Reddit Plunges 30% as Google AI Search Cuts Referrals — SkimNews
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- Reddit shares plunged 30.44% to $90.15 on Friday, extending their weekly decline to 44% after the company reported Q3 results and issued its current-quarter outlook.
- Steve Huffman said Google search referrals fell by more than 1 million per week on average in October, accelerating late in Q3, and warned of a low-double-digit percentage decline in total daily users during Q4 if that pace continued.
- Reddit grew Q3 revenue 53% to $895 million and advertising revenue 54% to $847 million, with $283 million in net income and $1.40 diluted EPS versus $1.33 expected, yet guided to $1 billion-$1.03 billion in Q4 revenue against roughly $1.05 billion expected.
- Reddit reported 130.3 million daily active unique visitors, up 12% year over year but below roughly 134 million expected, while U.S. daily users fell 2% to 50.7 million.
- Google AI Overviews and AI Mode increasingly answer queries inside search results instead of sending users to external sites; Huffman nevertheless said, “The AI mode does not drive traffic, not for us and not to anybody as far as I know.”
- Reddit plans to test a primarily logged-in experience in selected non-U.S. markets during Q4 to reduce its dependence on Google referrals.
- Google signed a reported $60 million-a-year Reddit data-licensing deal in February 2024 for AI-model training; Reddit later struck a similar OpenAI pact letting ChatGPT use Reddit content while Reddit received OpenAI technology.
Why it matters: For Reddit’s ad business, the pivotal change is where users stop: Google search referrals fell by more than 1 million per week in October even as Q3 ad revenue rose 54% to $847 million. Reddit is responding with logged-in access in selected non-U.S. markets, while its reported $60 million-a-year Google deal keeps it tied to the same search ecosystem.
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