Operator: Our next question comes from Richard Greenfield from Lightshed Partners. Please go ahead. Your line is open.
Richard Greenfield: Hi. Thanks for taking the question. I guess I wanted to follow-up, Steve, on your answer about Google. You really talked about how Google indexing for AI will ultimately be good for Reddit in the long-term. But I guess what I’d love to recall or help understand is when consumers are using AI plus, like I go on ChatGPT or I go on Gemini. And when I’m searching for something, I’m sure I’m getting content that I believe is coming from Reddit, but it doesn’t say this came from Reddit this — like when I go to Google and do a Google search, I get a very clear set of links and say, these are from Reddit and I click in and I go to a Reddit page, that doesn’t happen in AI. Will that happen in AI? Is that the future that we see?
And I’m just trying to understand traffic, this traffic end up slowing to things like Reddit.com and to your app versus these applications where you’re making money, how do you see this evolving? Because I think it obviously is impactful to your brand and what your brand means to the consumer?
Steve Huffman : Thanks, Rich. Good question. Look, when we do these agreements and the ones we have so far are very clear that if you’re using Reddit data in an answer like in your example, you have to link of Reddit or you have to say ready, you have to use our branding, you have to link to us. And I think that’s — it’s really important to your point. We are studying from a position of we would like Reddit to be out there. I think it’s good for the consumer. I think it’s been good for our platform. We’ve lived that for a long time in search. And I think of the AI products that we know today as really extensions of search, right, users are typing into a box, what they’re interested in and getting access. Now will people be able to take Reddit’s data, not send any users to us, take credit for themselves in and risk themselves going forward?
The answer is no. I think our historical way of handling public data no longer works, right? In the past, I think crawling Reddit benefited the whole ecosystem, including users on our platform as we said. But increasingly, we are seeing folks who hoard public data and they use it to enrich themselves. So we’re open-minded about having relationships with companies like this and being included in search and used for training, but it will come with guardrails, with agreements that protect our platform and our users. Similarly, in the past, Reddit has been open for research, and we want to preserve that. And so I think there are uses of Reddit data outside of Reddit data are really important. And I do want to be clear, under no circumstances will we ever license behavioral data or data that is not already public.
But I think these guardrails are really important. And so look, we’re open and we’re open for business, but we’re not just going to give it away. And I don’t think companies that have taken or continue to take our data can expect to continue to do so with no repercussion.
Operator: Our next question comes from Mark Shmulik from Bernstein. Please go ahead. Your line is open.
Mark Shmulik : Yes. Thanks for taking my question. Just a longer-term strategy one as we kind of get our first visual of Reddit as a public company. But as you think about all the different efforts that you’ve kind of shared underway around advertiser diversification, more ad products, the user economy, data licensing efforts. Any way to think through dimensionalizing how you’re thinking about prioritizing investments across all those monetization initiatives? Thanks.
Steve Huffman : Yes. Look, I’ll start and see if Jen and Drew have anything to add. Our top priority and where most of our resources go is the core of Reddit. And so this is the community and conversation platform our apps on the website and then the ad business. I think there’s a tremendous amount of potential in this area. So, I think we can grow users quite significantly, both in the U.S. and even more so outside the U.S. And then we’ve got a long way to go on that. I think we’re very happy with the progress. But really, it still feels like we’re at the beginning of our journey. There’s just so much upside. And so that’s the core of what we do and how we think about the future. And then kind of our next couple of chapters, yes, the user economy and developer platform and the search opportunity.
So, I think of this as like a 70/20/10 model. 70% on the core of our business, and then the rest on these future initiatives. Now, the things for our future initiatives, user economy, developer platform search, they’re pretty down the fairway for Reddit, I think, are very sensible opportunities to expand the platform and to grow our business. And so it’s not too far afield, I think all these things kind of fit together in a nice way. And of course, the other big opportunity, right, the international growth machine translation, I put that in the core, but it has a tremendous amount of upside itself. Jen, Drew, what would you add?
Drew Vollero: From here, Steve, I would just add that the margin profile of the business just really encourages investments. We have so many things that I think sort of lead us to want to invest in this business, at least in — we think of our business as a three-legged stool, right, in terms of ad revenues and licensing revenues and then kind of the user economy piece, but at least in the first two. I mean you’ve got a great collection of high-margin immediate payback, no capital. Like that’s way the ad businesses and that’s where we’re finding the licensing business here. The investments are really headcount-driven. And so those are just easy businesses to track. It’s easy to see from an accountability perspective, what you’re progressing here.
But the high gross margins give you a good chance for the payback, the immediate term, you can course correct if you need to. It really does sort of set yourself up to really look for the right investments and accelerate the revenue growth rate. That’s how we think about things sort of conceptually. Now, the third leg of the stool as it relates to the development platform, the user economy, that’s coming together now. And so we’ll see what that ends up being. Right now, we’re doing kind of more product market fit work. But overall, just the dynamic of the first two pieces of business, Steve, I think are just really unique and special in the sense that they’re short-term, high margin, no capital, those are really financially easy places to invest where you can see your payback quickly and course correct if you need to.
Operator: Our last question today will come from Andrew Boone from JMP Securities. Please go ahead, your line is open.
Andrew Boone: Thanks much for taking my questions. Two, please. The first for Jen, you talked earlier about feeling the business and adding diversity as a key area of focus. Can you just talk about your progress here, especially given the strength that you saw in SMBs this last quarter, I think there was 50% growth in the skilled business area? And then, Steve, a bigger picture question. Videos one of the key trends across in-app time spent at launch. Can you talk about how you think about video and how you’re corporate video onto the platform? Thanks so much.
Jen Wong: I could take the first piece. You’re diversifying on multiple fronts. Number one, in terms of geography, growing our monthly active advertisers outside of the U.S. Number two, in terms of advertiser size. So the scale channel, which is mid-market advertisers and SMBs, we saw strength in Q1 in an area of investment for us. But I like about those advertisers is, they really start at the mid-funnel, and they tend to be more performance-oriented. And I think they’re benefiting from some of the performance improvements we made in the top line. And there are just thousands more advertisers in that segment that can be on Reddit. So that is something we continue to work against. We are adding and growing our monthly active advertiser count in that segment.
That’s a focus for us as well. And then verticals. Verticals is something over the last 12 to 18 months, we expanded into and continue to have a lot of opportunity in our large customer segment. While we touch top 300 advertisers, a lot of these have multiple business lines. And we’re only penetrated in a handful. And so there’s just a lot more opportunity in sub-brands and sub-businesses and even in that segment as we grow out the different verticals. And so we see segments like Finance and Pharma and CPG growing 50% year-over-year, just is a signal that there’s just a lot of opportunity there. So it’s a priority for us. We are growing at monthly active advertisers. And I think that scale segment in particular, there’s just thousands more advertisers into our platform.
A – Okay. And that’s for video. As you say video is obviously huge, important content side on the Internet. I’d say, the way we think about that Reddit, looks there is different for what’s worth, Video is one of our fastest-growing content types. More-and-more people spend more-and-more time on video on Reddit. But I do — I think from a product point of view, try to think of Reddit as being content type agnostic, that is whatever type of content that users want to use to communicate or tell stories, they should be able to do so on Reddit. And so look, we’ve put a ton of effort into — in the last year of just the quality of our video player, making going in and out of video from our feed, making just the day-to-day experience of watching video on Reddit better.
And we’ve got some nice updates coming even in the near future towards that end. But with images, static images and tax are also hugely important to Reddit. And so a lot of our effort is how do we bring these things together in harmony. And so I’d say the core Retit product is parts of that are still under construction right now, making a mixed media feed, work really well, were text and links and hold their own alongside video and gifts and ads. That’s been really important to us. I think we’ve made some progress, but I also think there’s plenty of room for improvement there. So we’re going to — my answer is similar to my answer on search. I think we’ll make the video playing and creation experience on Reddit better. And when the product is really performing well, then I think we can start talking about monetization.
Obviously, it’s a huge monetization potential on Reddit. So we’ll get there before long, but our focus right now is on making the consumption and creation experience better. I think there’s plenty of to improvement. Okay. I think we’re at the top of the hour here, folks. Thank you so much for your time and attention. It’s really exciting to be here, I think, for our first public earnings calls, but the folks who have been with us helping us do this for so long. Again, we’re so grateful. And we will talk again soon. Thanks, folks. Bye.
Operator: This concludes Reddit’s Q1 2024 Earnings Call. You may now disconnect.