Now that we've covered Reddit's Q1 results and the strategic priorities across its user and advertising sides, let's look at how Reddit is evolving across mgmt changes, AI search, and advertising tooling. We'll also walk through the broader shifts happening in content discovery across AI citations, licensing deals, and legal cases.

Content discovery is a timely subject. We've had a number of updates this week between legal outcomes on AI use of content, and a steady drumbeat of media coverage on the ongoing declines in click-through traffic. Reddit was down 10% at one point today after WSJ pushed rumors as it renegotiates its AI data licensing agreement with Google.

  • Reddit has been adding talent from Google and Meta with deep expertise in advertising, personalization, AI search, and video.
  • They continue to focus heavily on user engagement. Reddit Search usage and WAUqs are up +30% after new UI changes put it more front and center, and it has become critical to driving engagement by improving content discovery and onboarding.
  • Search also gives Reddit a potentially meaningful new monetization surface. Reddit is now adding deeper shopping details to AI search results, leveraging DPA product catalogs into a carousel of relevant product ads.
  • The advertiser stack continues to evolve rapidly, with new DPA formats, e-commerce integrations, automated creative tailoring, AI-generated ads, and improved measurement.
  • Max Campaigns is becoming the core automation layer of Reddit Ads Manager. They are still pushing existing advertisers into Max Campaigns, and will be opening it up to new signups soon.
  • New split-testing capabilities allow advertisers to directly test and compare various campaign & ad strategies. Customers can also easily validate the impacts of automated campaign mgmt, targeting, and budget optimization within Max Campaigns. This should help accelerate the adoption of Max Campaigns, and embeds a new feedback loop to continuously improve ad performance.
  • DPA still has a substantial runway. The onboarding of mid-market and SMB advertisers is improving through e-commerce integrations with Shopify & WooCommerce. Besides using DPA ads within AI search results, new DPA formats like Collections and multi-vendor Shopping Listings are now emerging. Mgmt also hints at an eventual expansion of DPA beyond e-commerce, into other ad categories such as travel, services, and autos.
  • Video is emerging as another growth vector. The new CTO has extensive video and ML algo experience from Facebook, and Reddit is beginning to expand the use of video as another medium for community interaction.
  • Reddit remains one of the most-cited sources across major AI engines, despite a citation pullback by Perplexity.
  • AI search citations & legal battles are generating a lot of FUD, but I believe Google might be showing us the start of a better path forward. Google plans to increase emphasis on firsthand opinions and community perspectives in AI Search, which seems likely to further elevate Reddit's visibility and brand in its AI results.
  • Reddit's conversational data is becoming an increasingly important asset for brands and AI providers. The rise of AEO/GEO is encouraging companies to build organic Reddit presences to improve their standing in AI results.
  • While licensing negotiations and lawsuits with AI engines could create additional monetization upside in data licensing, the core investment thesis still rests on Reddit continually strengthening its ad engine. The financials are showing us that their efforts here to drive user engagement & advertiser demand are clearly working.

Sections:

  • Google Zero
  • Mgmt changes
  • User engagement moves
  • Advertiser tooling moves
  • A shift in video strategy?
  • Competition from Meta's Forum app
  • Google Search overhaul
  • AI citations
  • Legal battles
  • A new era in web marketing
  • Final thoughts