Too much emphasis is being placed on the the RDDT data licensing deals while the core ads business has so much room to run

There is a ton of buzz online about the contract renewals between Reddit and Google/OpenAI. Currently, RDDT licenses their data to both for a combined \~150m per year.

Obviously, this is a really nice position to be in for Reddit, because it basically translates to \~100% pure margin (minus tax). It also symbolizes how important their data is, which is supported by some studies showing that Reddit is one of the most commonly referenced sources for user queries in both Gemini/AI overviews and ChatGPT.

With that said, even under some pretty bullish assumptions, this is not the aspect that is really going to drive returns for long term shareholders. Some estimates floating around have suggested that the upcoming licensing agreements might land somewhere between 300-700m per year between Google and Reddit. This feels a bit optimistic to me, but let's suppose it comes in at the top end of that range for both Google and OpenAI. This would equate to roughly 1-1.5 billion in data licensing deals in a \*very\* bullish scenario.

Needless to say, this alone would equate to roughly a 20-25x earnings multiple and make the stock look quite cheap. But unless you believe the price of data licensing will continue to rise massively each and every contract renewal, this is more of a fixed annuity-like payout. You don't pay 25x earnings for a fixed contract with no visibility into future growth rates. In 5-10 years, this stock will perform based on how their core advertising business develops, and will likely not be bailed out by a data licensing contract.

I say all this as a Reddit bull. I own a fairly big position, and I've been actively buying the dip. Their advertising business has \*soooo\* much room to improve, in terms of total international users, time spent per existing user, converting more logged out users to logged in users, ad conversion rates, etc. But that's where an investor should really seek to understand their business, rather than focusing on their position as a data provider.