Reddit’s Expansion Plans: Seeking Acquisitions in Adtech and Beyond

Reddit’s Strategic Approach to M&A Revealed in Fourth-Quarter Earnings Call

During Reddit’s fourth-quarter earnings call, CFO Andrew Vollero disclosed the company’s plans for further mergers and acquisitions. The focus is on acquiring businesses that can leverage Reddit’s large user base to enhance their products or help in expanding the platform’s user numbers.

According to Vollero, Reddit is actively seeking to purchase capabilities, technologies, and companies to strengthen its position in the market. Investors were keen to learn more about the specific opportunities Reddit is considering, particularly regarding scaled opportunities.

Vollero clarified during the Q&A session that the company views opportunities on a spectrum and is looking for technologies and capabilities that can complement its existing business. He emphasized that Reddit’s success in the past has been attributed to acquiring and integrating new technologies efficiently, rather than developing them in-house.

One of Reddit’s notable strengths lies in its adtech team’s ability to seamlessly integrate acquired technologies, leading to faster time-to-market and improved monetization capabilities as an ad-supported platform.

Vollero cautioned that while adtech acquisitions have been successful in the past, Reddit remains open to exploring other opportunities. The company’s recent financial performance has been robust, with $726 million in revenue, primarily driven by advertising. Reddit’s global daily active unique users have increased by 19% year-over-year to 121.4 million, surpassing earnings expectations.

Looking ahead, Reddit foresees revenue growth potential from its AI search product, prompting speculation about potential M&A activities in this domain as well. The company has been actively investing in AI technologies, including an AI search engine, and has a history of acquiring startups to enhance its offerings.

Recent acquisitions by Reddit have focused on bolstering its advertising capabilities and machine learning tools. Notable acquisitions include Memorable AI in August 2024, aimed at improving Reddit’s advertising tools. Other acquisitions in 2022 include Spell, Spiketrap, Oterlu, and MeaningCloud, each contributing to enhancing Reddit’s machine learning and text analytics capabilities.