Reddit has reported excellent quarterly results, with revenue of $805 million (61% more year-on-year) and a net profit of 253 million. Future forecasts are also beating expectations and, even so, the shares have fallen more than 10% after the close. It’s down to changes in traffic from Google.
AI search changes the rules
Steve Huffman, CEO of Reddit, explained in a letter to shareholders that search-engine traffic were pretty volatile during the quarter, especially in the latter part of it. The rise of Google’s AI search summaries lets us find answers directly on Google without having to visit Reddit or any other website.
Those summaries are already affecting search-engine traffic significantly for many websites. In Reddit’s case, the situation is especially delicate because in 2024 the company signed a deal with Google worth $60 million a year in which it handed over its content for AI training, the same one that now seems responsible for the decline in visits.
Reddit has tightened access to its data and requires companies training AI models to sign agreements. At the same time, it is seeking to raise the profile of Reddit Answers to compete directly with Google while it considers whether to renew the 2024 deal.
Huffman believes communities and real conversations will keep Reddit appealing, but that requires visits. We’ll see how the situation evolves, but, in the meantime, shareholders are showing concern.
Author: David Bernal Raspall
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