Walking The Razor’s Edge: Reddit Tries To Figure Out Its Ad Business

redditWhen Ellen Pao stepped down from her post as CEO of Reddit on Friday – ceding the spot to Reddit co-founder Steve Huffman – it left Reddit’s monetization situation murkier than ever.

In a question and answer session on Reddit’s popular AMA (Ask Me Anything) section, Huffman wrote, “Reddit has a lot of cash. Monetization isn’t a short-term concern of ours.” He added Reddit “will continue to experiment with different efforts so that when time is right we know what works and what does not.”

That includes building out its advertising tools, a Reddit spokeswoman told AdExchanger.

“Reddit has massive scale, which is attractive to advertisers,” she said. “We want to allow brands and agencies to leverage not just the reach of Reddit, but the engaged community and create meaningful conversations with them on a more consistent basis.”

Despite a user base that can be extremely hostile toward corporate messaging, Reddit already has some advertising tools. For two and a half years, it’s used Adzerk’s SaaS ad management software to serve banner ads. It has also built a native platform to sell sponsored posts on top of Adzerk’s API, which lets users comment on, give feedback and interact with advertisements.

The search engine DuckDuckGo has used the native product, Adzerk CEO James Avery said, to great effect: “They have ads on there with 60 or 70 comments from users asking questions about ads and giving feedback. That kind of engagement is unique and you don’t see it a lot of places.”

Companies must work directly with Reddit to buy advertising, either using a self-serve or managed services offering.

And if there’s one thing Reddit has that could attract advertisers, it’s user data. Redditors use the platform to discuss video games, health regimens, make-up tips, their legal or relationship problems and more.

That’s some highly sensitive stuff, and Reddit has it all under lock and key, according to Avery. Reddit, he said, is the firm’s “most privacy-conscious customer.”

For instance, there’s no JavaScript on the main page, Avery said. This keeps Adzerk – and advertisers working through Adzerk – from seeing logged-in users or doing cross-site scripting to hack a user’s account.

“Reddit’s really focused on making sure that if a user on Reddit is sharing personal information, or has an anonymous login, that data isn’t leaked out to potential advertisers, ad networks or even us,” Avery said.

Furthermore, Reddit does not allow any third-party data tracking, and advertisers don’t have access to user-level data or targeting.

“We don’t allow advertisers to target based on user names as our privacy policy does not reflect this level of granular targeting,” said Reddit’s spokeswoman. “We want to respect the anonymity of our community above all else.”

So unlike Facebook – where one can buy large segments of consumers who like, say, Ford trucks – Reddit really isn’t much of a scale play. Brands that want to buy at scale on the platform have to bring their own data to do so.

“That’s something Reddit doesn’t inherently offer,” Avery said. “They offer scale but they don’t want to retarget users.”

The easiest way to target on Reddit is to buy inventory on a subreddit, a section of the greater Reddit site devoted to a certain niche – like “MaleFashionAdvice” or “MakeupAddiction.”

This is not as easy as it sounds, said Evan Levy, senior advertising manager for digital marketing agency Method Savvy, which ran a campaign on Reddit in May for its client Stanley Gibbons, a brand that sells collectible stamps. After discovering a subreddit devoted to philately, Levy saw tremendous opportunity to reach an audience difficult to find on open exchanges

“It’s relatively difficult to go into a display vendor or a DSP and say, ‘Find me all the philatelists on the Internet,’” he said. “Reddit was a gold mine in terms of an audience for us.”

But when Method Savvy got into the Reddit ad ecosystem, Levy said they ran into trouble immediately. With budget constraints and a one-month timeline, the agency was limited to the self-serve platform.

“We built the campaign only to find that the inventory for the entire month in our target subreddit was sold out,” Levy said. “There was no indication of that earlier in the sales process and no indication that would even be an issue.”

Method Savvy moved the campaign to other subreddits related to collectibles, but ran into more problems when running campaign diagnostics.

“Getting any sort of manageable data out of the Reddit ads platform from the self-serve side is an absolute nightmare,” Levy said.

For instance, if advertisers wanted to serve an ad to multiple audiences, they have to build individual units that each report separately. In other words, there’s no aggregate view in Reddit’s self-serve offering.

“Pulling this kind of information for reporting was such a ridiculous burden that we weren’t that interested in running another campaign, because we couldn’t get the audience we wanted and the reporting system was beyond frustrating,” Levy said.

Essentially, the Reddit audience can be great, especially for advertisers that want to reach hard-to-find segments. But the ad platform itself, according to Levy, “leaves much to be desired.”

Because of these hurdles, advertisers tend to take a different approach to marketing on Reddit. They often create user handles and interact directly with consumers in threads – sometimes transparently and other times not (which risks raising the ire of Reddit users). For instance, the CEO of men’s footwear brand Allen Edmonds interacts with the users of MaleFashionAdvice. And a Pornhub spokeswoman interacts with Reddit users across a number of subreddits.

But not all brands are as transparent with their marketing strategies on Reddit, and some masquerade as normal users to covertly promote a brand message. (Levy said Method Savvy hasn’t done this but he has heard that “a great number of companies do both these things.”)

So what’s next for Reddit? Condé Nast parent Advance Publications is a majority stakeholder, and it’s under pressure to grow audience and make money, especially since it raised $50 million in venture capital funding last October.

Certainly making its ad products more accessible is a priority – even if its data assets won’t be in play. The platform has beta advertisers running through private marketplace and programmatic guaranteed deals.

Reddit’s spokeswoman added that these offerings aren’t core to its current ad sales business. Programmatic, she said, is essentially an option for brands and agencies that prefer to use it.

And the advertisers working in those early-stage private marketplaces are still boxed out from Reddit user data.

If this policy changes – potentially infuriating an already touchy user base – advertisers on Reddit will simply be unable to do certain things. Retargeting of any kind, for instance, would require a change to the company’s privacy policy.

And whether or not advertisers flock to Reddit ultimately hinges on whether its users continue to flock there as well.

“Smart brands aren’t tied to any platforms; smart brands are trying to find their audience wherever they may be,” Levy said. “If you see a windfall of users evaporate from the system, I don’t foresee brands being that interested in the platform. If you see similar levels of engagement, interest and actually people on the site, I definitely think there’s opportunity in the future for further investment.”

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