Reddit search traffic is facing mounting uncertainty as Google continues rolling out its AI Overviews feature, according to statements made by Reddit CEO Steve Huffman during an interview on Oct. 21, 2024. While the platform reported strong second-quarter earnings with ad revenue jumping 61%—marking an eighth straight quarter above 60%—its stock plummeted 11% in extended trading, highlighting Wall Street anxieties over shifting web economics.
Google AI Overviews Disrupts Traditional Search Referrals
Historically, Reddit has relied heavily on Google search referrals to acquire new users. However, with Google now displaying more information directly on search result pages and pushing blue links further down, that referral traffic has grown volatile. According to Huffman, speaking during the WSJ Tech Live conference hosted by the Wall Street Journal at the Montage Laguna Beach in Laguna Beach, California, the traditional search ecosystem is undergoing a major transition.
“Search is volatile, and we see those changes, we’ve been through those many times,” Huffman said during the event. He noted that while the 10 blue links have historically driven tremendous value for the entire internet ecosystem, Google’s AI Overviews has yet to make a similar level of positive impact across the broader landscape.
Did you know? Reddit’s ad revenue grew by 61% in its latest reported quarter, fueled by platform improvements, overseas expansion, and steady user growth.
Balancing Data Licensing Deals With Traffic Concerns
Even as search dynamics shift, Reddit maintains significant data licensing partnerships with tech giants like OpenAI and Google. These companies use Reddit’s vast catalog of information to train their artificial intelligence models. Reddit reported that its “other revenue,” which includes these data deals, rose 24% from a year earlier to $43 million.
Earlier this month, the Wall Street Journal reported that Reddit was weighing whether to cut off Google’s access to its data amid growing publisher concerns—shared by outlets like USA Today and Politico—regarding shrinking search-referral traffic. When asked about this on Thursday, Huffman stated that the company’s “thinking hasn’t changed,” adding that Reddit is still looking for a “win-win” as Google transitions its products.
Shifting Strategy Toward Direct Traffic and Low Costs
To offset search volatility, Reddit is actively working to convert web visitors into direct traffic. By focusing on product updates and user retention, leadership aims to make incoming traffic more valuable over time, according to Huffman.
At the same time, Reddit operates under a vastly different financial model than rivals like Meta, which is pouring hundreds of billions of dollars into capital expenditures for AI data centers. “We’re a low-spend company,” Huffman said, pointing out that Reddit’s capital expenditures sat at approximately $1.1 million in the latest quarter. “We’re trying to deliver the AI returns without the AI cost.”
Why Users Still Seek Human Perspectives Over AI
Amid the rise of automated summaries, Huffman emphasized that internet users continue to prioritize authentic human experiences over machine-generated answers.
“Some of the tension is that people want Reddit, they don’t necessarily want a summary of Reddit,” Huffman said. “They want the human perspective, the multiple perspectives, the lived experience that we provide.”
Frequently Asked Questions
How is Google’s AI Overviews affecting Reddit?
Google’s AI Overviews provides more information directly on the search page and pushes traditional blue links further down, creating uncertainty and volatility for Reddit’s search-derived user acquisition.
What are Reddit’s primary revenue streams?
Reddit generates revenue primarily through advertising—which jumped 61% in its latest quarter—and “other revenue,” which includes data licensing partnerships with companies like OpenAI and Google.
Why are publishers concerned about AI search features?
Publishers, including major news outlets, have raised concerns that AI-generated summaries reduce the incentive for users to click through to external websites, leading to shrivelling search-referral traffic.
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