Reddit user growth slows for third straight month- report

Reddit's user base declined for the third consecutive month in May, with total audience numbers falling by 6 million, primarily driven by a decrease in feed ad unit users; U.S. and international growth rates have also decelerated since March. Despite Reddit's challenges, Piper Sandler reports a strengthening digital advertising market, projecting 6.3% year-over-year growth for Q2 2025, while Pinterest is showing improvements in its Performance+ advertising product with lower cost-per-clicks. Meta Platforms is also experiencing lower cost-per-clicks and cost-per-engagements.

Analysis

Reddit's user engagement metrics showed a continued decline in May, marking the third consecutive month of contraction, with total audience numbers decreasing by 6 million month-over-month, according to Piper Sandler. This decline was primarily attributed to a 7 million user drop in feed ad units, while conversation units remained stable. The platform experienced a significant deceleration in growth, with U.S. audience growth slowing to 9% year-over-year in May from 16% in March, and international growth decelerating to 31% year-over-year from 51% over the same period. In contrast to Reddit's challenges, the broader digital advertising market is reportedly strengthening, with Piper Sandler projecting 6.3% year-over-year growth for the second quarter of 2025, an 80-basis-point improvement from the previous month's estimate and an acceleration from Q1. Pinterest (PINS) demonstrated positive developments in its advertising offerings, as its Performance+ product campaigns showed improved pricing with cost-per-clicks approximately 17% lower than standard campaigns in May, a notable improvement from November when they were 25% higher. Meta Platforms (META) is observing lower cost-per-clicks and cost-per-engagements, which, according to Piper Sandler, provides more comfort with higher cost-per-thousand impressions (CPMs); the firm also noted that Temu ad units on Meta in the U.S. are near zero, a factor seemingly priced in by the market.

Key Decisions for Investors

• Investors should closely monitor Reddit's user engagement and monetization strategies in light of the persistent decline in user numbers and decelerating growth rates.
• The improved efficiency and pricing of Pinterest's Performance+ ad product may signal enhanced competitiveness and advertiser ROI, warranting attention for potential positive impact on PINS.
• While Meta Platforms benefits from a strong ad market and favorable cost metrics, investors should continue to assess the impact of evolving advertiser dynamics, such as the minimal Temu ad spend, on its revenue streams.
• The overall strengthening of the digital ad market provides a positive backdrop, but company-specific performance, like the divergence between Reddit's user trends and Pinterest's ad product success, underscores the importance of selective investment.