Reddit tests ads in search results as traffic declines and growth concerns mount
The new ad placements could help Reddit squeeze more revenue from existing users as Google's AI search changes how people discover its content.
Reddit, the popular online forum platform, is taking steps to offset declining search traffic and generate additional revenue from its existing user base. Just weeks after unveiling a weaker-than-expected revenue forecast, the company announced plans to experiment with ads in its search results pages. This move comes as Google's AI-powered search experience reduces traffic to publishers' websites, including Reddit's.
The new ad placements will appear based on contextual relevance to a user's search query, according to Reddit. The company emphasized that this is an initial test with a select group of eligible advertisers, and they will closely monitor user responses to refine the experience moving forward. Reddit provided examples of potential ads, such as an "espresso station" search displaying ads for espresso machines, coffee, or mugs, while a "home office setup" search could surface ads for monitors, desks, and office chairs.
This ad test is particularly relevant given Reddit's struggles with AI's impact on the web landscape. The company has observed a decline in search traffic referrals due to Google's AI-driven search experience, which provides answers directly on Google's search result pages and reduces clicks to other websites. Additionally, Reddit reported flat quarter-over-quarter global daily active users in Q3, totaling 130.3 million, while U.S. daily active users dropped from 53.2 million in Q2 to 50.7 million in the same quarter, marking a 2% year-over-year decline.
If this trend persists, Reddit could see its daily active users fall to a low double-digit percentage by the fourth quarter.
To address this decline, Reddit is shifting towards a logged-in experience, which will be implemented gradually, starting with markets outside the U.S. This move has multiple benefits, including protecting Reddit's site from unauthorized AI scraping and increasing its value to advertisers. Logged-in users provide more data about their interests and behavior, enabling better-targeted and more profitable ads.
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