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Reddit RDDT and Alphabet GOOGL are major players in the digital advertising space. While RDDT is an emerging social media platform gaining traction with community-driven advertising, GOOGL remains the dominant force in global search and digital ad markets.
Per the Fortune Business Insights report, the global digital advertising market size was valued at $573.06 million in 2025. The market is expected to grow from $662.52 million in 2026 to $2,114.41 million by 2034, expanding at a CAGR of 15.61% during the forecast period between 2026 and 2034. Both Reddit and Alphabet are expected to benefit from this rapid growth pace.
RDDT or GOOGL — Which of these Digital Advertising stocks has the greater upside potential? Let’s find out.
Reddit is benefiting from its strong focus on enhancing user-friendly features, which is driving significant growth in user engagement and ad revenue. In the third quarter of 2025, Advertising revenues surged 74% year over year to $549 million.
The company is benefiting from its investment in AI-powered tools, which are driving the company’s user engagement and ad revenue. In the third quarter of 2025, RDDT reported 116 million daily active users and 444 million weekly active users, both increasing 20% year over year. In the third quarter of 2025, ARPU increased 41% year over year to $5.04, indicating that portfolio expansions are driving higher monetization per user.
Further expanding its portfolio, Reddit recently announced the beta launch of Max campaigns. This AI-powered, automated ad solution optimizes targeting, creative, placements, and budget in real-time to improve performance and reduce manual effort. Using Reddit Community Intelligence, Max campaigns offer unique audience insights, including Top Audience Personas, which help advertisers understand who engages with their campaigns and what content resonates. Early testers experienced up to 27% more conversions and lower costs, showing both efficiency and effectiveness.
Alphabet is benefiting from rising advertising revenue, driven by strong growth in its Google Services segment, particularly in Search and YouTube. In the third quarter of 2025, Alphabet’s advertising revenues increased 12.6% year over year to $74.18 billion and accounted for 85.2% of total revenues. Search and other revenues accounted for 55.3% of total revenues and 76.3% of Google Advertising revenues. YouTube’s advertising revenues improved 15% year over year to $10.26 billion.
The Google search engine is advanced, simple, and adaptable, all at once. Alphabet’s initiatives to deploy AI and infuse AI in Search are driving segment growth. Alphabet’s initiatives, like the Mobile Friendly algorithm change, product listings, flight search, Google Now, and the AI infusion is expected to help drive Alphabet’s advertising revenues.
Alphabet’s innovative AI-powered advertising products, such as AI Max, are unlocking new opportunities for advertisers. AI Max is helping businesses identify new customers by delivering the most relevant ad across surfaces. It is also expanding the reach and accessibility of advertisers by matching them against additional queries. GOOGL continues to infuse Generative AI (Gen AI) capabilities at every step of the marketing process. The availability of Imagen 4 in Asset Studio and Product Studio is helping businesses produce more and better creatives.
In the trailing six-month period, shares of Reddit and Alphabet have rallied 57.9% and 73.6%, respectively. The outperformance in Alphabet stock can be attributed to its continuing AI push across its search, YouTube, and cloud computing platforms. An expanding focus on improving the enterprise footprint is expected to boost prospects.
Despite a robust portfolio, Reddit suffers from a challenging macroeconomic environment, including elevated tariffs, which may reduce discretionary ad spending. Stiff Competition also remains a concern.
Valuation-wise, RDDT and GOOGL shares are currently overvalued, as suggested by a Value Score of F and D, respectively.
In terms of the forward 12-month Price/Sales, RDDT shares are trading at 14.21X, which is higher than GOOGL’s 10.13X.
The Zacks Consensus Estimate for RDDT’s 2025 earnings is pegged at $2.35 per share, unchanged over the past 30 days, indicating a 170.57% rise year over year.
Reddit Inc. price-consensus-chart | Reddit Inc. Quote
The Zacks Consensus Estimate for GOOGL’s 2025 earnings is pegged at $10.58 per share, unchanged over the past 30 days, indicating a 31.59% increase year over year.
Alphabet Inc. price-consensus-chart | Alphabet Inc. Quote
While both Reddit and Alphabet stand to benefit from the booming digital advertising market, Alphabet offers greater upside potential given its growing AI-powered search capabilities and significant investments in cloud computing, which bode well for its prospects next year. GOOGL expects capital expenditure between $91 billion and $93 billion for 2025, which is anticipated to increase further in 2026.
Reddit’s prospects benefit from an expanding advertising business, an expanding clientele, and an improved user experience with upgraded search and discovery features. However, A challenging macroeconomic environment, especially uncertainty over tariffs and trade policy, could reduce discretionary advertising spending on Reddit’s platform. Stiff competition in the digital advertising market poses a significant challenge for Reddit.
Currently, Alphabet has a Zacks Rank #3 (Hold), making the stock a stronger pick than Reddit, which has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
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