Base effect is the phenomenon where a company's growth rate percentage declines even as it adds more absolute dollars, because the denominator (the base) has gotten larger.
A company that grows from $200M to $350M shows +75% growth. If it then grows from $350M to $600M, that's "only" +71% — even though it added $250M vs $150M. The percentage shrinks. The dollars accelerate. The base effect is why mature growth companies appear to be "decelerating" when they're actually compounding harder.
This is the lens to apply when evaluating any platform's ad revenue trajectory. When a headline says "growth slowed from 75% to 53%," the question is: did absolute dollar additions slow, or did the denominator just get bigger? If the latter, demand is actually strengthening — the math just makes it look weaker.
Example: Reddit (2025-2026)
- Q1 2025: added ~$148M in new ad revenue YoY (+39%)
- Q4 2025: added ~$293M in new ad revenue YoY (+75%)
- Q1 2026 (guided): adding ~$205M in new ad revenue YoY (+53%)
The growth rate "decelerated" from 75% to 53%. The dollars added grew from $148M to $205M. The demand signal is stronger. The base is just bigger.