Reddit stock price experiences the largest single-day decline since listing; Google AI search impacts recommended traffic

Reddit's stock price plummeted by 29.2% on Friday (October 30), recording its worst single-day performance since its listing in 2024. Despite the company announcing impressive performance growth, investors still reacted strongly to the sharp deterioration in its search traffic.

According to Reuters, Reddit warned that during October, the recommended traffic from searches decreased by more than 1 million times per week on average. Management regards Google's continuously expanding AI driven search function as the main cause of this issue.

The stock closed at $91.73, a significant drop from the previous trading day's price of $129.60. Investors have begun to question whether Reddit will be able to maintain its user base without being so dependent on Google.

Weekly search recommendations have seen a decrease of over 1 million searches.

This warning appeared during the release of Reddit's third-quarter financial report. CEO Steve Huffman acknowledged that traffic from searches had been deteriorating throughout the quarter.

Google's AI Overviews and AI Mode are increasingly providing answers directly in search results, which may reduce the necessity for users to visit the websites where the original information is located.

For Reddit, this threatens one of its important new sources of visitors.

The company reported that in the third quarter, the average daily number of unique visitors reached 130.3 million, a year-on-year increase of 12%. However, the number of daily active users in the United States decreased to 50.7 million, which is about 2.5 million less than in the previous quarter.

Management warns that if the current trend of search and recommendation traffic continues, the total daily visitors in the fourth quarter could decline by double-digit percentages.

For a platform where user-generated discussions often appear in search results, this would mean a clear reversal.

Coinpaper Previous reports on the Reddit financial statements mentioned that the stock price fell by 18% after trading hours, and the selling pressure on Friday further intensified.

The latest closing prices show that after regular trading resumed, investors' reactions were even more intense.

Reddit reported a 53% increase in revenue, but what Wall Street is concerned about is more than just the financial results.

This sale stands in sharp contrast to the latest financial performance of Reddit.

According to the company's official financial reports, revenue in the third quarter increased by 53% to $895 million, with net profit reaching $283 million.

Advertising revenue increased by 54%, to approximately $847 million; earnings per share after dilution rose to $1.40.

Nevertheless, management expects revenue in the fourth quarter to be between $1 billion and $1.03 billion, which is lower than Wall Street's forecast of around $1.05 billion.

This less-than-expected outlook has deepened market concerns that a weakening in search and recommendation traffic will ultimately affect ad growth.

This situation also highlights an unusual contradiction in Google's AI strategy.

On one hand, AI searches may be reducing the traffic flowing to Reddit; on the other hand, Alphabet is still making substantial investments in technologies aimed at improving its own products.

Coinpaper also recently analyzed Google's expenditure of $51 billion in the third quarter, during which time infrastructure investments had already exceeded the generation of operating cash.

Google's search revenue growth rate was also lower than in the previous quarter, indicating that the company's AI transformation itself is accompanied by financial uncertainties.

Reddit Plans to Raise Login Requirements to Reduce Dependence on Google

Reddit is currently considering changing the way users access the platform.

Huffman outlines a plan to first test in some international markets the requirement that visitors must log in before viewing more content.

This strategy is aimed at encouraging users to establish a direct relationship with Reddit rather than repeatedly accessing the platform through Google searches.

However, mandatory logging in also carries risks. Visitors who are only interested in getting answers quickly may choose to leave rather than creating an account.

Management stated that Reddit and application users together contribute over 80% of the company's monetization, making these audiences particularly important.

The company also maintains business cooperation with AI developers, including Google, which pays to obtain Reddit data.

However, if the number of people accessing the platform directly decreases, the authorized revenue may not be sufficient to compensate for the loss of advertising opportunities.

The broader impact extends beyond Reddit.

Google's continuously evolving AI search products may affect publishers, review websites, and other businesses that rely on search referral traffic, even though their content still appears in Google search results.

For Reddit, the next challenge is: whether stronger direct interaction can offset the decline in search traffic without harming user growth.

Until this point becomes clear, the record-breaking plunge in stock prices on Friday indicates that what investors are questioning is not the current profitability of Reddit, but whether its user base can continue to expand steadily.