Despite its popularity, Reddit has never made a profit in the 20 years since its existence. For the first time, in 2024’s Q3, the company made a profit.
The driving force behind this miracle is an AI-powered translation tool that has made its contents available to non-English speakers, increasing viewership by 4 folds.
Impressed by the success, the company has decided to expand its translation tool as well.
For the first time in the 20 years of its existence, Reddit has turned a profit in Q3 of 2024. This might surprise most netizens, but despite being so popular, Reddit had never made a profit before.
But the last quarter’s financial report revealed a “Net Income of $29.9 million and a net margin of 8.6%, an improvement of $37.2 million from the prior year”. As soon as the news came out, Reddit’s share prices also went up by 41%.
So What Caused This Change?
A lot of people might think that the profitability is a result of Reddit’s new deal with OpenAI. For those who don’t know, in May this year, Reddit signed a deal with OpenAI, allowing the company to use the data available on the platform for training ChatGPT. The financial terms of this deal were not disclosed.
A similar deal was also done between Google and Reddit for $60 million/year. However, neither of these are the main factors behind such massive revenue growth.
The real reason is a translation feature. Reddit recently introduced a new AI-powered translation tool that makes the platform’s content available to non-English speakers as well.
As a result of this, the platform noticed a 4x increase in visitors in the last quarter.
This in turn boosted the company’s advertising revenue by 56%, all the way up to $315.1 million.
Impressed by the results, CEO Steve Huffman said they will be expanding the translation feature to over 30 countries through 2025. Another small chunk of the revenue (which likely came from Google and OpenAI) contributed $33.2 million to the total.
What Does the Future Hold For Reddit?
So far, it looks like the future shines bright for Reddit. Since Huffman promised to expand the translation tool, in the coming quarters, we can expect more viewership which in turn will drive advertising revenue.
Apart from that, Google’s latest deal with Reddit might also enable Reddit pages to rank higher in the search results. If that happens, it’ll be another massive source of organic user traffic for the platform that will further add to its advertising revenue.
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Krishi is an eager Tech Journalist and content writer for both B2B and B2C, with a focus on making the process of purchasing software easier for businesses and enhancing their online presence and SEO. Read more
Krishi has a special skill set in writing about technology news, creating educational content on customer relationship management (CRM) software, and recommending project management tools that can help small businesses increase their revenue.
Alongside his writing and blogging work, Krishi’s other hobbies include studying the financial markets and cricket. Read less
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