Reddit Tests Search Ads as Traffic Declines and Growth Slows

Reddit is testing advertisements within its search results pages. The change arrives as the platform faces sliding search traffic and slowing user growth linked to artificial intelligence tools.

The company announced the test on Tuesday to let advertisers reach users looking for products and recommendations. Reddit stated that the new ads may appear based on how well they match a user's search query. The initial test includes a select group of eligible advertisers. During the trial, the platform will evaluate how users react to the ads to refine the experience. For example, a search for an espresso station might show ads for coffee or machines, while a home office search could display desks or chairs.

The ad test follows a financial report that showed weaker-than-expected sales forecasts. Reddit reported third-quarter revenue of $895 million, beating Wall Street expectations, but its fourth-quarter sales guidance of $1 billion to $1.03 billion fell below the expected $1.05 billion,. CEO Steve Huffman explained during an earnings call that Google's AI-powered search features, such as AI Mode and AI Overviews, provide direct answers and push websites down the page. Huffman stated that AI Mode does not drive traffic and noted that Reddit’s search traffic dropped by more than 1 million referrals per week on average in October.

User numbers have also shown strain. Global daily active users stayed flat at 130.3 million in the third quarter, while U.S. daily active users fell to 50.7 million, down 2% from the previous year. Reddit warned that if current trends continue, daily active users could decline by a low double-digit percentage in the fourth quarter.

To increase income from its existing audience, Reddit plans to shift gradually toward a primarily logged-in experience, starting in markets outside the U.S.,. Huffman noted that forcing users to log in protects platform data from unauthorized AI scraping and helps the advertising business,. Logged-in users provide more details about their interests, which allows for better-targeted and more profitable advertisements.

Summary

As artificial intelligence search tools send fewer visitors to open websites, major platforms are changing how they operate. Reddit is trying to protect its data, target its audience more closely, and find new ways to make money from the users it retains.