Reddit projects higher Q4 revenue as AI-driven ads boost marketing demand

Reddit on Thursday, October 30 projected fourth-quarter revenue above Wall Street estimates, driven by growing adoption of its artificial intelligence-powered advertising tools, reports news agency Reuters.

The forecast sent shares of the social media platform up 9% in after-hours trading. Reddit’s AI ad platform allows marketers to place targeted ads directly within its discussion threads, known as subreddits, helping brands reach specific interest-based audiences.

AI tools expand advertiser base

The report quotes Chief Operating Officer Jen Wong who said Reddit’s ad business is attracting a wider range of clients, leading to a 75% rise in its active advertiser base in the third quarter.

“We’re also in early testing of our end-to-end automated campaign platform that uses AI to streamline campaign setup,” Wong said as quoted in Reuters report.Reddit’s vast user-generated content has also become valuable for AI companies seeking training data for large language models. The platform has licensing deals with Google and OpenAI and recently filed lawsuits against Perplexity AI and three others over alleged illegal data scraping.

“To continue its upward trajectory, the company must continue to protect its intellectual property,” said Jeremy Goldman, senior director at Emarketer.While global daily active unique visitors (DAUq) rose 19% year-on-year to 116 million, U.S. user growth slowed to 7% from 11% in the previous quarter. Average revenue per user increased 41%.Reddit expects fourth-quarter revenue between $655 million and $665 million, ahead of analysts’ estimates of $637.9 million, and adjusted earnings between $275 million and $285 million, surpassing expectations of $258.8 million, according to Reuters.