Newly public Reddit has to level up its performance-driving products, and—after 20 years—figure out how to more fully monetize its signal-rich chat-based content.

Reddit’s long-awaited IPO values the platform at $6.5 billion on 2023 revenues of $804 million (98% driven by ads), with a loss of almost $91 million. While it’s growing, it missed its 2021 goal to hit the $1 billion mark in 2023. And its revenue is dwarfed by rivals like Snap (roughly $4.6 billion in 2023, per earnings), let alone giants like Meta (roughly $135 billion in 2023, per earnings).

“We have a lot of opportunity for growth,” COO Jen Wong told ADWEEK shortly after Reddit’s grinning mascot Snoo rang the opening bell at the New York Stock Exchange. “We’re always focused on the long term; we’re continuing to invest in the roadmap.”

On paper, Reddit looks to be in an optimal position to grab ad spend from X and TikTok—whose future in the U.S. could be shaky. Reddit has a contextual-based ad business that is safe from the tremors of cookie deprecation, and it’s making aggressive inroads with automation to make buying ads on its platform more efficient.

But ad buyers have often seen the platform as seasonal spend, and squeamish brands historically wary of appearing next to unsuitable content have stymied a flow of ad dollars. To get over those brand-safety fears and get that recurring spend, Reddit must prove its ads work throughout the funnel.

The growth roadmap

Reddit began this quest in earnest last year when it started offering pay-per-click ad products and got more competitive returns on click traffic. 

But Reddit still has a lot of work to do to catch up to powerhouses like Google and Meta. Reddit has historically been stronger in driving mid- and upper funnel activity, said Elizabeth Keefer, director of growth at Winclap, which helps brands attract users.

Clients, however, are pulling back their spend on these activities in favor of ads that drive more direct action from consumers. That’s pushing more ad spend to search channels and Meta, whose popular AI-powered Advantage+ shopping tool is sustaining marketer interest.

To catch up, Reddit is now building performance-driving formats and post-click actions, like app installs, purchase or add to cart. While it has developed some of these features, it’s early days, and advertisers are clamoring for more.