Reddit's shares fell 29% after it said AI search is taking its visitors
Reddit warned that fewer people are arriving from search as AI tools answer questions directly, and its shares fell hard. Its revenue still grew 53%, because most of its ad money comes from loyal users. Brands that rely on search clicks should check how many customers come back directly.
The short version
- Reddit told shareholders on October 29 that visits from search engines fell hard last quarter, and the fall sped up toward the end.
- It warned that its 130 million daily visitors could drop by a low double-digit percentage this quarter. Reuters reports the shares fell 29% the next day.
- Reddit's revenue still grew 53%, because most of its ad money comes from loyal users. If your business lives on search clicks, check how many customers come back to you directly.
What Reddit told its shareholders
Reddit's third-quarter letter says the slide in search traffic has carried on into this quarter. Reddit says search traffic dropped by more than 1 million visits a week on average during October. If that pace continues, Reddit says total daily visitors could fall by a low double-digit percentage in the fourth quarter.
The letter doesn't name Google. It says web search is changing from a gateway to other sites into "an AI-powered destination itself." Reuters is more direct. It reports that Reddit still appears in Google results but gets fewer clicks, because people now take the answer from Google's AI tools.
Investors moved fast. Reuters reports the shares fell 29% on October 30, their biggest one-day drop. If that fall held, Reuters says, more than $7 billion of market value was lost.
Reddit's revenue is still growing fast
Revenue in the quarter was $895 million, up 53% from a year earlier. Advertising brought in $847 million of that. Reddit's revenue forecast for this quarter is $1,000 million to $1,030 million.
The biggest hit landed on people who visit the website without logging in. Reddit says logged-in and app users bring in over 80% of its ad money, and both groups grew from the previous quarter. The damage can still spread, the letter adds, because search is a common way for lapsed users to come back.
Logged-out daily visitors in the US fell 4% from a year earlier, to 27.3 million. Outside the US they rose 33%, to 49.5 million. Those are averages for the quarter that ended September 30, so they don't include October's drop.
Reddit's answer is to ask everyone to log in
Reddit plans to move to a logged-in-only site. Full tests start this quarter in select markets outside the US, which the letter doesn't name. The results will shape a global version.
The letter gives several reasons. Logged-in users give Reddit more signals for targeting ads, and they tend to engage more. A login wall also gives Reddit more control over who can read its data. Co-founder and CEO Steve Huffman writes that most big ad-funded platforms have already made this move.
Reddit also has room to push people toward its app. Only about 13% of eligible mobile website users see the install prompt today.
What this means for a business in Indonesia
Reddit is one company, and most of its revenue comes from the US. Others are feeling the same shift, though. Reuters names news publishers, education platforms, and travel and product-review sites.
If your website answers questions people type into Google, you face the same risk. Start by looking at your price comparisons and how-to guides.
The Reddit case also shows what protects you. Its revenue held up because a large group of people come back directly and log in. A business that relies on one-time visitors from search has less cushion.
Brand teams should note one more thing. Reddit threads about your products may get harder to read without an account if the login tests spread.
What to do next
- Split your search traffic in 2: people searching your brand name, and people asking a general question. Track them separately, because they may not move together.
- Work out how much of your revenue comes from people you can reach directly, such as through your app, email list or WhatsApp.
- Each month, ask AI search tools the questions your buyers ask. Note whether your brand appears and what is said about it.
- Watch Reddit's next results. They will show whether the warned drop arrived, and whether ad income held up without those visitors.