithm, which primarily affected logged-out users coming from search. Although traffic recovered in Q1, future algorithm changes could pose risks to user acquisition and engagement.
- International expansion requires significant resources and remains in early stages. Reddit's non-U.S. user base is only 50%, compared to 80%-95% for peers. Growth in international markets relies on high-touch efforts like building communities and recruiting moderators, which may slow down scaling and increase costs.
- Large stock-based compensation expenses have impacted profitability. In Q1 2024, Reddit reported a $575 million loss due to a $595 million accounting charge related to stock-based compensation. Ongoing expenses of this nature could continue to affect net income and shareholder dilution.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | Q4 2024 | no prior guidance | $385 million to $400 million, representing 54% to 60% year‑over‑year growth, midpoint 57% growth | no prior guidance |
Adjusted EBITDA | Q4 2024 | no prior guidance | $110 million to $125 million, representing a 30% adjusted EBITDA margin at the midpoint | no prior guidance |
Revenue | Q1 2025 | no prior guidance | $360 million to $370 million, representing 48% to 52% year‑over‑year revenue growth, midpoint 50% | no prior guidance |
Adjusted EBITDA | Q1 2025 | no prior guidance | $80 million to $90 million, representing approximately 700% to 800% growth | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
International Expansion | Consistently cited as a core growth area. Key points in prior calls: • 50% of user base outside U.S., aiming for higher share • Rapid growth in EMEA, with revenue growth up to 57% • Focus on expanding go-to-market teams globally | Reported 50% of users outside U.S., aiming for 80–95% non-U.S. user share. International ad revenue grew 77% YoY. Investing in marketing and go-to-market. | Recurring topic with continued optimistic sentiment. High impact on future growth. |
Machine Translation | Mentioned each quarter as a key driver of international user growth. Prior expansions included French, Spanish, Portuguese, etc. | Highlighted as an ongoing initiative in eight languages. Cited cost efficiencies and strong results, e.g., France growing 30–40% faster. | Recurring topic with consistently positive sentiment and long-term impact. |
User Growth and Engagement | Strong year-over-year DAU growth noted every quarter (e.g., 37%–47%). Logged-in vs. logged-out traffic regularly discussed. | Ended Q4 with 101.7M DAUs (39% YoY growth). Logged-out traffic volatility due to Google changes but quick recovery. | Recurring topic, sentiment remains positive. Logged-in user growth is a core focus. |
Advertising Initiatives and Ad Revenue | Central focus in all prior calls, with emphasis on mid-/lower-funnel, SMB, new ad formats, and strong year-over-year growth (e.g., 41%–60%). | Total ad revenue grew 60% YoY to $395M. Mid-market/SMB and new placements (e.g., ads in comments) highlighted. | Recurring topic, sentiment remains bullish with new formats and expanded advertiser base. |
AI-Driven Products and Tools | Repeatedly addressed: launch of AI Headline Generator, acquisitions (Memorable AI), data licensing partnerships, machine learning for moderation. | Notable Q4 mentions include Reddit Answers (AI-powered search), ICE partnership for data, AI-driven ad review and creative generation. | Recurring topic with continued investment; strong potential for future monetization and user value. |
ARPU and CPM Challenges | ARPU not managed directly, but it fluctuated with user and revenue mix. CPM faced headwinds due to new placements (e.g., conversation ads). | ARPU grew nicely, but no specific CPM challenges discussed. Emphasis on overall revenue/user growth rather than direct ARPU management. | Recurring topic; stable sentiment. CPM not highlighted in Q4. |
Developer Platform Monetization | Q2 call: platform in public beta with plans for end-to-end monetization. Q1 call: early-stage discussion, targeted for later rollout. | No mention in Q4 about developer platform monetization. | No mention in Q4. Remains a future initiative with unaddressed updates. |
Vulnerability to Google’s Algorithm | Acknowledged fluctuations in logged-out user traffic. Q3: described synergy with Google but recognized potential volatility. Q1: improvements in page performance to mitigate algorithm changes. | Confirmed some Q4 traffic volatility from a Google update, mainly affecting logged-out users. Impact on revenue was minimal. | Recurring topic. Consistent messaging that vulnerability is limited and manageable. |
Stock-Based Compensation Expenses | Fluctuating SBC expenses each quarter, including one-time IPO-related costs in Q1 (over $500M) and more normalized levels in subsequent quarters. | SBC for Q4 was $97M (23% of revenue), slightly higher from annual grants and vesting schedules. Potential for small Q1 2025 bump. | Recurring topic, remains an expected expense. |
Macro Headwinds (Inflation, Elections) | Q1/Q2 calls: mentioned elections, inflation, and geopolitics as potential advertiser concerns. Q3: mild caution on Q4 due to elections, but no major impact. | No mention in Q4 about these headwinds. | No mention in Q4. May resurface depending on future events. |
Tough Year-Over-Year Comparables | Q1 call: noted easier comps for Q1 vs. tougher in H2 2024. No major updates Q2/Q3. | Not discussed in Q4. | No mention in Q4. Prior caution stands but no new commentary. |
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Impact of Google Algorithm Changes
Q: How did Google’s search algorithm change affect Reddit's traffic and revenue?
A: Steven Huffman stated that Google’s algorithm change primarily affected logged-out users in the U.S., causing a temporary dip followed by a recovery shortly after. He assured that there was no impact on revenue and expressed confidence in handling future changes, noting that such fluctuations are common and their relationship with Google remains strong. -
User Growth and Retention
Q: What initiatives are in place to convert logged-out users to logged-in and improve retention?
A: Steven Huffman explained that efforts focused on making it easier to log in and improving onboarding have been effective in 2024. They prioritized giving users answers when they come from search rather than pushing app downloads, aiming to build products for seekers as well as scrollers. This approach helps increase retention and expands their mission. -
Reddit Answers and Monetization
Q: How is Reddit Answers impacting engagement and monetization potential?
A: Reddit Answers, launched as a beta in December, is unlocking the depth of Reddit's content by providing annotated answers linked to specific comments. Jennifer Wong highlighted that about 40% of posts are commercial, making Reddit Answers an incredible opportunity to monetize high-intent searches and recommendations. They plan to integrate it with Reddit Search over time. -
Cost Growth and Hiring Plans
Q: What are the expectations for cost growth and headcount in the coming year?
A: Andrew Vollero indicated that total adjusted costs grew around 20% year-over-year over the last few quarters, and they plan to slightly accelerate hiring compared to the prior year. They aim to invest in areas like engineering and sales to drive accelerated revenue growth but maintain flexibility to adapt investments as needed. -
ARPU vs. User Growth
Q: Which has more visibility: U.S. user growth or ARPU growth?
A: Jennifer Wong stated they do not manage to ARPU but noted that it grew in Q4 in both regions, with significant headroom for growth. They focus on growing revenue by expanding verticals and driving performance, with users and revenue growing in parallel. There's an opportunity to increase ARPU, especially internationally where it's a fraction of the U.S.. -
Advertiser Count Growth
Q: How is Reddit increasing its advertiser count, particularly focusing on self-serve?
A: Jennifer Wong mentioned they continue to see healthy growth in monthly active advertisers, driven by improvements in ease of use and activation. Their strategy isn't focused on self-serve currently; instead, they're growing managed mid-market and SMB businesses. Plans include top-of-funnel efforts like paid marketing, SEO, and partnerships to acquire more advertisers in 2025. -
International Expansion
Q: What is the strategy for international user and monetization growth?
A: Steven Huffman noted that Reddit is roughly 50% U.S. versus non-U.S., while peers are 80–95% non-U.S., indicating significant international growth potential. Initiatives like machine translation—starting with France growing 30–40% faster—and community development work are key strategies. Jennifer Wong added they are investing in marketing and go-to-market teams in EMEA to acquire more advertisers. -
Open-Source AI Models Impact
Q: Do open-source AI models threaten Reddit's data licensing revenue?
A: Steven Huffman stated that open-source models do not impact their licensing opportunities. He explained that every foundation model, including those from DeepSeek, used Reddit data. Reddit provides ongoing, up-to-date information, which is crucial as models need current data to remain relevant. He emphasized that Reddit is a source of information on all aspects of the human experience.
Research analysts covering Reddit.