Reddit puts ads in search results as daily users slip
Reddit has started testing ads on its search results pages, letting advertisers reach users as they look for products, recommendations and other information on the platform. The company announced the test on Tuesday, days after warning investors about declining search traffic and a weaker-than-expected revenue forecast.
“Ads in search may appear based on a range of factors, including contextual relevance to a user’s search query,” Reddit said in its announcement. “This is an initial test with a select group of eligible advertisers. During this test, we will evaluate and understand how users respond to these ads so we can refine the experience for users and advertisers over time.”
The company gave examples of the ads it expects: a search for “espresso station” might show ads for espresso machines, coffee or mugs, while a search for “home office setup” could surface ads for monitors, desks and office chairs.
The test comes as Reddit reckons with how AI has changed the web and its own reach. Despite beating Wall Street’s estimates for revenue and earnings per share, the company’s stock dropped after it reported third-quarter results last week. Its fourth-quarter guidance predicted sales of $1 billion to $1.03 billion, below expectations of $1.05 billion.
That was tied to declining search traffic referrals resulting from Google’s move to an AI-powered search experience. AI search now sends less traffic to publishers’ websites, as features like AI Mode provide answers directly on Google’s search results pages, reducing clicks to other sites.
Reddit also said its global daily active users were flat quarter-over-quarter in the third quarter, reaching 130.3 million. U.S. daily active users fell from 53.2 million in the second quarter to 50.7 million, down 2% year-over-year. The company noted that if the trend continues, daily active users could decline by a low double-digit percentage by the fourth quarter.
That leaves Reddit needing to earn more revenue from its existing users, which is where the new ads come in. The ads could prove more valuable after Reddit makes its planned shift to a logged-in experience, also announced during earnings. The company said it will make the transition gradually, starting in markets outside the U.S.
Limiting its content to logged-in users serves several purposes: it protects Reddit’s site from unauthorized AI scraping and increases its value to advertisers. Logged-in users are worth more to advertisers because they provide additional signals about their interests and behavior, allowing for better-targeted, more profitable ads.
