Reddit to Mandate Logins After Google AI Cuts Referral Traffic and Growth
By Jaspreet Singh
Reddit's Response to Declining Referral Traffic and AI Search Impact
Oct 29 (Reuters) - Reddit CEO Steve Huffman outlined a plan on Thursday to mandate sign-ins for most content to deter data scraping on the social media platform after he blamed Google's AI search features for a decline in referral traffic.
Decline in Referral Traffic and User Growth
Shares of Reddit fell 18% in extended trading after Huffman warned that total daily active unique visitors could fall by a low double-digit percentage in the fourth quarter from about 130 million if referral traffic continues to fall.
Search engine referrals to Reddit decreased by more than one million on average each week during October, he said. In the US, DAUq fell 2% to 50.7 million, marking its first decline since Reddit went public in 2024.
Google AI's Role in Traffic Reduction
"Google is crawling us as hard as ever, so the demand hasn't changed from their point of view either. The reality is, the AI mode does not drive traffic, not for us and not to anybody," Huffman added on a post earnings call.
AI-powered search is answering user queries directly, cutting off traffic to publishers and social media firms and threatening the user growth essential to their advertising business.
Impact on User Engagement and Monetization
"Requiring users to log in creates another barrier to engagement, particularly for casual users," said Luke Stillman, a managing director at research firm Madison and Wall.
Reddit's Data Licensing and Legal Actions
Reddit, which licenses its data to OpenAI and Google, has sued IPO-bound Anthropic, Perplexity AI and three data scraping companies, accusing them of illegally collecting Reddit's data.
The company's trove of user-generated discussions is a prized asset, offering AI startups data to train models and helping marketers get insights for ads.
Commercial Licensing and User Protection
"We will continue licensing our corpus intentionally, but those commercial deals come with guardrails that protect our users and our business," Huffman said in a statement.
Financial Performance and Future Strategy
Reddit's 53% revenue growth slowed sequentially in the third quarter, but is still better than firms including Snap and Pinterest, as they compete for ad dollars with bigger rival Meta in a tough market.
Revenue Milestones and Projections
CFO Drew Vollero said Reddit crossed $3 billion in trailing 12-month revenue in the third quarter and the company's next "internal north star is $5 billion in revenue.
Testing Login Requirements and Monetization Insights
Reddit plans to test the logged-in-only experience in select markets outside of US in the fourth quarter to assess its impact before wider implementation, the shift that would end two decades of allowing anyone to browse Reddit freely without an account. Huffman said logged-in users make up over 80% of the monetization.
Quarterly Earnings and Forecasts
The firm's third-quarter revenue of $895 million exceeded LSEG-compiled analysts' average estimate of $878.4 million. Its revenue forecast for the current quarter of $1.00 billion to $1.03 billion is largely in line with estimates.
It expects quarterly adjusted earnings before interest, taxes, depreciation, and amortization to be between $480 million and $510 million, versus estimates of $512.2 million.
(Reporting by Jaspreet Singh in Bengaluru; Editing by Shailesh Kuber)
