Dive Brief:

• Reddit acquired Dubsmash, a short-form video-sharing social media platform that touts a diverse creator base, per a company blog post. The deal marks Reddit's first major acquisition, though its financial terms were not disclosed.
• Dubsmash will continue to operate its existing platform and brand, but Reddit will integrate the app's video-creation tools into its own product. Another driver of the acquisition was Dubsmash's audience: Around one-quarter of Black teens in the U.S. use the app, according to the blog post, while 70% of its user base is female.
• Dubsmash claims to draw around 1 billion monthly video views, with 30% of users logging in daily to produce content. The news suggests that user-generated video is a key piece of Reddit's bid to grow a bigger ad business, a strategy that squares with how the rest of the social media world is moving in the wake of TikTok's breakout success.

Dive Insight:

Reddit is in the middle of an ambitious plan to grow a bigger advertising business, and it's increasingly clear that user-generated video content is a linchpin to its overall strategy. The company notched $100 million in ad revenue last year, and claims it is on a path to generate $1 billion in revenue within the next few years, per Ad Age.

Dubsmash, founded in 2014, could be an accelerant to meeting those goals. The platform shares several qualities with TikTok, the ByteDance-owned app that has taken social media by storm thanks to a video-recommendation algorithm that promotes viral short-form content. Like TikTok, Dubsmash lets users lip-synch to videos featuring popular music or lines from TV shows and movies. In 2016, the app started pushing for brands to sponsor channels on its network, Adweek previously reported, pointing to where Reddit could see advertising opportunities.

It's hard to overstate the effect TikTok has had on similar services. Triller, a rising competitor, has moved to attract more of TikTok's top creators to grow its appeal, and recently scored brand deals with high-profile marketers like Pepsi and E.l.f. Cosmetics. Dubsmash itself has experienced a significant resurgence and landed near the top of the video-sharing app charts thanks to users searching for alternatives to TikTok, TechCrunch reported in January.

Dubsmash looks to differentiate from the pack by championing a diverse user base, something Reddit could be glomming onto as it tries to broaden who it connects with and assure brands that it's a safe place to advertise. Reddit has frequently grappled with the presence of racism on its forums, and in the past has favored a free speech position while disallowing open calls to incite violence. However, the site's tune has started to change of late, as reported in The Atlantic, particularly in reaction to the protest movement for racial justice that swelled over the summer.

Dubsmash has put a more concentrated effort behind helping its Black and Latino influencers make money. Last month, it debuted a feature called Shoutout that allows users to commission videos from celebrities or their favorite creators in a manner akin to Cameo, according to Forbes. The app does not take a cut of the revenue generated from Shoutout videos. In general, Dubsmash does not generate much in the way of revenue at all, according to TechCrunch.

Historically focused on text-based forum discussions around a variety of topics, Reddit has also increased the amount of video-creation tools it offers in recent years to meet consumer demand. The site debuted native video features in 2017, lessening a dependence on third-party hosting sites. Reddit Public Access Network (RPAN), its livestreaming video service, has landed in the spotlight as homebound consumers spend more time watching live video during the pandemic.

Content shared through RPAN was described by The Verge as "wholesome." Overall, Reddit says users have doubled their posting of videos in 2020. The uptick in video engagement — and the interest in Dubsmash — is potentially reflective of a shift in Reddit's audience toward its mobile app and away from the desktop site. Reddit currently commands 52 million daily active users, a figure up 44% over last year, The Wall Street Journal reported earlier this month.

The entire Dubsmash team, including co-founders Suchit Dash, Jonas Drüppel, and Tim Specht, will join Reddit as part of the transaction.