Prolonged protests put Reddit at crossroads with ad revenue

Reddit is dealing with continued disruption to its advertising business as some clients keep spend reduced while the platform deals with ongoing protests against its new developer fee.

With the return of many brands still up in the air, some buyers see Reddit going the way of Twitter by upping investments in alternative revenue streams to make up for ad reductions. Others see Reddit at too critical a moment in its nascent ad lifespan for such a move, as marketer interest in the platform has never been higher.

On June 12, around 8,000 subreddits announced that they would be privatizing their communities for 48 hours to protest Reddit charging developers for data and content use. While many subreddits opened back up on June 14, others have prolonged their efforts indefinitely after The Verge publicized an internal memo from Reddit CEO Steve Huffman telling employees to wait out the protest.

Huffman also said at the time that “We have not seen any significant revenue impact so far and we will continue to monitor.”

When a subreddit goes private, that means redditors won’t be able to search for or join that community, which stunts the reach of ads served within them. That performance hit has been enough for some advertisers to pause spend on the platform entirely, while others dialed back their investments.

The impact has also extended beyond Reddit’s walls. Earlier in the month, Prabhakar Raghavan, Google’s SVP of search, said that search users were dissatisfied with being unable to add “Reddit” to many of their searches, according to leaked audio from a company meeting obtained by CNBC.

Reddit’s controversy has also continued for longer than many media buyers suspected. On June 19, a hacker group posted that it would leak confidential data it stole during a February breach if Reddit doesn’t undo its new pricing model. Some subreddits began exclusively posting pictures of John Oliver or changing their topics, while others marked their communities as NSFW to prevent ads from showing.

“We are more concerned with overall participation in that extended aspect of the protest and how many subreddits will switch over to NSFW classification, effectively removing ad placement from them,” said Darren D’Altorio, VP of social media at Wpromote. “If that becomes a widespread action — right now it's only a handful of subreddits — it could impact ad load and affect CPMs and delivery.”

Admins have asked moderators to remove this mark, and Reddit began removing moderators last week so they comply.

Just over 2,400 communities are still private, as of June 27.

While the size of protests has shrunk, their continuation has left some brands with one foot out of the door.

Tinuiti advised some clients to reduce their spend and invest more in other platforms during the first week of protests, Elizabeth Keefer, associate director of paid social, told Campaign US. One week later, some returned to normal levels while others continued operating at a reduced rate.

Wpromote had two client category takeovers — a premium buy that allows brands to place ads in prime spots across a range of communities within a category — appear in blacked-out subreddits, D’Altorio said. The media company was able to reschedule both buys for last week without delivered impressions counting against the purchase. It also suggested that several clients reschedule ‘ask me anythings,’ an interactive format where a poster responds to questions within a thread.

Two of social tech agency GoSpooky’s clients paused their Reddit advertising as soon as the protests kicked off to avoid appearing “tone deaf,” said co-founder Tim van der Wiel. He added that around five to 10% of the brands’ media spend went to Reddit, as they were just getting started on a platform where users have historically felt hostile to brands.

Those two clients have since resumed their activity on the platform.

Social network Twitter also faced extended ad pauses since Elon Musk took over the platform in October. Given the parallels between Reddit and Twitter, as Reddit faces uncertainty over whether or not it will return to its full advertising strength, Van der Wiel anticipates a trend of community-led social media platforms banking on alternative revenue streams when ad revenue is jeopardized.

“Platforms are now actively trying to get money from their users,” he said. “Twitter started it with verification badges through Blue. Meta is doing it as well with its verification subscription service.”

Twitter also upped its application programming interface fees in March.

Reddit has had a subscription service since 2010, when it launched Reddit Gold as a way for members to reward one another. Reddit Gold was evolved into the more expensive Reddit Premium in 2018, through which users pay $59.99 per year or $6.99 per month for an ad-free experience and additional features such as icons, avatar gear and access to a member’s lounge.

D'Altorio agreed that Reddit will likely pursue other revenue streams, but suspects that it will hold off until controversy is long behind it.

"Pivoting to another cash grab when controversy arises looks terrible and has major potential to backfire," he said. "The Twitter subscription saga is a cautionary tale in many ways."

If Reddit does immediately follow suit with other ways to monetize, it would be diverting attention from a nascent ad model that brands are just now paying attention to. As a result, other buyers expect Reddit to continue building its ad business.

“Reddit, while having made huge strides in ad products over the last year, is still at the very beginning of its advertiser journey and with that, there is bound to be hiccups,” Keefer said. “I see this as an opportunity for Reddit to come out with even more creative ad formats.”

In April, Reddit announced that Horizon Media, PMG and Wpromote had joined its independent agency program that provides partners with ad incentives, measurement tools, early access to ad product tests and support from Reddit's in-house creative agency KarmaLab, which are otherwise reserved for clients at the holding company level. Tinuiti also re-upped its partnership this year.

Wpromote currently spends less than 5% of its total media budget on Reddit, and plans to up that to 6% this year, D'Altorio said. Last year, it had a roughly $600 million media budget.

“We would consider Reddit to be an emerging platform,” he said. “We’re seeing a tremendous amount of interest on the paid side for brands wanting to understand what advertising on Reddit looks like…while it’s admittedly the smallest portion of our total media under management, it is one of the fastest growing.”

That interest stems from the ability to tailor ads to specific niches within communities, he added.

Wpromote said it will continue to monitor Reddit for the value it provides to clients’ media mix while balancing its brand safety risk.

“This is an instance where the community of Reddit has a lot of power because the community is the platform,” D’Altorio said. “This is why we’ve invested in partners with these platforms because they’re part of the ecosystem and it’s our responsibility to have perspective and guide across the ecosystem.”