- Reddit is acquiring Memorable AI to enhance ad performance on its platform.
- Memorable AI uses artificial intelligence to predict engaging ad content.
- Reddit's ad business is growing but still lags behind major competitors like Google and Meta.
Reddit on Thursday said it had acquired Memorable AI, a startup that uses artificial intelligence models to predict which images and videos are most likely to catch a person's attention, stick in their memory, and encourage them to click on an ad.
The terms of the deal were not disclosed. But two people familiar with the deal said the transaction value was in the region of $40 million.
Reddit said the acquisition would help improve the performance of advertising on the platform.
"As we integrate Memorable into our ad stack, our partners will be able to see performance benefits from creative insights from previous ads, better creative effectiveness, and automation that guides their creative toward maximum performance and return on ad spend," Roelof van Zwol, Reddit's vice president of ads engineering, told Business Insider by email.
Memorable AI, based in New York, was launched in 2021 by a team of machine learning researchers and Harvard, Stanford, and MIT graduates.
Brands like Unilever, L'Oréal, and NotCo pay Memorable AI an annual fee to use its tools. Memorable AI trains its models — built on millions of human reactions to ads — on their creative assets.
That model feeds into Memorable's generative AI technology, which quickly creates new ads designed to perform better than the originals. For example, the size of the logo might change, the hero product might be pushed to a different corner of the ad, or the text could change color.
The company said this allows advertisers to reduce the time they would usually spend testing and optimizing ad creative, the company said.
Memorable AI had raised $2.75 million in funding from investors, including Aperiam Ventures, Bertelsmann Digital Media Investments, LDV Capital, and individual investors such as 3C Ventures' Michael Kassan and Scope3 CEO Brian O'Kelley.
The Memorable AI team has joined Reddit as part of the acquisition. Reddit said they would work on projects across its ads business.
The purchase comes less than two years after it acquired Spiketrap, an AI startup that makes it easier to target users based on the context and the sentiment of the content they're consuming.
Reddit went public in March but hasn't turned a profit since it was founded nearly two decades ago despite being one of the most highly trafficked sites on the internet.
Its ads business is growing, but still tiny compared to Google, Meta, Amazon, and TikTok. As Reddit went public, advertisers told BI that the company needed to do more to prove its ads could drive sales.
Beyond advertising, Reddit also generates revenue through licensing its user-generated data to companies such as Google and OpenAI to train their AI models and provide content for their products.
Reddit is scheduled to report its quarterly earnings on August 6. Analysts expect a jump in revenue but widening losses.
