Reddit is testing ad placements inside its search results pages after warning investors about declining search traffic and a weaker-than-expected revenue forecast. The company said the new placements are meant to help it earn more from existing users as Google’s AI search changes how people find Reddit content.
Reddit’s search ad test
On Tuesday, Reddit said advertisers can now reach people as they search on the platform for products, recommendations, and other information. The company said ads in search may appear based on contextual relevance to a user’s search query. It described the effort as an initial test with a select group of eligible advertisers, and said it will study how users respond so the experience can be refined over time.
Reddit gave examples of the kinds of ads that could appear. A search for espresso station might show ads for espresso machines, coffee, or mugs. A search for home office setup could surface ads for monitors, desks, and office chairs.
AI search and falling referrals
The test comes as Reddit adjusts to how AI is changing the web’s reach. Last week, the company reported third-quarter results that beat Wall Street’s revenue and earnings per share estimates, but its stock fell after it issued fourth-quarter guidance of $1 billion to $1.03 billion in sales. Analysts had expected $1.05 billion.
Reddit tied the weaker outlook to declining search traffic referrals caused by Google’s move to an AI-powered search experience. Features such as AI Mode now give answers directly on Google’s Search Result pages, which reduces clicks to other websites. The company also said its global daily active users were flat quarter over quarter in Q3 at 130.3 million.
User numbers and logged-in plans
Reddit said U.S. daily active users fell from 53.2 million in Q2 to 50.7 million in the quarter, and were down 2% year over year. The company said that if the trend continues, daily active users could decline to a low double-digit percentage by the fourth quarter.
That leaves Reddit looking for more revenue from its existing users. The new ads could become more valuable after the company makes its planned shift to a logged-in experience, which it also announced during earnings. Reddit said the transition will happen gradually, starting in markets outside the U.S.
Logged-in users give the platform more signals about interests and behavior, which makes them more valuable to advertisers and supports better-targeted ads. Reddit also said the move to logged-in content helps protect the site from unauthorized AI scraping.
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