Reddit has been around for about 15 years, but the site has grown dramatically over the course of the last five years alone, with people like Jared Leto and even Snoop Dogg investing in it.
However, have you ever taken a moment to consider how Reddit makes money in the first place? That’s the question I’m going to answer today.
So how does Reddit make money? Reddit makes the vast majority of its money through advertising. Reddit also sells premium memberships and awards that can be given to particularly impressive posts to its users.
However, there are a few more details to consider about how Reddit makes its money that can’t be handily summed up in a single paragraph. I’m going to explore Reddit’s main sources of income in further detail over the course of today’s article, and then I’ll broach some closely related topics.
How Reddit Makes Money
The first question that pops into most Redditors’ minds when they see that a Reddit account is 100% free is “How does Reddit make money?” Well, the first thing to consider is that a basic Reddit account is free, but Reddit does feature paid accounts, known as Reddit Premium.
Reddit Premium offers a range of advantages over a basic account, including the complete elimination of ads from a user’s home page and subreddit feeds. However, this is just the tip of the iceberg. Reddit Premium users also unlock the exclusive r/lounge subreddit, as well as 700 coins per month.
Recently, Reddit upped the ante with its premium offerings, including new awards for Premium members as well as special app icons for the mobile Reddit app and even subreddit powerups, much like Discord Nitro. However, in spite of all of this, Reddit Premium makes up a very small share of Reddit’s income.
The true source of Reddit’s riches is through advertising, which comes as little surprise when you consider the average number of ads your typical Reddit user sees over the course of a day. While you may be able to block these ads out using something like Adblock, most of Reddit’s users are on the mobile app, where this is impossible.
Like any other social media site, the main advantage that Reddit has over other sites is that it knows enough about its users to target them with ads. Both research and common sense show that targeted ads are far more effective because it will be more likely that a user will be interested in something that suits them.
For larger businesses, Reddit offers managed ad campaigns starting at the low, low rate of $50,000. When you invest in a marketing plan like this one, you essentially contract Reddit’s sales team to work for you and put your business up in all of the right places to get you results.
For smaller enterprises that are still looking to make an impact with their ads, Reddit also offers an auction-based advertising system. This is similar to how other social media sites like Facebook and even YouTube offer advertising auctions, and Reddit works on a CPM basis, meaning the cost per thousand impressions.
The minimum rate that you can start at with an auction ad campaign on Reddit is $3.50 CPM, but there’s no guarantee that you’ll get that unless you’re working in an incredibly niche market. To get your ads up on the site, you’ll have to compete with other businesses working in your wheelhouse to ensure that you can host your ads for an affordable enough price.
How Effective is Reddit Advertising?
The effectiveness of Reddit marketing depends on the kind of product you’re selling and whether your ad campaign is targeted at the right people. There are a few innate hurdles that you’ll have to get over when you decide to market on Reddit, making it a little more challenging than other social media platforms.
The first thing that you’ll need to consider is that Redditors like their privacy and their feeling of relative anonymity when they use the platform, since Reddit hides personal info like emails. This is in stark contrast to other social media sites like Facebook and Instagram, in which your name is typically up there for all to see.
Since Redditors are so private, they’re also suspicious of any targeting marketing that looks like it’s pandering to them. Reddit users have typically been on the internet for a long time, and trying to pander to them in a way that makes them cringe will likely result in your advertising campaign crashing and burning.
However, a well-done, self-aware marketing campaign that clearly has some value to it will be loved by most Redditors, and it will be sure to get you back the money you invested in it, and then some. Whether you’re trying to advertise a movie or a political campaign, Reddit is fertile ground for ads.
Does Reddit Have Competitors?
As a social media site, Reddit has plenty of competitors, including monoliths like Facebook/Instagram, YouTube, Pinterest, and more. However, when you look beyond the bounds of the social media industry, you’ll see that Reddit also has competition in the news and content aggregation domain.
There are plenty of sites that have had ideas that are similar to Reddit’s, including Digg, 9GAG, Tumblr, and more. However, in spite of these sites’ popularity, Reddit’s far reach and huge user base have essentially made it the top dog of its field, and the site’s executives seem to understand that.
Over the course of the past few years, Reddit has become more and more corporate, trying to shed its reputation of being a toxic hangout for males in their 20s. While this is certainly still the vast majority of the site’s demographic, the people running Reddit are trying hard to paint a more diverse image for Reddit.
Whether or not this succeeds remains to be seen, but it seems to be working for them so far.