Reddit begins testing ads in its search results

Why Reddit is testing search ads

Reddit announced the test on Tuesday, saying ads in search "may appear based on a range of factors, including contextual relevance to a user's search query". It is an initial test with a select group of advertisers, and Reddit will evaluate how users respond before refining it. The move follows a warning on the 29 October earnings call that Google's AI search is cutting the traffic that reaches Reddit.

CEO Steve Huffman said on the call that Google's AI Mode "does not drive traffic, not for us and not to anybody". Search referrals fell by more than 1 million a week on average in October, after a slide that sped up late in the September quarter. Huffman said Google still crawls Reddit as heavily as ever, so the pages get read and the visitors do not follow.

Reddit described the AI Mode explanation as a working hypothesis rather than a proven cause, and named a second factor: machine-translated versions of its pages now rank lower in international search results. Huffman also said demand for Reddit's content has not disappeared, only moved.

The audience number that spooked investors

US daily active uniques, the metric Reddit calls DAUq, fell to 50.7 million in the third quarter, down 2% from a year earlier. That was the first decline since Reddit listed in 2024, and it landed below the 53.5 million analysts expected. The figure stood at 53.2 million in the second quarter.

Worldwide DAUq rose 12% to 130.3 million, short of the 133.7 million estimate.

Revenue rose 53% to $895 million, ahead of the $878 million consensus, and earnings per share of $1.40 beat a $1.35 forecast. Investors still sent the stock down between 15% and 18% in after-hours trading. For a company that sells ads largely to US marketers, a shrinking domestic audience is not a footnote.

The login wall plan

Reddit will test a primarily logged-in experience in the fourth quarter, starting in markets outside the US. Logged-in users and people on the mobile app together generate more than 80% of Reddit's monetization, according to the shareholder letter. Each group grew from the second quarter, at home and abroad.

No launch date exists, and no host countries have been named. Which parts of Reddit stay open to logged-out visitors is still undecided, and the tests are expected to settle those details. Cryptobriefing noted that login walls can push away the drive-by visitors who sometimes become loyal users, and that testing outside the US first suggests caution about the home market.

The licensing deals underneath

Reddit signed a licensing deal with Google in February 2024 worth roughly $60 million a year. A similar arrangement with OpenAI was reportedly worth around $70 million annually. Both are heading into renewal windows.

Reddit weighed limiting Google's access as the deal neared renewal. Shares fell about 8% in July when that report surfaced. Data licensing sits in an "other revenue" line that grew 24% year over year to $43 million in the second quarter of 2026. Huffman wrote that future licensing will be handled intentionally, under commercial terms carrying protections for users and for the business.

What to watch

Reddit guided fourth-quarter revenue to between $1.0 billion and $1.03 billion. That is below a $1.05 billion Wall Street estimate, and it implies growth slowing from 53% to a 38% to 42% range. Reddit also warned that worldwide DAUq could fall by a low double-digit percentage in the quarter, against a base near 130 million.

The login test begins in the same quarter. Its scope is undecided.