Reddit CEO: Google's AI Mode 'does not drive traffic' as referrals drop 1M a week
What's the deal? Reddit chief executive officer Steve Huffman told investors on October 29 that Google's AI-powered search features are no longer sending users to the platform. "Google is crawling us as hard as ever, so the demand hasn't changed from their point of view either," he said on the post-earnings call, according to Reuters. "The reality is, AI Mode does not drive traffic. Not for us, and not to anybody, as far as I know."
By the numbers: Reddit said search referrals fell by more than 1,000,000 per week on average in October. If the decline continues, it warned fourth-quarter daily active uniques could drop by a low-double-digit percentage from a base of about 130 million. Reuters reported that Reddit shares fell 18% in extended trading after the warning.
Why now? Huffman said Google's AI Overviews and AI Mode have expanded across the US and other markets, pushing other search results lower on the page. He also said Reddit's machine-translated content is ranking lower, which would mainly hit traffic outside the US.
The company stressed demand for Reddit has not changed. "People still want Reddit," Huffman said. "It says Google is not sending them to Reddit the way they used to."
What's the endgame? Reddit is shifting to a primarily logged-in experience, which it will test in selected markets outside the US during the fourth quarter before a possible global rollout. Huffman said the move is "better for user experience, better for our ads business," and more protective of Reddit's data. The company also introduced a "For You" feed with personalised recommendations.
The bigger picture: Logged-in and app users already account for more than 80% of monetisation, according to Reddit's shareholder letter. Third-quarter revenue rose 53% to $895 million, including $847 million from advertising, even as US daily active uniques fell 2% year over year to 50.7 million, the first decline since the company listed in 2024, while international users grew 24%.
What could go wrong? Reddit has not isolated Google AI as the cause, calling it the leading part of its hypothesis. Forcing sign-ins could also trade open-web reach for engagement and ad targeting, a bet that users will follow.
Update, 31 October: Investors did not wait for the test. Reddit shares closed about 29% lower on Friday 30 October, their worst day since the 2024 listing, CNBC and others reported. Besides the traffic warning, fourth-quarter revenue guidance of $1.00 billion to $1.03 billion came in below the roughly $1.05 billion analysts expected, and Citizens downgraded the stock to market perform. Commentators on X read the call as a warning for the wider web: the investor behind the BuccoCapital account called it "a bellwether for where the internet is going", arguing that AI answers inside search are a headwind for media sites that are not destinations and for SMB software firms that rely on content marketing for leads.
The signal: Reddit's warning mirrors a wider strain on publishers as AI answers queries without onward clicks. Google itself has said it sees lower monetisation in AI Mode ads, underscoring how search-driven business models are being tested on both sides.
Read more: Reuters (via AOL), CNBC, The Verge, TechCrunch, Reddit Investor Relations, Stock Titan market close, BuccoCapital (X), Nicholas Mugalli (X)
Image credit: The Verge
