* COO says advertiser count in the second quarter rises 70%

* Quarterly U.S. user growth slows due to search algorithm

changes

* Reddit ( RDDT ) says its quarterly revenue surges 61% to $805

million

By Jaspreet Singh

July 30 (Reuters) - Reddit ( RDDT ) forecast third-quarter

revenue above Wall Street estimates on Thursday, signaling its

strategy to draw marketers by offering AI-powered advertising

tools is paying off.

The company's ad tools are designed to enhance campaign

performance by offering a library of successful ads, generating

Reddit ( RDDT )-specific ad copy, tracking visitor actions after ad

exposure and enabling interest and community-based targeting

within subreddit discussions.

Reddit ( RDDT ) has succeeded in carving a place for itself in a

highly competitive social media market, where bigger rival Meta

through its Threads communities hub and new Forum app

for Facebook Groups users appears to be directly targeting

Reddit's ( RDDT ) core community model.

"The company's advertiser growth in the second quarter was

70% year-over-year. So, we continue to onboard a lot more new

advertisers onto Reddit ( RDDT )," COO Jen Wong told Reuters.

She added the growth was particularly strong among

mid-market and small- and medium-sized businesses and

international advertisers.

Reddit ( RDDT ) forecast third-quarter quarter revenue of $860

million to $870 million, above LSEG-compiled analysts' average

estimate of $829.1 million. Second-quarter revenue rose 61% to

$805 million, beating estimates of $730.4 million.

But the growth in its U.S. daily active unique visitors

(DAUq) slowed in the second quarter sequentially, even as global

DAUq rose 18% from a year earlier to 130.3 million and slightly

higher than prior quarter growth.

"Search referrals were choppy in the quarter, and traffic

was more volatile later in the quarter, but the bigger picture

is unchanged: the commercial business is strong," co-founder and

CEO Steve Huffman said in the shareholders' letter.

Wong said "SEO headwinds" caused by changes in search

algorithms "more than offset" the company's efforts in terms of

user acquisition in the quarter.

Still, product improvements are helping convert

lower-engagement visitors from search engines into loyal app

users, she said.

Reddit ( RDDT ) expects quarterly adjusted earnings before interest,

taxes, depreciation and amortization of $385 million to $395

million, above estimates of $369 million.