Reddit told analysts on Thursday's fourth-quarter earnings call that it is preparing for more M&A. Reddit CFO Andrew Vollero said the online forum site is looking for companies that can leverage Reddit's scale, meaning their products will be more impactful once adopted by Reddit's vast user base, or companies that can help the company grow its user base.
“[We’re] “We are looking at acquiring capabilities, technologies and companies,” he said in his opening remarks.
Investors clearly wanted more information, especially what the company had in mind when it came to large-scale opportunities.
During the question-and-answer portion of the conference call, Borrero clarified: “I wouldn't think too much about large-scale opportunities. I would just look at it as kind of a spectrum of opportunities.” He reiterated that the company is looking for features and technology to add to its business, noting that it has had success with this in the past.
“That was exactly one of the secrets of our success,” he noted.
Vollero explained that Reddit's ad tech team was particularly good at “embedding” acquired technology rather than building it in-house.
“We saved six months to market, 12 months to market, and now we have a proven product,” the CFO said, crediting these deals with improving Reddit's ability to monetize as an ad-supported business.
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Still, Volero cautioned that while ad tech acquisitions have been successful in the past, the company is “not ruling anything out.” That's why he said Reddit might acquire companies that would do well when added to a group of its size.
The company reported strong revenue of $726 million in the quarter, of which $690 million came from advertising. The company's daily active unique users worldwide increased 19% year over year to 121.4 million, and earnings per share of $1.24 exceeded expectations.
Reddit also said it sees more opportunities to generate revenue from AI search products in the future, raising questions about whether the company is also looking at M&A in this area.
Reddit, which has ramped up its investments in AI in recent months, including its AI search engine, has acquired startups in the past. In recent years, it has acquired ad tech companies and AI optimization tools, including Memorable AI in August 2024.
The acquisition, aimed at strengthening Reddit's advertising tools, joins several other acquisitions starting in 2022, including Spell, an AI platform designed to power Reddit's machine learning capabilities. Spiketrap focuses on improving ad targeting. Oterlu has developed a machine learning moderation tool. MeaningCloud is another startup acquired to improve Reddit's machine learning and text analysis capabilities.