Reddit's $385Mn Cloud Commitments

You might think that only B2B companies sign large 💲 cloud commitments with hyperscalers.

But that's not the case. Take Reddit, Inc., for example.

Reddit has been making headlines since its March IPO, and just yesterday, it signed a significant partnership with OpenAI, boosting its shares by nearly 10%. But more on that later.

💰 Let’s talk about their $385M in Cloud Commits first

Last year, Reddit committed over a third of a billion dollars in cloud commitments with hyperscalers.

“During the year ended December 31, 2023, we signed addenda to extend our cloud services agreements through 2026.

We are committed under these arrangements to spend at least $385.0 million through September 2026. We enter into contracts with non-cancellable purchase obligations, primarily related to third-party cloud infrastructure agreements under which we are granted access to certain cloud services.”

This is a massive commitment. For context, Reddit generated $810 million in revenue in 2023. They signed cloud commitments equal to nearly half of their annual revenue. Impressive, right?

Reddit also highlighted that “We have met all minimum purchase commitments under these agreements for the years ended December 31, 2022, and 2023.”

This precision underscores how seriously both companies and hyperscalers approach these agreements. When it comes to signing binding contracts, they need to meet them.

📈 Why commit to clouds?

Companies get substantial discounts in exchange for committing to 2-3 years. Clouds, in turn, can plan their capacity and expansion based on these commitments. Companies are then obligated to adhere to them, which is where cloud marketplaces come into play. If Reddit needs to buy other software, they can do so via hyperscaler marketplaces, and this spend will count toward their commitments. This creates a huge incentive for buyers to buy and for sellers to sell there.

🤝 Reddit isn't just savvy about signing cloud commits with hyperscalers, it also partners with them

Yesterday, Reddit signed a massive deal with OpenAI to bring its content to ChatGPT, significantly boosting its shares.

This follows its recent partnership with Google, making its content available for training Google's AI models.

These deals show Reddit's attempt to monetize its data and content and diversify beyond its advertising business. OpenAI will also become a Reddit advertising partner, the company said.

🎯 So, what does this mean for companies navigating cloud GTM and partnerships?

Reddit's strategy offers a compelling blueprint: leverage cloud commitments for discounts, use cloud marketplaces to maximize these commitments, and forge strategic partnerships to enhance value and diversify revenue streams.

How are you leveraging your cloud GTM and partnerships for maximum impact?

__________

📈 Accelerate your Growth in Cloud Marketplaces

Transform your marketplace strategy with first-hand insights from Cloud GTM leaders in our 5-week cohort course. Learn in a community of great alliance leaders. Join 100+ alums from companies like GitLab, Darktrace, IDC and others.

Join Cloud GTM Leader course