Reddit: From Digital Ads to AI Data, This Stock Is Still Heating Up

In 24 hours, LikeFolio’s Data Engine processed 1,193,582 data points – or positive matches to our brand-mapping database – from a single social media source: Reddit (RDDT).

An average 97.2 million users visit this “front page of the internet” daily – to get the latest-breaking news, browse and share tasty memes, enjoy millions of adorable animal photos, read and consume original stories and artwork, converse with fellow superfans, and find support for the most obscure problems.

Since its launch in 2005, it’s become so ubiquitous that users often trust Reddit more than they trust Google (GOOGL) when trying to get the REAL answer they’re searching for.

We’ve been keeping close tabs on RDDT’s growth prospects ever since its March IPO. This stock is of special interest to our team, after all – providing one of many invaluable data streams that power our consumer insights machine.

The flip side of that firehose of social media data is that we have unique insight into the opportunity ahead.

With Reddit at the top of investors’ minds this week after a series of bullish signals, you’ll want to see what LikeFolio data reveals about the stock’s prospects.

Shares popped yesterday on a key product update that leverages AI to answer user queries and an upgrade from Morgan Stanley (MS).

Analysts cited Reddit’s strong engagement and advertising pipeline as key drivers of its future growth, flagging the platform’s potential to outpace its peers in user engagement, time spent, and advertising revenue.

Here’s what we think.

Leading the Digital Ad Resurgence

Reddit’s first big opportunity? Capitalizing on the digital ad resurgence.

Just look at the outsized growth in visits to Reddit’s web platform versus those of other more established peers:

In the most recent quarter, the company generated $315.1 million in advertising revenue, impressing the market and fueling a 41% rally in RDDT shares.

And it has significant room to grow from here.

Reddit’s $315 million is about a third of the revenue Pinterest (PINS) generates from ads… and a drop in the bucket compared to Meta Platforms’ (META) $40 billion.

That should give you a sense of scale.

Reddit also just made a few next-level enhancements to its ad platform, making it all the more attractive to potential advertisers:

• Keyword Targeting and Audience Expansion

Reddit allows advertisers to position ads alongside specific keywords across feeds and conversations. This ensures ads appear in highly relevant contexts, such as placing a gaming laptop ad next to discussions about “best budget gaming rigs” in r/PCGaming.

The AI-driven audience expansion further amplifies campaigns by identifying users likely to engage with similar topics. For example, it could target users in subreddits like r/Gaming who frequently interact with posts about hardware upgrades.

This tailored approach boosts ad relevance and effectiveness, making Reddit a stronger competitor to platforms like Google and Meta.

• Ad Creation Tools

Reddit’s Smart Headlines leverage AI to craft ad copy that resonates with its unique user base, such as suggesting “Stay Ahead in Tech with These Top Laptops” for a campaign targeting r/technology.

The Creative Asset Cropper simplifies visual optimization by adjusting images for Reddit’s ad formats, enabling brands to showcase clear product shots in both mobile and desktop layouts.

These tools reduce creative friction, ensuring advertisers can quickly tailor content to Reddit’s communities while maximizing engagement.

However, advertising is just the tip of the iceberg when it comes to Reddit’s growth prospects.

Reddit Is Sitting on an AI Goldmine

Think about it: Nearly two decades of real people having authentic conversations about everything under the sun?

Reddit is sitting on a treasure trove of real human language – priceless training material for generative AI and large-language models.

Reddit was early to recognize the incredible opportunity in data licensing deals with major AI players.

Tech giants such as Google and OpenAI utilize Reddit’s extensive user-generated content to train their AI models – and these partnerships are paying off in a big way.

Data licensing revenue surged 547% year over year to $33.2 million in the most recent quarter.

The company is also leveraging machine learning to bolster its own global user base.

Once heavily tilted toward English speakers (and users), Reddit is now using machine translation to expand its already extensive reach, driving 4x growth in daily active users in the third quarter (compared to the three months prior).

In 2025, Reddit aims to bring its content to over 30 countries.

Our x-ray view into Reddit’s digital traffic shows the company is successfully expanding its platform and audience segments.

Worldwide platform visits are currently up by 34% year over year:

Clearly, its strategy appears to be working.

Bottom line: While advertising still makes up the biggest slice of RDDT’s pie, AI is the real opportunity investors should be watching.

This recent IPO doesn’t appear to be on top of its growth mountain yet.

Until next time,

Andy Swan
Founder, LikeFolio

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