Plunging Search Traffic is Hammering Reddit's Stock — WSJ

What happened

Reddit's stock fell more than 25% Friday morning after it warned that search traffic dropped by over 1 million referrals per week in October and that daily average users from search could fall over 10% in the fourth quarter. Third-quarter revenue rose more than 50% but user growth missed analysts' expectations.

Confirmed

Global impact / market context

Reddit's business relies on Google search sending visitors who see ads and join discussions. Google's AI-generated answers reduce clicks to Reddit, which means lower user growth, potentially weaker advertising revenue, and pressure on a stock priced for expansion.

Analyst inference

Investors are repricing Reddit after its rapid post-IPO rise on Google traffic. The warning suggests AI search summaries, which answer questions without clicks, are hurting referral-dependent websites, a risk for other publishers and platforms that depend on search traffic.

Analyst inference

What to watch

1. Reddit said search traffic dropped by more than 1 million referrals per week in October and daily average users from search could fall more than 10% in the fourth quarter. Confirmed
2. Watch whether Reddit renews its existing licensing deals with OpenAI and Google, since the CEO said talks continue but renewal is not certain. Proposed
3. Track fourth-quarter user and revenue figures to see if search-driven declines persist, which would test whether Reddit can grow without depending on Google referrals. Analyst inference

Evidence

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