Reddit Inc continued to gain share of social advertising budgets in the second quarter, with agency checks pointing to strong momentum ahead, according to Jefferies. The platform's contextual targeting capabilities are driving more low-funnel ad spend, while newer performance products remain in early stages.
Reddit Inc gained share of social advertising budgets in the second quarter, with agency checks pointing to strong momentum ahead, Jefferies analysts said.
"Agencies cited Reddit's contextual targeting capabilities as critical for driving more low-funnel spend, suggesting new performance products could extend the runway for share gains," the analysts wrote in a note.
Digital ad spending accelerated sequentially in the second quarter, with growth expected to hold steady through the second half of the year, the analysts said. Agencies most frequently cited LinkedIn, Pinterest, Snap and X as the platforms losing budget share to Reddit. Advertiser adoption of Reddit's offerings remains concentrated in the mid and upper funnel, while newer performance products, including dynamic product ads, are still in early stages. Agencies said most advertisers remain in a test-and-learn phase with these tools, and further improvements to lower-funnel measurement and targeting could unlock additional budget by bringing Reddit closer to parity with competitors.
Reddit's investments in automation and ease-of-use, including its "Max" tool and Shopify integration, are lowering barriers to entry for smaller advertisers, according to the note. Jefferies said this could broaden Reddit's advertiser base and support continued growth if spending among longer-standing advertisers moderates.
By contrast, agencies trialing ChatGPT's advertising product described the results as underwhelming, citing above-average cost per impression and uncertain return on ad spend, with budgets that were either incremental or diverted from search rather than social.
Macro-sensitive advertisers turned more constructive after showing hesitancy earlier in the year tied to Middle East conflict concerns, the analysts said. Paid social continued to gain share within the broader digital ad market, supported by improving lower-funnel capabilities, growing investment in influencer strategies and an expanding role in product discovery. Reddit's gains were attributed to its high-intent audience, incremental reach and contextual targeting capabilities.
Reddit will report second-quarter results after the market close on July 30. The company had more than 126 million daily active uniques as of its last disclosure.
The Jefferies endorsement signals that Reddit's ad business is gaining traction beyond its core user base, with performance products still in early innings. Investors will watch the July 30 earnings call for updated revenue guidance and commentary on advertiser adoption of new tools.
This article is for informational purposes only and does not constitute investment advice.
