After 19 Years, Reddit Has Finally Become a Profitable Company by Using This Unique Strategy

  • Reddit has experienced financial losses for most of its existence.

  • However, a series of changes to its business model have started to pay off.

In 2005, just one year before the launch of Facebook, two roommates at the University of Virginia founded Reddit. The social media platform quickly became a hub for millions, securing a prominent place among the most visited websites in the world. Surprisingly, the company lost money for nearly two decades. The situation has recently changed as Reddit has finally become profitable.

Under the leadership of co-founder Steve Huffman, the company has reported a profit for the first time in its history, totaling $29.9 million for the third quarter of 2024. This marks a significant turnaround compared to the same quarter last year when the company experienced losses of $7.4 million.

From Losing Money to Generating Profits

This milestone for the platform comes at a time of positive developments on several fronts. Advertising revenue increased by 56% year-over-year, reaching $315.1 million. Additionally, the “Other” revenue category, which includes licensing agreements with both Google and OpenAI, generated $33.2 million, a remarkable 547% increase.

Daily Active Uniques—the number of single users Reddit identifies during a 24-hour period–grew by 47% compared to the previous year. Currently, Reddit boasts 97.2 million users who engage with the platform daily, participating in discussions, sharing content, and fostering strong communities. However, the platform has also faced controversy, with some subreddits featuring explicit material or promoting hate.

According to Huffman, part of the increase in users can be attributed to the platform’s recent translation features. These features allow subreddit content to be accessible to a broader audience beyond those who speak the original language, primarily English. Posts can currently be translated into Spanish, Italian, French, and German.

Reddit co-founder and CEO Steve Huffman

Achieving profitability significantly impacted Reddit’s market capitalization. On Tuesday afternoon, shares were trading at $81.70. However, they surged more than 35% on Wednesday’s market opening to $110.60. The fact that Reddit can be referred to as a publicly traded company could be one reason its situation has changed.

The company announced its intention to go public in February when it filed a Form S-1. In this form, Reddit outlined its plans to grow its business through advertising and by licensing its data to companies to train their AI models. The filing also disclosed other interesting information about the social media platform.

Major shareholders include Huffman, who owns 3.3% of the company, as well as Advance Publications, which holds 30.1% and is the parent company of Condé Nast, the entity that acquired Reddit in 2006. Other notable shareholders include Chinese tech giant Tencent, which has 11%, and OpenAI CEO Sam Altman, which has 8.7%. For now, the strategy has progressed as planned, resulting in Reddit becoming profitable with a market value of about $19 billion.

Image | Brett Jordan | Web Summit

Related | OpenAI Will Reportedly Lose $44 Billion by 2028 and Become Profitable a Year Later

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