As search traffic dries up, Reddit announces itâs shifting to a logged-in experience
Reddit has long attracted millions of users to its site through Google, with many even appending the word âRedditâ to their search queries for better answers. But as search traffic dries up amid the shift to AI-powered search, Reddit is rethinking its relationship with the open internet. In itsthird-quarter earnings callon Thursday, the company announced itâs transitioning to a primarily âlogged-in experience.â The move is designed to protect its data from AI scraping, allowing the company to instead forge lucrative licensing deals with model providers. But just as important, such a shift could help Reddit to increase its revenue even as it faces daily active user declines in its largest market, the U.S. Overall, Redditâs global daily active users were flat quarter-over-quarter in Q3, reaching 130.3 million, while U.S. daily active users dropped from 53.2 million in Q2 to 50.7 million in Q3 and were down 2% year-over-year. The company is not alone in seeing such declines; the shift to an AI-centered web has impacted most websites and publishers by now, leading to fewer click-throughs, as AI summaries provide answers that donât require website visits and Googleâs traditional âten blue linksâ have reduced relevance. (The change is now evenimpacting Googleâs bottom line, itsearningsrevealed.) But at Redditâs scale, the numbers associated with such a decline are enormous. The company said search traffic referrals dropped by more than 1 million referrals on average per week in October. It warned that if the trend continues, daily active users could decline to a low-double-digit percentage by next quarter. (To play that out: a hypothetical 10% to 12% decline could bring Reddit to roughly 115 million to 117 million daily actives, down from 130.3 million in Q3. Thatâs a huge drop!) At the same time, Reddit has gotten significantly better at monetizing its audience even as its growth weakens. Revenue increased 53% year-over-year to $895 million, ahead of Wall Streetâs expectations of about $875 million. Net income rose 74% to $283 million. Advertising revenue grew 54% to $847 million while nonadvertising revenue, which includes its AI data-licensing business, grew 35% year-over-year to $48 million. And despite a 2% year-over-year decline in U.S. daily users, Redditâs average revenue per daily active user in the U.S. rose 53% to $13.82. Globally, average revenue per daily active user increased 36% year-over-year to $6.87. Shifting to a logged-in experience could boost those numbers even higher because logged-in users are typically worth more to advertisers. Unlike the logged-out users who often find their way to the site via search, logged-in users provide more signals about their interests and behaviors, which helps to better target and personalize ads. Those same signals would also help Reddit provide a more personalized experience to its users, which includes personalized feeds, recommendations of new communities to subscribe to, and pushes to vote, comment, participate, and more. (This also includes pushing recommendationsto its new algorithmic âFor Youâ feed, announced yesterday, which will combine posts from communities users belong to alongside other recommendations based on their interests.) Still, a change of this magnitude could be the canary in the coal mine for the open web. âI donât know about you, but as someone whose life has been defined by the open internet, itâs a big change for me,â wrote Reddit co-founder and CEO Steve Huffman ina post published on Redditâs site. âBut Iâve come to the conclusion that this is the right decision for our platform and the right decision for our business,â he said. The company notes that the shift to the logged-in experience will not be an overnight change; it will first run tests in select markets outside the U.S. in the fourth quarter. It doesnât yet have a timeline for when the change will be rolled out to all its users worldwide. It also acknowledged that access to a logged-out front page is important. Plus, Reddit pointed out that being logged in doesnât mean having to give up anonymity, nor will it remove its option to browse anonymously through its âincognito modeâ experience, which is being rebuilt. âThere are still plenty of questions that are unanswered, particularly around where the boundaries should be between logged-in and logged-out experiences,â Hoffman wrote. âThis is a big evolution for Reddit, and not one weâre taking lightly. But I believe itâs the right next step for the platform and for our future.â
BestAITools
