Reddit Unveils 'Free Form Ads' Mimicking Organic Posts, Ahead of IPO

Reddit on Thursday announced a new ad format designed to mimic its native user posts. Named "free-form ads," this format seamlessly blends with user-generated content, aiming to optimize engagement for advertisers. This move coincides with Reddit's highly anticipated IPO, signaling the platform's strategic move to enhance advertising opportunities and appeal to potential investors.

What are Reddit’s free-form ads?

As per the official announcement, the newest ad format closely resembles the "megathreads" often shared by users. Although the platform aims for these ads to seamlessly blend in with organic content, they may not be perceived as such by users. Acting as a hub for discussions, these ads encourage multiple users to engage with the product or brand being promoted.

Reddit suggests that this format is ideal for launching products, introducing brands, or sharing seasonal shopping guides. The new ad format offers creative freedom to spark engaging conversations and is accessible within the Ads Manager through predefined templates.

Companies like Just Eat Takeaway, Kraft Heinz, and Leica have already adopted these free-form ads. Similar to other Reddit ads, these will be labeled "Promoted" to distinguish them from organic posts.

Do free-form ads work?

During early testing, Reddit reported that the new free-form ads surpassed all other ad types in average click-through rate (CTR) by 28%. The platform showcased a successful campaign by Philadelphia Cream Cheese, which leveraged the post "How do you use 'Philly cream cheese' to take foods to the next level?" as an ad.

This post garnered over 1,000 comments, a 91% upvote rate, and achieved a 42% higher clickthrough rate compared to the brand's previous best performance.

"Free-form ads give advertisers the flexibility to build an ad of any length, using multiple media types, with a look and feel that’s native to the platform," said Jim Squires, Reddit’s EVP of Business Marketing and Growth.

Reddit’s IPO and Sam Altman’s Share

The social media platform has set a price for its IPO, scheduled for March 21 as per the NASDAQ calendar of initial public offerings. Shareholders of Reddit are aiming to sell approximately $748 million worth of stock, potentially valuing the company at nearly $6.5 billion, according to Quartz.

Sam Altman, the CEO of OpenAI, is the third-largest shareholder poised for a significant windfall with the platform's upcoming IPO. Quartz referenced a recent regulatory filing indicating that the company plans to offer 15 million shares priced between $31 and $34 each, with an additional seven million shares being sold by existing shareholders.

Business Insider estimates Altman's ownership at around 1.66 million shares, translating to a potential stake valued between $51.4 million and $56.4 million at the speculated share price.

However, a previous IPO prospectus filed with the SEC suggests that Altman may not directly own all the shares associated with him. These shares could be tied to one of his funds, such as Hydrazine Capital II and Apollo Projects, both mentioned in the filing.