Tattoo aftercare brand Mad Rabbit saw quick and early success on TikTok. But with the platform’s future in potential flux, the strategy is shifting.

The direct-to-consumer brand has nearly 600,000 TikTok followers and has been posting more of its TikTok content to social platforms like YouTube and Snapchat in the last year, as well as increasing spend.

This was spurred by uncertainties over TikTok’s future, plus technical issues with TikTok Shop and tracking conversion campaigns. As such, Mad Rabbit stopped buying ads on the platform in August 2023 for eight months.

Mad Rabbit reported $20 million in revenue in 2023. While nearly 60% of its sales come from Meta behemoths like Facebook and Instagram, TikTok generates 15% of its sales. While smaller, the platform’s role in building new audiences is important, partly thanks to the For You page algorithm driving product discovery.

“Whenever you post [to TikTok], it’s not your followers that are seeing it all the time, it’s multiple people outside your following,” said Mad Rabbit co-founder and chief revenue officer Selom Agbitor, who will be speaking at ADWEEK’s Social Media Week event in New York next week about the impact of a potential TikTok ban. “A lot of content that does well for us on TikTok also ends up doing well on YouTube Shorts.”

The ongoing debate in Washington, D.C., over TikTok’s fate in the U.S., should its Chinese ownership fail to divest, has prompted some DTC brands like Mad Rabbit that rely on the platform to test content, reach new audiences and boost sales to diversify their platform strategy.

Mad Rabbit debuted on TikTok in late 2021, getting cut through with its soothing gel product swipe videos, where tattoo artists applied the gel with a wooden stick to enhance the appearance of tattoos, driving brand awareness. This propelled its followers from 50,000 to nearly 600,000 over three years, with videos like applying healing gel on tattoo sleeves netting millions of views and over 1,000 comments.

“We’d have over 1 million views on every other post,” said Agbitor. “That’s how easy and fast it got for us.”

Mad Rabbit’s TikTok content expanded to include educational tutorials on products and reaction videos, which are also posted on YouTube Shorts and Instagram Reels. The content is created by a four-member team, posting either once or twice a day on TikTok.

“It’s easier to test on TikTok since it’s people who don’t follow [the page] that view your content,” said Agbitor. “If we lose TikTok, we lose our testing strategy.”  

And with the potential of a ban looming, that’s not out of the question, so the DTC brand is building up its audience elsewhere.

Driving more sales on YouTube and Snapchat

In the past six months, Mad Rabbit has started posting content to Snapchat’s Spotlight feed to grow its younger audience, between 18 and 21, hiring an additional social media associate. While follower growth is steady, it has not been as rapid as on TikTok.

The brand is also now posting Snapchat story ads, but “customers’ lifespan is not as long as it is on Instagram or TikTok,” said Agbitor

While it has been posting to YouTube for years, subscribers have grown by 95% from 2023 to 2024, the company said. Admittedly, that comes from a small base: It currently has nearly 21,000 YouTube subscribers.

After seeing YouTube drive 5% of sales, Mad Rabbit is increasing spend on YouTube ads, allocating 7% of its digital ad spend to the platform.

Mad Rabbit resumed buying paid ads on TikTok last month following a period without incidents on TikTok Shop. But, lingering questions about TikTok’s privacy, the possibility of a future ban and technical issues like recurring product takedowns from TikTok Shop have deterred the brand from investing more.

Marketers and adtech firms have latched onto metadata to improve ad targeting on the web and connected television, as data quality worsens with cookie decline.

Metadata is data about the environment of the ad, said Mike O’Sullivan, co-founder of data firm Sincera. “It’s data that puts the transaction in context,” he said.

While metadata can refer to any signal in the bidstream, its recent applications often center around advanced contextual signals, like ads-to-content ratio and genre, which can direct marketers toward more premium inventory. 

The looming deadline of cookie deprecation has made looking for signals outside of audience data necessary. And advancements in artificial intelligence have made it possible for algorithms to ingest hundreds of these potential alternative signals and figure out which is best to power a campaign, on the web or elsewhere, O’Sullivan said.

​​”These signals have been historically underutilized because of an overreliance on user IDs,” he added.

Metadata in action

Rain the Growth Agency analyzed its log files and found that time of day, ZIP code and genre or channel were the primary drivers of conversions. Using these signals, the the agency ran a CTV campaign for a technology client looking to drive audiences to create accounts.

The campaign achieved customer acquisition costs 47% lower than the brand’s historical average and reduced the brand’s average CPMs (cost per thousand impressions) by 16%. 

About one-half of Rain the Growth Agency’s CTV clients are using metadata to target, and most see positive results. As a result, the agency is expanding tests to the rest of its CTV clients this year.

The pendulum swings away

Chalice Custom Algorithms, which has worked with Rain on metadata strategies, has roughly five clients that have found that metadata makes their targeting algorithms much more predictive of outcomes like brand lift, lifetime value and sales, said co-founder Ali Manning. The company began using metadata in the first quarter of last year.

Metadata is emerging as a new signal to find audiences as cookies expire on the web this year. It helps buyers find quality media programmatically—a growing priority for those experiencing traditional adtech methods result in too much long-tail, poor quality inventory. Exemplifying this pendulum swing away from pure audience targeting, The Trade Desk’s forthcoming SP500+ solution lets buyers target across a group of premium publishers.

“We’re not optimizing against an addressable human audience,” said David Nyurenberg, associate director of digital video at Rain the Growth Agency. “We’re looking at all the signals and [seeing] which signals correlate to conversion.”

More precise and quantitative targeting

Of course, targeting based on contextual signals is not new. Marketers can currently target off the IAB Tech Lab’s content taxonomy, which distinguishes content like sports from news.

But metadata allows for more precise and quantitative targeting. Sincera can compare the ads-to-content ratio on television shows like 2 Broke Girls, where 11% to 12% of the program’s runtime has ads, versus Cops, which is 17% ads, said O’Sullivan.

The signals can help brands still buy inventory on the web amid signal loss. Metadata can also be used to buy better media in CTV, which doesn’t typically use cookies, but where finding quality programmatic inventory can be difficult since most ads are bought directly.

“Demand-side platform algorithms will naturally optimize to long-tail publishers,” Nyurenberg said. “By removing the addressable audience piece, we were able to optimize against metadata [toward] premium inventory.”

But targeting with metadata in CTV has its limitations because not enough inventory is available programmatically to use a purely metadata strategy, said Robin Cohen, executive vice president of integrated media investment and planning at Rain the Growth Agency.

Nonetheless, metadata strategies represent the paradigm shift in programmatic advertising.

“Instead of knowing who the users are,” Manning said, “you have to profile the information you have about the impression.”

An earlier version of this article incorrectly stated that Rain the Growth Agency used algorithms from Chalice Custom Algorithms for a CTV campaign.

Generative AI search engine Perplexity, which claims to be a Google competitor and recently snagged a $73.6 million Series B funding from investors like Jeff Bezos, is going to start selling ads, the company told ADWEEK.

Perplexity uses AI to answer users’ questions, based on web sources. It incorporates videos and images in the response and even data from partners like Yelp. Perplexity also links sources in the response while suggesting related questions users might want to ask.

These related questions, which account for 40% of Perplexity’s queries, are where the company will start introducing native ads, by letting brands influence these questions, said company chief business officer Dmitry Shevelenko. 

When a user delves deeper into a topic, the AI search engine might offer organic and brand-sponsored questions.

Perplexity will launch this in the upcoming quarters, but Shevelenko declined to disclose more specifics.

While Perplexity touts on its site that search should be “free from the influence of advertising-driven models,” advertising was always in the cards for the company.

“Advertising was always part of how we’re going to build a great business,” said Shevelenko. 

The year-old search engine was founded by AI researchers from Meta and OpenAI, and is powered by both OpenAI’s GPT model and its proprietary AI model. It currently charges a $20 monthly subscription fee.

Perplexity will have a lot to prove

Advertisers think the native units are a smart format for Perplexity’s AI search engine.

“It’s an ad format that doesn’t disrupt the core flow of the platform,” said Jeremy Hull, chief product officer of Brainlabs. 

But Perplexity also will have a lot to prove. Its success will hinge on its scale, brand safety plans, access to audience insights and targeting effectiveness.

Perplexity must get enough users for marketers to be interested, said Matt Larson, vp of media and connection strategy at Collective Measures.

The AI search engine claims it had over 10 million monthly active users in January. 

Perplexity must also ensure its sponsored questions are relevant, Larson added.

“We all remember when native recommendation widgets went wrong by propagating spammy ads about belly fat and celebrity gossip,” he said.

Brands are also wary of brand safety and transparency. They don’t want the related questions they sponsor to show up against queries they don’t want to be associated with. This will be on top of mind for advertisers if they consider shifting spend, said David Shapiro, svp of earned media at NP Digital.

“If there’s any risk related to brand safety risk and ROI because of limited reach, that’s not a tradeoff that advertisers are going to want to make,” Shapiro said.

As Perplexity finalizes its product scope plans, “brand safety will be a paramount priority,” said Shevelenko.

According to a class-action lawsuit brought by Facebook and Instagram advertisers, Meta’s metrics flub owes them potential damages exceeding $7 billion.

In a ruling, the 9th U.S. Circuit Court of Appeals in San Francisco is letting advertisers pursue legal action against Meta for monetary damages, accusing it of inflating the social platforms’ Potential Reach metric (the number of people in an ad set’s target audience) by up to 400%.

Advertisers claim the metric measured the number of social media accounts—which could include bots and other fake accounts—rather than individual users, leading to artificially high premiums for ad placements.

“The claim is that [plaintiffs] made advertising spend decisions based on inflated reach,” said Jason Kint, CEO of the nonprofit trade group Digital Content Next. “Meta has argued the metric was meaningless as the advertisers mostly pay based on performance metrics. The metric matters, or it wouldn’t be presented to the marketers.”

The case, brought in 2018 by former Meta advertisers DZ Reserve and Cain Maxwell, encompasses potentially millions of advertisers that have run paid ads on Instagram and Facebook since Aug. 15, 2014. Here’s what you need to know.

Advertisers halting spend

Ads account for the majority of Meta’s revenue, which was $134.9 billion in 2023, up 16% compared to 2022. Much of those ads were bought by small to medium-size businesses.

Per the court document, DZ Reserve, an ecommerce business, invested over $1 million across 740 Meta ad campaigns. Maxwell operated an online firearm mount store and allocated approximately $379 to 11 Meta ad campaigns. Following the filing of the complaint, DZ Reserve ceased its Meta operations; it remains unclear whether Maxwell’s business is still operational.

The case is “at least symbolically significant because advertisers feel these companies often bully them because they have so much reach and scale,” said eMarketer principal analyst Paul Verna.

A Meta spokesperson told ADWEEK that “these allegations are baseless, and we will defend ourselves vigorously.”

Duplicates, bots and fake accounts

In the fall of 2017, an industry analyst found that Facebook’s Potential Reach exceeded the U.S. census count, which led to a response from Meta’s senior executives acknowledging the inflation and attributing it to fake and duplicate accounts.

Meta CMO Alex Schultz purportedly directed Facebook’s sales team to avoid discussing fake and duplicate accounts with advertisers. Yet, internally, according to the lawsuit, Schultz acknowledged that Potential Reach figures had to be inflated by at least 10%.

However, the lawsuit states that advertisers creating a new ad were provided a Potential Reach number that was inflated by at least 33%.

Meta’s senior executives, including former COO Sheryl Sandberg, were aware of the inflation driven by duplicate and fake accounts, including bots, the documents state, and took actions to conceal this information.

“Advertisers don’t like spending money if they don’t know where it is going. Another way to put this: [Potential Reach] is vital to 100% of our ads revenue,” the Facebook executive said.

What’s next?

Returning to the district court in San Francisco, the case will either proceed to trial or potentially be resolved through a settlement involving financial compensation for the plaintiffs.

“We look forward to continuing to litigate this case on behalf of Meta’s advertising customers and to presenting the evidence to a jury that Meta knew about its inflated Potential Reach and refused to fix the issue due to revenue concerns,” said Geoffrey Graber, partner at Cohen Milstein and lead counsel representing the plaintiffs in this class action. 

Newly public Reddit has to level up its performance-driving products, and—after 20 years—figure out how to more fully monetize its signal-rich chat-based content.

Reddit’s long-awaited IPO values the platform at $6.5 billion on 2023 revenues of $804 million (98% driven by ads), with a loss of almost $91 million. While it’s growing, it missed its 2021 goal to hit the $1 billion mark in 2023. And its revenue is dwarfed by rivals like Snap (roughly $4.6 billion in 2023, per earnings), let alone giants like Meta (roughly $135 billion in 2023, per earnings).

“We have a lot of opportunity for growth,” COO Jen Wong told ADWEEK shortly after Reddit’s grinning mascot Snoo rang the opening bell at the New York Stock Exchange. “We’re always focused on the long term; we’re continuing to invest in the roadmap.”

On paper, Reddit looks to be in an optimal position to grab ad spend from X and TikTok—whose future in the U.S. could be shaky. Reddit has a contextual-based ad business that is safe from the tremors of cookie deprecation, and it’s making aggressive inroads with automation to make buying ads on its platform more efficient.

But ad buyers have often seen the platform as seasonal spend, and squeamish brands historically wary of appearing next to unsuitable content have stymied a flow of ad dollars. To get over those brand-safety fears and get that recurring spend, Reddit must prove its ads work throughout the funnel.

The growth roadmap

Reddit began this quest in earnest last year when it started offering pay-per-click ad products and got more competitive returns on click traffic. 

But Reddit still has a lot of work to do to catch up to powerhouses like Google and Meta. Reddit has historically been stronger in driving mid- and upper funnel activity, said Elizabeth Keefer, director of growth at Winclap, which helps brands attract users.

Clients, however, are pulling back their spend on these activities in favor of ads that drive more direct action from consumers. That’s pushing more ad spend to search channels and Meta, whose popular AI-powered Advantage+ shopping tool is sustaining marketer interest.

To catch up, Reddit is now building performance-driving formats and post-click actions, like app installs, purchase or add to cart. While it has developed some of these features, it’s early days, and advertisers are clamoring for more. 

Incremental audience attracts repeat business

About 70% of Winclap’s clients active on Reddit continue to spend with the platfrom year-over-year, said Keefer. But these are largely relegated to special occasions like product launches, seasonal moments and holidays.

“Brands overall are a little bit more hesitant to commit to joint business plans with Reddit because it is such a new platform, [but one that has] a lot of promise,” she added.

But for some ad buyers, Reddit has already proven itself ready to move out of the experimental ad spend bucket.

Ad agency Tinuiti’s client Liquid IV saw a 41% improvement in conversion rate and a 69% improvement in retargeting conversion rates on the platform. Another health and wellness client saw Reddit’s promoted ads drive more than a 13% lift in unique conversions.

That performance convinced Tinuiti to invest up to 15% of total media spend there for some clients. “They figured out how to tap into an incremental audience that’s beneficial,” said Jack Johnston, senior social innovation director at Tinuiti. More typically, advertisers who see success are scaling closer to 5% in the second year, he added.

Wong wouldn’t share how many advertisers renew each year, instead saying that a good litmus test is its growing number of annual partners. “That’s a strong indication that we are partners at that point, setting annual strategy together year after year. We have a strong retention rate in advertisers,” said Wong.

The search opportunity

Reddit is also working to make its ad placements more relevant to consumers. It plans to add more contextual and interest-based signals to its ad platform, beefing up existing placements in the home feed and conversations, plus adding more formats like video and ads in comment threads and on search pages.

It’s working on building out its search capabilities, as a large amount of intent-based search queries start with Reddit. Monetizing that is not yet in reach.

“There’s a big opportunity on the advertising side—search is driven by keywords and biddable traffic. We already have the foundations of that,” said Wong.

TikTok’s future in the U.S grew more uncertain after the House passed a bipartisan bill Wednesday that would force China-based ByteDance to sell TikTok within 165 days or face a nationwide ban. This comes on the heels of escalating concern in Washington over China’s access to Americans’ data.

Introduced last week, the bill still needs to be cleared by the Senate. Meanwhile, President Joe Biden—who recently joined the app ahead of the 2024 presidential election—said he would sign the bill if passed.

Mounting privacy concerns have sparked a years-long battle over TikTok in the U.S. In 2020, then-president Trump issued an executive order to ban the app over national security concerns. This prompted software giant Oracle to bid for hosting TikTok’s user data as its “trusted technology partner” in the U.S.

“If history tells us anything, it’s very unlikely that a ban will happen,” said Jack Johnston, senior social innovation director at performance marketing agency Tinuiti. “Massive private equity firms in the U.S. have invested into TikTok and ByteDance. If any big action happens, it would be a forced sale.”

It’s ridiculous for Congress to single out one app while failing to act on this huge problem that’s prevalent across all social media.

Jenna Ruddock, policy counsel, Free Press Action

Some brands continue to spend on TikTok, while others are exploring rival platforms such as Meta’s Reels, YouTube Shorts and Snapchat. Still, lingering questions about TikTok’s brand safety, investment requirements, digital audio rights and the possibility of future bans deters brands from spending on TikTok.

“Banning a single platform will not address the problem at the root of the entire tech landscape,” said Jenna Ruddock, policy counsel for media-focused advocacy group Free Press Action, in a statement. “It’s ridiculous for Congress to single out one app while failing to act on this huge problem that’s prevalent across all social media.”

What TikTok divesture entails

If ByteDance agrees to sell TikTok, it’s likely that another technology company will acquire the platform. Former Activision boss Bobby Kotick reportedly expressed interest in buying TikTok earlier this month, and in 2020, Microsoft was in talks to purchase the U.S. operations of the platform.

As a result, TikTok could benefit from the technological capabilities of that company, and vice versa, especially if the platform contains an existing DSP (demand-side platform).

“What that would mean for advertisers is increased inventory and opportunities to buy that media,” said Johnston. “You will probably see decreased costs come onto the platform from direct buys, but more premium ad units and more autonomy.”

Conversely, if users leave the platform and ad buyers pull ad dollars from TikTok, CPMs become more efficient and auctions would be less competitive, said Johnston.

Meta’s Reels and YouTube Shorts are runner-ups

TikTok remains a key focus for brands, driving performance and boosting influencer marketing efforts alongside brand messaging. Ad spend on TikTok reached $1.2 billion in Q4 2023, 43% more than the $805 million spent during Q1 2023, per MediaRadar.

Brand partners at Tinuiti have increased its investment in TikTok by between 10% and 15% year-over-year for the last two to three years.

However, in the event of a renewed call for a nationwide ban, advertisers are expected to shift their ad dollars to platforms where TikTok’s 170 million active users migrate. Meta’s Reels and YouTube Shorts could emerge as alternatives, according to Johnston.

As a result, creators whose primary audience is on TikTok may find themselves in a difficult position if brands decide to allocate their marketing budgets to creators with larger audiences on other platforms.

At media agency Collective Measures, brands are already testing identical ad units offered by Snap, YouTube Shorts and Reels. According to Lauren Beerling, the agency’s director of performance media, Meta emerges as the top performer, as Reels run across Instagram and Facebook, resulting in higher reach.

“There’s been a lot of hesitancy in the marketplace, even with our clients to use TikTok, because of the ever-growing privacy era,” Beerling said. About 4% to 6% of digital ad spend for 2024 is allocated to TikTok.

“TikTok just keeps a lot more under lock and key. They’re willing to share less about how they’re using data,” she said.

Still, no platform quite works like TikTok with its built-in editing tools and unique algorithm, according to Ryan Enoch, svp and director of strategy at Momentum Worldwide.

“While YouTube can have similar effects, the process to create content is more arduous and relies more on search functionality vs. discoverability. Instagram on the other hand requires quite a bit more strategic thought and creative polish in how to connect with and reach audiences vs. TikTok,” he said.

Call for federal privacy law

A ban on TikTok could lead to more market share for American social media companies despite having nearly the same brand safety and data accessibility issues as TikTok.  

Many social media services make their money in part by harvesting user data, and so—to some degree—many of these services present some of the same concerns for misuse of user data as TikTok does, according to Kate Ruane, director of the Center for Democracy and Technology’s Free Expression Project.

“The ultimate solution is to pass strong consumer privacy protections that also create strong protections against any government’s access to data collected by companies like TikTok and beyond,” she said.

Google launched its artificial intelligence-powered search engine, Search Generative Experience, in beta last May, sending publishers scrambling to prepare for a significant disruption in organic search traffic, with potential declines ranging from 20% to 60%, according to media executives and search engine optimization experts interviewed for this story.

A decrease in search traffic for publishers on the open web often translates to a decline in digital ad revenue. Marc McCollum, executive vice president of innovation at Raptive, estimates that with the current SGE, ad revenue loss could amount to as much as $2 billion annually across the publishing industry.

Raptive—which runs ad sales for titles like MacRumors and Stereogum—gets a significant percentage of its organic traffic from Google Search, according to McCollum. The company didn’t share specifics.

“When fully rolled out, SGE could result in a 25% decline in search traffic across its 5,000-publisher network,” McCollum said. Travel and family verticals saw the least favorable results, with a 29% loss in traffic, while the food vertical saw a 20% loss.

Meanwhile, other publishers expect a material decline in search traffic of over 60%, one publishing executive, who wished to remain anonymous because they weren’t authorized to speak to the media, told ADWEEK.

In response, publishers are preparing to combat the predicted SGE traffic impact, including retooling their SEO strategies, investing in content expertise and diversifying traffic.

“Advertising is still the largest revenue generator for Google, across Google properties and YouTube, and we can expect that they will continue to design SGE to maximize this revenue,” said Gartner vp analyst Nicole Greene. “Publishers need to rethink the structure of their companies, often focused on large investments and growth, and look to embrace the changes in technology and consumer engagement by diversifying revenue streams beyond advertising to areas like paid models and events. This helps bring content to consumers where they are more likely to engage.”

SGE is available for people in the U.S., India, and Japan, where Google’s crawlers pull in content from across the internet and provide fact-driven opinions. However, not all keywords have a SGE response. Studying 23 websites in the technology industry last September, Search Engine Land reported an aggregate organic traffic drop of between 18% and 64%. A total of 1,242 high-impact keywords were identified across all 23 websites, of which 8% did not have an SGE.

Raptive conducted its first analysis last September, with a subsequent one in February, by comparing Google’s current search experience with SGE for its top 1,000 keywords that drive traffic to its network of websites. While some keywords yield no SGE results, some SGE responses include links to Raptive websites. Conversely, for other keywords, no links to Raptive websites were included in the SGE results. With an internal program that calculates expected click-through rates, Raptive arrived at an expected average traffic loss.

“It’s premature to estimate the traffic impact of our SGE experiment as we continue to rapidly evolve the user experience and design, including how links are displayed,” a Google spokesperson told ADWEEK. “We’ll continue to prioritize approaches that send valuable traffic to publishers and are showing more links to sites with SGE in search than before, creating new opportunities for content to be discovered.” 

However, Raptive does not consider SGE results displayed above or instead of the traditional organic link as “new opportunities for content to be discovered,” said McCollum.

Diversifying traffic and content expertise

Publishers are increasingly looking into managing their intellectual property, either by legally defending or monetizing their content, said Steven Read, adMarketplace’s chief product officer.

A growing number of publishers, such as The Associated Press, have arranged licensing deals with OpenAI for its data in exchange for compensation. Meanwhile, The New York Times sued OpenAI and Microsoft over AI use of copyrighted content.   

“Other publishers are also exploring options to sell [their] content via deals to OpenAI or other large language models,” Read said.

Elsewhere, publishers are taking a pragmatic approach to their editorial strategy, diversifying traffic from newsletters and subscriptions and, in some cases, investing in their own generative AI chatbots to attract traffic.

Money.com gets 40% of its traffic from Google Search, according to CEO Greg Powel, a former Google employee. The publisher is reworking its website format by including snippets of content deployed in a question-and-answer format, answering people’s questions related to a product or service, ultimately, to increase traffic from SGE.

“The idea is that Google would crawl and incorporate that into SGE potentially,” said Powel.

Meanwhile, publishers with less editorial flexibility are exploring paid search and social ads to grab traffic, said McCollum.

Publisher clients at Collective Measures are gearing up for mid-funnel SGE queries, which include comparison questions for products and services. They aim to rank for questions that SGE has not yet answered, as traffic for top-level queries is expected to shrink.

“It’s important to try to get into the SGE result, as well as to rank for those things that SGE isn’t showing,” said Katie Tweedy, associate director of SEO and content marketing at Collective Measures.

Ultimately, it’s all contingent on people’s behavior. In the SGE environment, ads are displayed toward the bottom of the AI-generated response, unlike the current experience, where sponsored ads typically appear at the top.

“Potentially, people won’t click on ads as much, and that cannibalizes revenue for Google in a big way,” said Powel. “If Google makes a lot less money when they show SGE, I will hypothesize that they might not show [SGE] for that query.”

Reddit is rolling out a suite of organic social strategy tools today as the discussion platform prepares for its initial public offering (IPO), ADWEEK can exclusively report.

This is the first time the company has offered free tools for businesses, a move that aims to generate more organic activity from brands, potentially turning them into paying advertisers.

The product, Reddit Pro, includes social listening tools to understand where members of Reddit’s communities are talking about a brand or its category, as well as tools for brands to analyze activity and create posts.

“Reddit Pro has native social listening,” Reddit chief marketing and consumer experience officer Roxy Young told ADWEEK. “Right now, if you want to get any insights around Reddit, you have to do that all on your own [through] just being active on Reddit … using another third party tool.”

The social listening tool distinguishes the suite from other platforms’ organic tools around posting and analytics, which are table stakes for social media managers, said Kendall Dickieson, an independent social strategist.

Reddit can be seen as a bit of a maverick despite its two-decade history, and brands haven’t felt the platform’s members have been the most receptive to marketing messages. It only submitted initial filings to go public in February of this year. The company posted revenue of $804 million in 2023, a 21% increase from the previous year, according to filings, but a drop in the bucket compared to Meta’s nearly $135 billion in revenue in 2023. Plus, the company generated net losses of $90 million.

Still, the company, which earns the majority of its revenue from advertising, says it is in the “early stages of monetizing” its business, according to Reddit’s S-1. Reddit Pro can act as a flywheel to turn more brands into advertisers: more than 200 brands, like Taco Bell, Wendy’s, the NFL and The Wall Street Journal, participated in its test phase.

Turning insights into action

Unilever-owned skincare brand Kate Somerville was looking for ways to rejuvenate the 20-year-old brand when it turned to Reddit to try and join in on conversations with customers, said director of brand activation Jaclyn Sepulveda. The brand joined the Reddit Pro test phase in October 2023, having never used Reddit before, either as an advertiser or organically.

Using insights from Reddit Pro, Kate Somerville launched a paid Ask Me Anything activation where users could pose questions about skincare to the brand’s education manager.

“This pro tool has been so helpful on what people are talking about and what’s driving the conversation and what’s getting the community hyped around skincare and trends,” Sepulveda said. “Prior to this, we didn’t have access to any of that sort of functionality. Even other tools from Instagram and TikTok don’t have trendspotting.”

The campaign generated 2.9 million views and a 90% upvote rate, above Reddit’s internal benchmark, according to Reddit. Sepulveda said Kate Somerville can use Reddit Pro not only to learn what people are talking about but to respond to the right communities in real-time.

“You can get a sense of what people are talking about,” Young said. “That gives you around how could you contribute and add value.”

Dickieson said getting social insights from Reddit seems like a useful trove for new clients. But that doesn’t necessarily translate into ad dollars.

For Breanne Morrison, practice lead at Publicis Canada, investment in Reddit has mostly stayed flat over the past year after increasing by more than 70% over 2022, ADWEEK reported previously. The agency has its own audience tools to learn which communities are best to engage within Reddit, and the new organic offerings might not move the needle toward more investment, she said.

“The listening tools are nice. We would see this mostly with the creative agencies or content teams,” Morrison said. “Historically, these tools, even if it’s a third-party tool, have been useful for brands to curate the topics they want to talk about or build those content calendars. From a paid perspective, we don’t put a lot of weight on it.”

Buy-side tech platforms are accusing publishers and the tech firms they work with of using deceptive practices to identify audiences in discussions happening within the IAB Tech Lab over the past month, ADWEEK can exclusively report.

These tactics, spurred by signal loss, can obscure digital marketing efficacy, making techniques like conversion tracking and frequency capping more difficult for marketers.

In digital advertising, demand-side platforms (DSPs) decide which audiences they want to buy on behalf of their brand clients using third-party cookies, which identify users across the web.

Other ways of identifying users have emerged as web browsers like Safari, Firefox, and soon Chrome, have deprecated third-party cookies. Sell-side platforms are using some of these techniques without the buy side knowing, the DSPs allege, according to six sources.

“This is literally an exchange applying some technology they never told anybody,” said one DSP executive, who requested anonymity to discuss sensitive industry relations. “It’s manipulating the contents of a bid request in abnormal ways whenever you feel like. It’s a really alarming precedent.”

As signal loss continues, due to browser crack-down and privacy-preserving regulation, sell-side partners are looking for ways to identify audiences to keep marketer budgets flowing. But the extent of how shady these practices are depends on the transparency between the DSP and supply-side platforms (SSPs).

Deceptive?

These allegedly clandestine targeting mechanisms often take the form of probabilistic identifiers, which use machine learning to guess who a reader of a website might be. This includes ID bridging, a technique where an ad-tech firm approximates who a user might be in a cookieless environment like Safari by linking the user to their identity on Chrome. And because the buy side does not know the exact method the sell side is using instead of cookies, some equate this to outright fraud.

Sell-side platforms and publisher networks have not necessarily denied that they engage in ID bridging and other probabilistic techniques in IAB Tech Lab conversations. But some reject that these practices are being done deceptively, arguing DSPs have ways of knowing what’s going on, two sources said.

This smells to me as a desperate way to recover some of that revenue.

—Anonymous DSP exec

These techniques in question are often used in cookieless environments and became more apparent in early February, a month after Google Chrome deprecated cookies for 1% of web traffic, which is when the conversations in the IAB Tech Lab began.

“We are aware of and have addressed this practice within the Programmatic Supply Chain Working Group, where we are actively exploring methods and updates to Open RTB to ensure transparency and full disclosure,” said Anthony Katsur, CEO of IAB Tech Lab. “We are actively engaged with industry stakeholders to gather proposals and collaborate on developing industry-wide standards that address these concerns.”

Whether this type of ID bridging is deceptive depends on whether DSPs had any reason to know that the sell-side was using these techniques. Not everyone at a DSP might know the structure of their deals with the sell-side, said Paul Bannister, chief strategy officer at Raptive.

“There is missing communication between business teams and technical teams on the buy side,” Bannister said.

Not precise or privacy-safe

Buyers are particularly concerned the techniques the sell-side is using instead of cookies—particularly in cookieless environments—are not always precise or privacy-safe.

Often mentioned was ID bridging, where the ad-tech firm tries to link a user in a cookieless environment like Safari with who they might be on Chrome, by using a signal like an IP address or email to match the user. Not only are the privacy ethics of this practice debated, but it’s a technique that won’t work once Chrome fully deprecates third-party cookies.

“This smells to me as a desperate way to recover some of that revenue,” that came from cookies, said the DSP executive. “It is very myopic. What happens when the cookiepacoplyse comes? This is no longer possible.”

Publishers and their tech partners might use other probabilistic techniques to guess who a user might be without cookies, said Peter Day, chief technology officer at DSP Quantcast.

“What’s the probability that the person I saw on this website is on this other website or has this other email address?” Day said, noting the kinds of calculations these identifiers might make. “Probabilistic methods are fine as long as you know they’re probabilistic.”

Legit alternatives

Not all the ways the sell-side might identify audiences without cookies are based on soon-to-disappear or shaky evidence.

An SSP executive, who requested anonymity to discuss sensitive industry relations, said their company only works with identifiers that have some legitimate method to identify users in cookieless environments, like email addresses, and rejects vendors with weaker privacy controls or questionable data sources.

“On one side [are solutions that] sound great and then you’ve got people who are inserting IDs that have no connection whatsoever … that are completely fraudulent and completely should not be allowed,” said Bannister. “Then you got a ton of stuff in between. The important thing is where is the line. What is good? What is consistent with how buyers want to buy and what crosses that line?”

Identifying the problem

The anonymous DSP executive learned of the scope of the problem through their own forensics.

“My way of determining this is to examine and compare the ID received in the bid request, told to us by the exchange, to the ID we see directly in our cookie when we serve the ad,” the DSP source said. “So I’m looking at the rate at which the ID is consistent from the bid request to the ad delivery.”

I haven’t heard a single DSP, say, ‘Yeah, I knew that was happening’

—Anonymous exec

Using a cookie, the ID in the bid request should be consistent with the ID attached to the resulting ad. When there are discrepancies, it’s likely the SSP or publisher is using another kind of ID or technique.

According to the DSP source’s bidstream data, the consistency rate for one SSP was only 36%, meaning it was hard to verify that the user targeted was the one receiving the ad. This affects an estimated 5%-10% of the impressions this DSP runs, making conversion tracking and frequency capping more difficult.

Many DSPs first learned that their sell-side partners were ID bridging or using probabilistic techniques instead of cookies to identify users at the IAB Tech Lab conversations in February.

“I haven’t heard a single DSP, say, ‘Yeah, I knew that was happening,’” said a source familiar with IAB tech lab conversations.

Day, however, said he first noticed these identification techniques in 2018-2019 when Quantcast launched cookieless measurement.

“When we started to develop our first cookieless measurement, there was a lot of smoke and mirrors,” Day said.

Advertisers are eager to understand how their ads, in different guises, can show up in generative AI-powered chatbot conversations.

While high-profile examples like OpenAI’s ChatGPT and Google’s Gemini don’t currently run ads, platforms such as Snap’s gen AI chatbot My AI—powered by Microsoft’s Chat Ads API—introduced sponsored links last September. Chinese tech firm Baidu and German media giant Axel Springer also use Microsoft’s Chat Ads API.

“Once all the big players have consumed data [from the free internet] and trained their models on it, [what will] make the AI tools stand out is the ability to use proprietary data,” said Graham Wilkinson, chief innovation officer at IPG Mediabrands marketing agency Kinesso.

Advertisers are hungry for new avenues to understand consumer behavior in light of the third-party cookie’s demise. For platforms, the cost of operating AI chatbots is enormous. Major players like Google, OpenAI and Microsoft are in an AI arms race, tinkering with monthly subscription models of $20 to bolster revenue.

Against this backdrop, different types of ad formats, including sponsored links and interactive conversations, emerge as a viable option. However, it’s too soon to judge ad effectiveness in this nascent market.

Sponsored links

Microsoft’s chatbot app Copilot currently includes links to web sources that the chatbot uses to provide relevant information, similar to how search engines from Microsoft and Google (which have integrated gen AI) include citations when they provide a response.

By 2026, according to Gartner, search marketing will lose market share to AI chatbots and other virtual agents, with traditional search engine volume dropping by 25%. While the ad market’s growth within chatbots remains to be seen, ad dollars tend to follow eyeballs.

Two-person startup Adzedek is testing ads via sponsored links within custom GPTs via OpenAI’s GPT store and chatbot apps using OpenAI’s API. In a video demo showcasing its service, the company showed a Nike-sponsored link appearing at the end of a response from a “basketball expert” chatbot. Axios reported that the firm uses a pay-per-click model, with 75% of the ad revenue going to the chatbot creator and Adzedek keeping 25%.

Advertisers could replicate their paid search strategies like keyword targeting within AI chatbots, said Jon Morgenstern, evp and head of investment at VaynerMedia.

Interactive formats

Another way ads could end up within AI chatbots is via interactive formats, using the conversational AI framework to move beyond interaction to drive conversion, said Wilkinson. While brands are yet to test these interactive ads, they can guide users through the sales funnel, providing relevant recommendations, facilitating transactions and ultimately converting consumers.

“When somebody prompts something to a chatbot and a relevant answer could be provided by a brand, then there’s no reason why you couldn’t dive into having a fully interactive conversation with that brand,” said Wilkinson.

For example, prompting ‘Plan my weekend in Nashville’ will see a chatbot generate a list of restaurants and hotels, which could prompt the following response: ‘What makes this restaurant so popular?’ In such cases, if the restaurant has signed up to use the LLM-based chatbot for advertising purposes, it can directly respond to provide information about its popularity, ultimately leading to a booking.

Ad placement will become more important in driving revenue, but companies looking to insert themselves into the conversation need to tread carefully so that placements are detailed and contextually relevant, said Nicole Greene, vp analyst at Gartner.

“Brands will also need to continually revisit their paid channel strategy, as chatbots join the list of sprawling channels that require different types of content to meet customers where they are,” she said.

The longer the response, the higher the price

Tokens, a term in data science that translates to chunks of words, are the units that vendors use to price their APIs. Different vendors, like OpenAI and Anthropic, use different tokenization methods and charge varying prices per token based on whether it’s an input or output token, or related to the model size.

However, the longer the response you get from an LLM, the higher the token count, according to Wilkinson.

“For interactive conversation ads, advertisers can get charged based on the length of the conversation,” said Wilkinson. “The more words that you share with the LLM, the deeper conversation you’re having. The longer a consumer stays in a conversation, the more information they find out about the product and are more likely to buy.”