Reddit stock falls after RBC cites challenging SMB ad checks

Investing.com -- Reddit (NYSE: RDDT) stock fell 6% Thursday following a report from RBC analyst Brad Erickson that highlighted "challenging" feedback from small and medium-sized business (SMB) ad agency checks for the social media platform.

In a research note, Erickson indicated that while macro conditions appear positive for Google parent Alphabet (NASDAQ: GOOGL), Meta Platforms (NASDAQ: META), and to a lesser extent TikTok, the outlook was "less positive" for Reddit and OpenAI.

The analyst noted that Reddit’s feedback was "more mixed," with relatively low pricing aligning with conversion levels. He also observed instances where small brands are shifting toward building organic presence strategies rather than focusing solely on advertising spending.

Despite the challenges, Erickson suggested that Reddit’s numbers could still see upside, though he cautioned that "much is expected" from the platform. He also noted that Google’s renewal of its partnership with Reddit likely won’t occur until 2027.

The report comes as Reddit continues to develop its advertising business. The platform faces competition from established digital advertising giants that are seeing stronger demand, with Meta reportedly experiencing "outsized inflation" in its ad auction system.

Agency responses citing consumer softness dropped significantly compared to October, suggesting an overall improving macro environment for digital advertising, though Reddit appears to be benefiting less than its larger competitors.

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