Reddit's ad revenue soars 61% in Q1 as platform navigates Google relationship

Reddit's first quarter financial results demonstrate the powerful growth of its advertising business, with total revenue reaching $392.4 million, a 61% increase compared to the same period last year. The vast majority of this revenue came from advertising, which accounted for approximately 91% of total revenue for the full year 2024.

The company's advertising revenue hit $358.6 million in Q1 2025, up from $222.7 million in Q1 2024 – representing a dramatic 61% year-over-year increase. This growth was driven primarily by "an increase in impressions delivered, and to a lesser extent, an increase in pricing," according to the company's filing. Reddit's top ten largest customers accounted for approximately 25% of total revenue in 2024.

Despite this concentration, Reddit's Average Revenue Per Unique (ARPU) showed healthy improvement across all markets. Global ARPU increased to $3.63, up 23% from $2.94 in the prior year period. The platform has a significant monetization gap between markets, with U.S. ARPU at $6.27 compared to just $1.34 for users in the rest of the world.

Reddit's advertising growth comes as the company expands its advertising formats and measurement tools. "We will continue to identify and develop potential new revenue streams," the company stated in its filing. "We have explored and continue to explore different ways for Redditors to make money on Reddit, including Reddit's earnings programs for contributors, developers, and creators, while also providing a source of revenue for Reddit as well."

Google relationship critical to Reddit's user acquisition

The financial filing reveals the crucial role that Google and other search engines play in Reddit's ecosystem. The company directly acknowledged that changes in search engine algorithms significantly impact its business performance.

"Our success depends partly on our ability to attract online visitors to our website. We rely, in part, on internet search engines, such as Google, to generate traffic to our website, primarily through free or organic searches," the filing stated. "Search engines frequently update and change the logic that determines the placement and display of the results of a user's search, such that the purchased or algorithmic placement of links to our websites may be ranked lower in the search results or otherwise less visible in a user's search."

Reddit specifically highlighted that its recent user growth was driven in part by "third-party search engine and algorithm changes." Daily Active Unique users (DAUq) grew to 108.1 million in Q1 2025, a 31% increase year-over-year, with much of this growth coming from logged-out users who typically arrive via search engines.

The company noted that logged-out users constituted 55% of global DAUq in Q1 2025, with many of these users finding Reddit through search engines. "Visitors that come to Reddit from search engines are generally not logged in and originate from both desktop and mobile web. Currently, monetization of these users is mainly through conversation pages and feed ads," the filing explained.

This reliance on search creates both opportunities and vulnerabilities. The filing warned that any negative change in search algorithms "could have a negative impact on traffic for our website and, ultimately, our business, results of operations, financial condition, and prospects."

The company has also faced challenges measuring search traffic, noting that historically, "a portion of our historical DAUq metric counted views of pages that were hosted using Google's Accelerated Mobile Page ('AMP') framework. The accuracy of counting the DAUq attributable to this AMP traffic relied on the accuracy and completeness of information received from Google."

In Q1 2025, Reddit achieved a net income of $26.2 million, a significant improvement from the net loss of $575.1 million in Q1 2024, with advertising performance being a key driver of this turnaround. Operating expenses for Q1 decreased significantly to $351.4 million from $804.6 million in the same period last year, enabling the company to translate its advertising revenue growth into bottom-line results.

As Reddit continues to grow its advertising business, maintaining and improving its visibility in Google search results remains a crucial factor for its continued success. The company faces the challenge of converting search visitors into logged-in users while maximizing ad monetization across both user segments.

Timeline

• Q1 2024: Advertising revenue reaches $222.7 million
• Q1 2025: Advertising revenue increases to $358.6 million, up 61% year-over-year
• Q1 2025: Global ARPU increases to $3.63, up 23% from prior year
• Q1 2025: Logged-out users (many from search) comprise 55% of global DAUq
• Q1 2025: U.S. ARPU reaches $6.27 vs. $1.34 for rest of world