If you have been very active on social media for the past few weeks, then there is every assurance that you must have come across Reddit trending alongside conversations on stocks. How a seemingly tiny social media platform became a key player in shaping up stockbroking directions is something that should probably be studied in schools.
Besides its undisputed integral role in the game of investing recently, Reddit has also grown from being an underdog forum to leading conversations across politics, civil society, and culture. With more than 430 million monthly active users engaging deeply within its 100,000+ interest-based communities, it is not far-fetched to say that the platform deserves this bragging right.
This article is a walk through the key factors that led to Reddit’s dominant status on the internet.
Why is Reddit so Popular?
To explain how Reddit transitioned into such a well-known and trusted forum in such an impressive time, we would look to key areas such as growth in users, marketing opportunities for brands, access to funding, etc.
Millions of Active Users
Reddit’s symbolic contribution to championing thought patterns and promoting essential topics throughout the year 2020 is evident in the startup’s year in review publication. According to internal data through end-October 2020 published on the Reddit blog, the platform had:
52 million daily active users – up 44% YoY
303.4 million posts – up 52.4% YoY
2 billion comments – up 18.6% YoY
49.2 billion upvotes – up 53.8% YoY
However, it is the 44% Year over Year (YoY) growth in its DAU count that sets it apart as one of the social media platforms to have outdone itself. More people flocking to the platform definitely indicates that something is being done right.
Like other A-list social media platforms, Reddit sought to capitalize on its expanding user base by introducing opportunities for sponsored ads which the company termed as ‘Trending Takeover’ ad units.
Reddit released this feature and announced it in March 2020 stating that brands can now advertise by sealing a spot on the platform’s hotly visited ‘Search tab’ and ‘Popular feed’.
The statement on the Reddit blog read:
“Fads, trends, and movements get their start in Reddit communities every day. And as we invest in highlighting those trends for user visibility and participation, it presents a huge opportunity for advertisers looking to align with conversations in real-time. […] With this new offering, brands looking to position themselves at the center of discussion on Reddit now have premium venues in two of the most commonly visited areas of the platform: Reddit’s Search tab and Popular feed.”
Two phrases in this circular are bound to attract brands who want to position themselves better in the public eye – ‘user visibility’ and ‘conversations in real-time. Reddit’s ability to deliver on both factors has attracted top brands like Spotify, Method, and Adobe to the platform.
What makes the ‘Trending Takeover’ ad units even more ingenious is that users can see the brands they love initiate relevant conversations that do not scream ‘I want to take your money.’
What this means for advertisers is an increased cultural relevance among the conversations that matter today. According to Shariq Rizvi, Vice President of Ads Product and Engineering at Reddit, “brands can now be part of where cultural trends are born online — Reddit.”
By targeting Reddit communities that are relevant to their niches, the Trending Takeover feature has helped brands like Method achieve a click-through rate two-times higher than the industry standard for social platforms.
What this means in the long-term for Reddit is more established brands choosing to advertise on the platform thereby contributing more to the forum’s popularity online.
Reddit’s soaring valuation is yet another proof of the trust the startup has garnered, especially from investors. On Monday, February 8th, Reddit announced that it had raised $250 million in a late-stage funding round led by venture-capital firm Vy Capital. This comes amidst plans to boost user growth and double its workforce.
The latest funding round now values the social news startup at $6 billion. This signifies an impressive doubling of the startup’s valuation when placed in contrast with its $3 billion valuations in February 2019, according to PitchBook, a provider of private-market data.
Reddit Chief Executive, Steve Huffman, in an interview, attributed the latest round of funding to higher advertising revenue. “It’s a good market to fundraise,” he said. “Valuations are very high right now. It never hurts to raise money when there’s an opportunity to do so, and Reddit had a strong year. For example, advertising revenue for the company shot up 90% in the December-ended quarter from a year earlier,” he said.
Conversations that Matter
The year 2020 is certainly a year that humanity would remember for so many things, top among this list being the coronavirus pandemic.
The cultural, political, and health-related conversations that stemmed from happenings throughout the year were represented well on Reddit. For instance, there were 50.2M+ mentions of COVID, COVID-19, or coronavirus across the platform.
According to the social media startup, in a year rocked by unprecedented events, users showed up to discuss, provide support, and navigate the challenges. The U.S. election, Black Lives Matter, and climate change were just a few of the issues at the forefront of Reddit’s top news, social justice, and politics communities across the platform.
Judging by the numbers, the sensitivity and relevance of these issues contributed to its popularity and rapid user growth very much. There was:
9972.4% YoY activity increase in r/blacklivesmatter
40.8% YoY activity increase in r/politics
r/USPS experienced a 55.1% YoY increase in activity
r/2020policebrutality was the #1 activism community (by subscribers) created in 2020
r/politicaldiscussion experienced a 106% YoY increased in its activity
The saying “there is no such thing as bad publicity” seems to very much represent the situation of Reddit after the recent volatility in shares of GameStop following a rally fueled by a group of day traders active on the r/WallStreetBets Reddit board.
Over a two-week period that began in January, GameStop’s stock (GME) blew up by 500 percent, peaking at $483 on January 28th. Several government entities are now investigating whether market manipulation led to the rapid rise. While this brings Reddit into the midst of the Wall Street trading frenzy, it has also helped the platform score more in terms of attention and user growth.