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HomeEntrepreneurReddit CEO: AI Search, Paid Subreddits Are Path to Profit

Reddit CEO: AI Search, Paid Subreddits Are Path to Profit

During Reddit’s Q2 2024 earnings call Tuesday, cofounder and CEO Steve Huffman said that Reddit’s 342 million active users are increasingly using the platform as a search engine, resulting in over one billion internal searches per month.

Huffman also explained how AI could draw users deeper into Reddit while adding some advertising dollars to the company’s revenue. AI could help moderate content on Reddit to make the site safer and turn it into a search powerhouse.

“Search on Reddit is a huge opportunity,” Huffman said, on the call. “Many new users run a search… they’re literally typing into a box exactly what they’re interested in. So it’s [a] really important consumer product service area.”

Huffman said that Reddit will start testing new AI search result pages with summaries and recommendations “later this year” to help users find answers and new communities. Google, currently the largest search engine in the world with over 90% of the market, rolled out AI search results earlier this year to mixed reviews and has since scaled back the feature.

Related: Here’s Why Reddit Turned Down an Acquisition Offer From Google in Its Early Days, According to Cofounder Alexis Ohanian

Huffman also said that AI search held long-term advertising potential, which could increase the platform’s revenue. Reddit famously did not make a profit in the nearly 20 years it operated before it went public in March, but Huffman said that the platform was now profitable on an adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) basis.

“For the second consecutive quarter, we had positive cash flow,” he said. Reddit has only released two quarterly reports so far.Reddit CEO Steve Huffman. Photo Credit: Spencer Platt/Getty Images

Huffman also talked about more ways that users could make money off of Reddit. The team is working on getting the developer platform monetized “this year” so that creators can earn money, he explained.

Related: Here’s Your Cheat Sheet of AI Tools That Actually Work, According to Real Entrepreneurs

Even though Redditors may soon be able to monetize conversations, Huffman reassured shareholders that Reddit wouldn’t become another YouTube or Twitch. The current free communities on Reddit will keep growing and existing, with the paid subreddits existing alongside them.

“In my experience on Reddit, whenever we add basically a new way of using Reddit, what happens is it expands Reddit, but we’ve not seen it cannibalize existing Reddit,” Huffman said. “Now we will unlock the door for new use cases, new types of subreddits that can be built that may have exclusive content or private areas, things of that nature.”

The rest of Reddit’s report showed that revenue for the second quarter was up 54% year-over-year, hitting $281.2 million. The growth was led by a 41% increase in ad revenue, which jumped to $253.1 million.

The platform’s daily active users also grew by 51% to 91 million.

Reddit has content licensing deals with Google and ChatGPT-creator OpenAI.

Related: Reddit Traffic Nearly Triples in 8 Months, Posts Rise to the Top of Google Search

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