A Full Analysis of Reddit ($RDDT)

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Welcome back to GRIT Alpha! This week, we’re analyzing a company that found an interesting niche in the social media space — and leveraged it to gain millions of daily active users. Let’s now see the investment case for Reddit.

Let’s dive in! But first — check out the offer below.

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Stock Deep Dive: Reddit (RDDT-US, $26B MCAP)

In a world where AI usage is exploding - we need to focus on one core concept…

Proprietary Data.

AI models are only as good as the data that they are 1) trained on; and 2) can access.

Salesforce recently announced that they are cutting off AI startups (like Glean) from accessing Slack chat data. They are doing this because instead of using a startup AI agent, Salesforce is instead pushing for companies to use their own Agents, aptly named Agentforce.

As the war for AI agents intensifies, proprietary datasets are increasingly valuable.

Since Large Language Models (LLMs) are mostly trained on scraping the web, it only makes sense that they pay for this data.

This week’s pick has a large user-generated trove of data that they are effectively monetizing through AI company licensing agreements.

Swim with the tide instead of against it.

• Why now? 👉 AI Licensing Opportunity

• Overview 👉 What Does Reddit Do?

• How Do They Win? 👉 Value Proposition

• How Do They Make Money? 👉 Advertising & Data Monetization

• Competitive Landscape 👉 Niche Among Ad Giants

• By The Numbers 👉 Key Metrics

• Risks 👉 Potential Pitfalls

Why now? 👉 AI Licensing Opportunity

Reddit’s public market debut has been nothing short of dramatic. Since its March 2024 IPO at $34 per share, valuing it around $6.4B, Reddit’s stock has skyrocketed—recently trading near $187—as investors pile in. What’s driving the excitement now is Reddit’s unique position in the generative-AI boom. The platform sits on a goldmine of user-generated content—millions of discussions on every topic imaginable—that AI companies desperately need for model training.

In 2024, Reddit moved to monetize this data: it inked a deal with Google reportedly worth $60M for access to Reddit’s API, giving models more efficient ways to train. In May 2024, Reddit struck a partnership with OpenAI, granting ChatGPT real-time access to Reddit posts. In return, Reddit gains OpenAI’s tech to build new features, and OpenAI even became an advertising client on the platform.

This symbiotic approach—licensing Reddit’s large, up-to-date archive of authentic human conversations—opens a promising revenue stream well beyond advertising. It’s why now is a pivotal moment: Reddit is turning its vast trove of content into cash just as the AI era hits full stride.

With accelerating revenue, newfound profitability, and a unique data asset that AI developers covet, Reddit straddles social media and artificial intelligence at precisely the right time. The result is a rare growth narrative: a social platform converting its content moat into cash while still expanding engagement, making Reddit a potential breakout winner of the AI era.

Overview 👉 What Does Reddit Do?

Reddit is one of the world’s largest social media and online-community platforms—often dubbed “the front page of the internet.” Founded in 2005 by Steve Huffman and Alexis Ohanian, it has grown into a network of 100,000+ active subreddits (and more than 2M total) where users share news links, images, questions, memes, and more. Content is organized by topic rather than friends, with upvotes surfacing the best posts, creating passionate niche communities and a bottom-up curation system. The platform’s pseudonymous culture encourages frank discussion and honest opinions rarely found on friend-centric networks, making Reddit a vast, user-driven hub of information and conversation.

Reddit’s scale is immense: the site reaches an estimated 1+B monthly active users and about 97M daily active users, who together have generated over 16B posts and comments. By late 2024, the company reported 101.7M daily active uniques—putting it on par with Twitter/X and Snapchat in daily reach—but with far deeper engagement. Users dive into long threads for breaking news, personal advice, technical help, viral memes, or “Ask Me Anything” sessions featuring scientists, CEOs, and celebrities.

Culturally, Reddit has become an internet bellwether; trends often start on Reddit before spreading elsewhere. The 2021 GameStop meme-stock frenzy ignited on r/WallStreetBets, illustrating Reddit’s real-world influence. At its core, Reddit provides the infrastructure and algorithms to surface popular content while volunteer moderators enforce subreddit rules. This model—combining meaningful discussions, niche interests, and innovative ad opportunities—now underpins Reddit’s investment appeal as a newly public company.

How Do They Win? 👉 Value Proposition

Reddit’s edge is authenticity: topic-based subreddits surface unfiltered, crowd-curated insight that users can’t find on highly polished, influencer-driven apps. Threaded conversations and upvotes reward depth, turning posts into a durable knowledge base that ranks high in Google searches and continuously attracts new traffic—more content brings more users, who generate still more content.

Volunteer moderators police each subreddit, enforcing custom rules and pruning spam so that quality stays high without massive head-count. Over time Reddit has tightened site-wide policies and supplied better tools, allowing communities like r/AskScience and r/ChangeMyView to earn reputations for civil, expert discussion that rivals struggle to replicate; leaving the platform means losing those specialized networks, creating powerful lock-in.

The formula is working: Reddit’s U.S. user base is forecast to grow almost 31% YoY in 2025, the fastest among major social platforms. That momentum, plus a vast archive of real, up-to-date human conversation, makes Reddit indispensable not only to users but also to AI firms seeking authentic training data—reinforcing its relevance in the next tech wave.

How Do They Make Money? 👉 Advertising & Data Monetization

Reddit earned $1.3B in 2024, with >90% from ads. Promoted Posts let brands target by subreddit—contextual advertising that sidesteps cookie limits and commands premium CPMs. New comment-section ads already account for ~3% of impressions, and performance ads now drive 60% of ad revenue, showing Reddit’s rapid progress in monetizing its unique, interest-based feed.

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