Last month, Reddit debuted a new ad format that looks just like real user posts. Called free-form ads, the posts mimic the site’s megathreads that include a variety of media in one thread. Now, the site is adding another new ad format: Dynamic Product Ads.
In 2023, the company says people added “reddit” to their search queries over 32 billion times. Reddit hopes that Dynamic Product Ads will help advertisers reach those customers by showing them relevant products exactly when they’re researching them.
Calling the communities on the site “naturally commercial,” a blog post about the new ads claims that 40% of conversations on the site are related to purchasing decisions or products. Reddit argues that people trust these conversations, as 75% of users say they can have “genuine” discussions about brands or products on the platform.
Also: 3 ways the Reddit app just got easier for you to use on Android and iOS
Will users continue to trust Reddit if real conversations are overtaken by ads?
Despite its immense user base, Reddit hasn’t turned a profit in its entire 20-year history. The company has few significant revenue streams outside of advertising. Its recent IPO may have injected some cash into the company, but that was a one-time affair. Reddit wants to keep focusing on ads: Instead of charging you for features directly, most revenue comes from the ads the site shows you.
Creating enough ad revenue to make a profit but keeping ads subtle enough that users can still have genuine interactions is a tricky balancing act.
Reddit’s blog post claims Dynamic Product Ads provide a “contextually relevant, personalized ad experience.” They populate product images and pricing in real time from the advertiser’s site, allow brands to retarget customers who have engaged with an ad before, and support placement as both a single image or a carousel.
Reddit EVP of Business Marketing and Growth Jim Squires added that “Reddit shoppers are worth more (than other potential ad targets) because they spend more time on the platform in the research and consideration phases of their purchase journeys.”
So far, the ads are working, Reddit claims. During beta testing in Q1 2024, Reddit says Dynamic Product Ads drove a 1.9x greater return on ad spend compared to conversion objective campaigns. Reddit did not share any metrics on the user side of the equation.
When it comes to ads, Reddit is just getting started. “Over the coming years, we intend to continue investing in both advertising and organic shopping solutions to further build on Reddit’s rich shopping conversations,” the blog post concluded. That includes new ad formats, a merchant platform integration that welcomes smaller merchants, and other ways to simplify purchasing.
Dynamic Product Ads are now in public beta and available to all Reddit advertisers globally.
