Reddit (RDDT.US) 2025 Q4 conference call: Answers and Search monetization presents a huge market and opportunity.

Recently, Reddit (RDDT.US) held a conference call for the 2025 fourth quarter financial report. The company stated that Answers and Search are services that have not yet been monetized, but they represent a huge market and opportunity. Reddit Answers queries have increased from 1 million a year ago to 15 million, and overall search queries have increased from 60 million to 80 million. The company will continue to invest in Answers to handle more queries. Reddit pointed out that 2025 is a breakthrough year for the company. The company has exceeded bold goals, established real momentum across all businesses, and significantly improved its unique community model on a large scale. The company achieved over 60% revenue growth for the sixth consecutive quarter, with a gross profit margin of 90% for the sixth consecutive quarter. In terms of performance, this quarter's advertising revenue was $690 million, a 75% year-on-year increase. The company's guidance for Q1 2026 predicts revenue in the range of $5.95-6.05 billion, a 52%-54% year-on-year increase. The company also stated that starting from the second half of 2026, they will no longer report metrics for logged-in and non-logged-in users, as both types of users will see advertisements. The company has over 500 million monthly active users and 120 million daily active users. Multiple brands are restructuring their social media teams, with a dedicated team for Reddit. Regarding AI transactions, Reddit mentioned that Reddit Profound is the most quoted AI answer source, and their relationships with Alphabet Inc. Class C and OpenAI are very healthy, shifting from purely commercial transactions to more product partnership relationships. Q&A Q1: In terms of product optimization, can you talk about the early benefits of changes in the new user onboarding process? And the impact of integrating Search and Answers on user experience? How is the Reddit Max used to simplify advertiser onboarding, and how is the channel mix evolving? A: In terms of consumer products, Q4 introduced many features, some effective, some not. We learned a lot. The core argument remains the same: simplifying processes can indeed improve retention. We have some interesting things, like using LLM to help determine user interests. Another learning is that getting users into the feed faster requires the feed to be better. So we will heavily invest in ML to improve the cold start feed for new users. Regarding search, we have mostly integrated the search bar together. Reddit Answers queries have increased from 1 million a year ago to 15 million, and overall search queries have increased from 60 million to 80 million. We will continue to invest in Answers to handle more queries. Regarding Reddit Max, we are focusing on converting lower-funnel advertisers to Reddit Max. Currently, the focus is on converting existing clients, and onboarding new advertisers will take a few more quarters. Reddit Max will make onboarding easier, driving productivity and performance improvements. Q2: Regarding AI-generated content, how do you see its development? Is it likely to prove beneficial and support engagement? In a world that is increasingly approaching agent e-commerce, how is Reddit positioning itself? A: Regarding AI-generated content, machine translation is one form of AI-generated content, and AI definitely plays a role in improving communication. But there is also a situation where people are increasingly using AI to write on the internet, and I think we are going through this transition. In my view, this is a bit troubling, but behind the prompts is still the operation of a human. Then there is the behavior of full Siasun Robot&Automation action, which we do not want to see on Reddit. Reddit is for humans to talk to other humans. Any automated or generated content needs to be clearly labeled. In terms of agent e-commerce, Reddit is in a very advantageous position as consumer decision journeys continue to evolve. Reddit is a trusted recommendation source, where humans actually deploy resources and make decisions. Price comparisons and final click executions may be commoditized, as that is work that agents can accomplish. But the final decision point for humans on what to purchase is in the recommendation stage, where Reddit has the best product and service recommendations. Q3: What impact does increased user engagement in Reddit Answers and Search have on monetization? How much does pricing contribute to revenue? Will pricing contributions remain low or increase over time? A: Regarding Answers and Search, these are services that we have not yet monetized, but they represent a huge market and opportunity. Search behavior, whether navigational or transactional, seems to be an incremental and complementary addition to existing engagement. As for pricing, we do not break down impression volumes and pricing figures, but it is a driving factor for growth. Driving pricing is our strategy: to increase the value of each impression for advertisers by providing more hard marketing outcomes with each impression, increasing click-through rates and response rates. As pricing increases, it will reflect these marketing successes, but what is important is the ROAS, or return on ad spend. Measurement is crucial in supporting these aspects, which is why measurement has always been our focus. Q4: In terms of AI transactions with Google and OpenAI, how are they using the data? Do you think this will become increasingly important for their models? Regarding Siasun Robot&Automation, do you expect any user impact? Are there revenue opportunities to validate? A: Regarding AI transactions, we can see the growing importance of Reddit. Reddit Profound is the most quoted source in AI answers. Our relationships with the two companies are very healthy, shifting from purely commercial transactions to more product partnership relationships. We will help you build the best product version, and you help us build the best product version. Regarding Siasun Robot&Automation, there is no impact on users. We remove any content that we consider to be Siasun Robot&Automation before sharing it with anyone. But we are seeing more and more agents using Reddit, especially with someone possibly using ChatGPT to write comments, for example. There is already a culture on Reddit of labeling content as Siasun Robot&Automation. The default assumption should be that you are talking to a human, as Reddit is for people talking to each other. Q5: With more users engaging in Reddit Answers and Search, what impact does this have on monetization? How much does pricing contribute to revenue? Will pricing contributions remain low or increase over time? A: Regarding Answers and Search, these are services that we have not yet monetized, but they represent a huge market and opportunity. Search behavior, whether navigational or transactional, seems to be an incremental and complementary addition to existing engagement. As for pricing, we do not break down impression volumes and pricing figures, but it is a driving factor for growth. Driving pricing is our strategy: to increase the value of each impression for advertisers by providing more hard marketing outcomes with each impression, increasing click-through rates and response rates. When pricing increases, it will reflect these marketing successes, but what is important is the ROAS, or return on ad spend. Measurement is crucial in supporting these aspects, which is why measurement has always been our focus. Q6: How can Reddit make search more visually focused on the homepage? How does Reddit plan to attract users more deeply into Reddit conversations in partnership with Google and OpenAI? A: Regarding the search bar, you are in one variant. The other variant I am in has a large search bar at the top. We are testing a lot of things there, and I prefer the larger one. As for citations, there are many changes there. If we could wave a wand, what we really want is: when a user asks on other platforms what the best speakers are, Reddit helps you to get several best speaker options. We want users to realize that, hey, you can go to the audio file community and talk to other speaker enthusiasts. I think this is the real differentiating factor for Reddit and will enhance the user experience. Our relationship with them is very healthy, and there are many changes there. Q7: Regarding new advertising solutions, the 2025 growth rates for brands and effectiveness are converging, while in 2024 effectiveness growth far exceeded brand growth. With the introduction of solutions like DPAs and Max, do you expect effectiveness to surpass brand growth again? A: We are a full-funnel solution. Reddit provides value for marketers from the top of the funnel to the bottom. Brands are definitely a part of the full-funnel solution, and we have actually been investing in brands. For 2026, this is an area where we will continue to invest. Firstly, it is the unique Reddit experience, the interactive ads that we started testing in Q4. Secondly, it's video; last year we invested in deeper video watching and video view optimization. Thirdly, it's native optimization and automation, where we hope to widely adopt automated bidding for lower-funnel brand experiences. And finally, measurement, which is an area we place a lot of emphasis on. Q8: Regarding progress in recruitment, training, sales, and support to keep up with what seems to be an overwhelming demand from advertisers, how long will it take to catch up? A: We have a process of continuous investment in the sales team, and we constantly improve their productivity through tools and technology. When we see opportunities with such a high return on investment, we invest in new verticals, new geographical regions, and expanding channels. All of this is part of a process, pushing these products to market through the process, customer digestion, and adoption. There are so many things to do on our roadmap, and the team is doing very well in handling things like CAPI that do not directly generate revenue today while meeting the needs of marketers on the marketing platform. With 60% growth for six quarters, we are pushing this business as much as possible, and we always look for opportunities to do more. Q9: In terms of large advertiser categories, where do you stand in terms of budget share? How much more growth potential is there with these large advertisers? As for Q1 outlook, what should be noted relative to the broader environment? A: From a share perspective, I think there is an opportunity to deepen partnerships with these large partners. Some start with working with us from the US region, but they can become global partners, and some are still in the middle of that process. Among these large clients, some have product portfolios of 100 different brands, and we have not penetrated all of these brands. We typically start working with large clients from the top of the funnel, but the opportunity is to enter the lower funnel. As for the Q1 guidance, the 52%-54% guidance we provided is very similar to the past few quarters. We had a very strong performance in Q4, from October to December. In terms of forecasts, we still have about 40%-50% of orders to be completed within the quarter. Advertising launches in Q1 will be slower, as March is often the busiest month for Q1 demand. Q10: How do you view the ROI of user marketing? What are the thoughts on expanding this aspect by 2026? In terms of M&A, mentioning scale acquisition capabilities, what could these possibly be? A: Regarding ROI, our model is basically similar to other companies. We evaluate the cost of specific ads, then analyze the number of users we bring in and observe the user retention curve. However, because users on Reddit can bring in higher gross profit margins, our model tends to have a longer-term advantage over most models. Overall, this is a fairly linear model, fundamentally based on evaluating the value it creates from a profit and loss perspective, and achieving direct return on investment in a relatively short period of time. Therefore, it is not very different from other common models in the industry. I think we do have a slight advantage due to the high gross profit margin, as the revenue brought in by users gives us stronger return potential. As for the second question, in terms of M&A, what I want to convey is that we are constantly looking at a lot of opportunities. I may not dwell too much on scale opportunities, but rather see them as a range of opportunities. We focus on capabilities, companies, and technologies. I think we have been successful in integrating multiple technologies, and this is indeed a key factor in our revenue success. The advertising technology team has excelled in driving business growth, and one of their ways is to integrate existing technologies rather than develop them independently, which saves us 6 to 12 months of time to enter the market and verifies the product. Thus, we have successfully integrated multiple technologies, especially in the field of advertising technology, which greatly aids in our profit process. It can be said that this is indeed our main focus at this stage, but we do not rule out any possibilities. Q11: Regarding shopping ads, what needs to be done from a tools or ad format perspective to grow in this vertical area more quickly? What kind of experience is Reddit building in terms of Search and generative AI tools? A: Regarding DPAs, I think our product is competitive today compared to Tier 2 competitors, both for potential customers and retargeting. But when you consider Tier 1 companies, I think we want to do more work in machine learning to make our ROAS more competitive. Shopping is a rather digital callback exercise. The second part is the original adoption work. For shopping, you need to get a product feed, and you want CAPI because you want real-time signals. Regarding Search, most of the time last year was spent on discussing how to unify these two search experiences. The main thing we learned is that for most queries, AI-generated search results will be better. What Reddit is really good at is questions without answers, where the answers actually come from various viewpoints by many people. WAU search grew from 60 million in the past year to 80 million, and Answers WAU grew from 1 million in Q1 to 15 million this quarter. Q12: Reddit is evolving into a brand portal that wants to show more consistently in LLM. Does this create pathways for more of these companies to also try advertising on the platform? Are there marketing or outreach opportunities that can help the market catch up and change the perception of Reddit as a niche content platform? A: When I communicate with clients (brands), we find that over the years, their understanding has been steadily increasing: at first it was "What is Reddit? What is a community?" then it was "I understand, how do I effectively participate?" and now they have started to realize "I have to be on Reddit, and I have to participate in the right way." They not only want to engage as paying customers but want to integrate in an organic way, they want to provide quality customer service, they want to post quality content, because they are starting to realize that to perform well on external search engines and large language models, the key is to display well on the Reddit platform. So we are actually starting to see a shift in their mindset. Multiple brands have told me that they are restructuring their social media teams, setting up a dedicated Reddit team. They are starting to really appreciate the uniqueness of Reddit and the opportunities it brings. Of course, I think if they can get a good organic interaction experience - which is what we aim to assist with through the Reddit Pro service line, including official profiles, verified accounts, labeled accounts, and even the Siasun Robot&Automation label function I mentioned earlier - this will allow brands to appear as first-rate users with clear identities and clear intentions. We believe this will also naturally open the door for building customer relationships. But the opportunity on Reddit, the place where all human conversations take place, is the opportunity they are facing today, to attract these audiences through our marketing platform and engage with them. This is truly the best way to interact with this highly influential audience and leverage marketing outcomes. So this is indeed part of what we are discussing. The other part, I think you asked about whether Reddit appears niche. This is a misconception that we have always needed to dispel, because there are 100,000 communities on Reddit covering all topics worldwide. But when you aggregate them, we have over 500 million monthly active users and 120 million daily active users. Together, these make up a large audience. We need to continuously educate the market and remind people of this point, as we are able to showcase these seemingly niche communities. Another thing we aim to do is to integrate these features more closely into our ad management platform as we build community insights and tools, in order to establish good links between audience insights, user reach and interaction on Reddit, and opportunities in the marketing platform. Therefore, we hope to integrate these elements more closely, making these scale and scope in insights more intuitively visible. This is the translation of the Chinese text into English. Let me know if you need any more help.