Reddit's third-quarter revenue rose 53% to $895 million, even as search referrals fell further in October, raising the possibility of a fourth-quarter audience decline if the trend persists.
In its Q3 shareholder letter filed with the Securities and Exchange Commission, Reddit reported that search referrals fell by more than one million per week on average in October. The drop followed a meaningful decline in the quarter ended Sept. 30 that accelerated toward the period's end. Logged-out visitors and web traffic were most affected, though the decline also reached logged-in users and app traffic.
At an Oct. 29 earnings call, Reddit CEO Steve Huffman said his leading hypothesis about changes in Google traffic involved AI Overviews and AI Mode. He also cited lower rankings for machine-translated content, a possible factor mainly outside the United States. Reddit did not quantify how much either issue contributed to the October referral decline. Huffman said, “The reality is the AI mode does not drive traffic, not for us and not to anybody as far as I know.” That was his assessment, not a measurement of traffic across other sites.
Reddit averaged 130.3 million daily active uniques in Q3, up 12% from a year earlier and unchanged from Q2. The U.S. figure fell 5% from Q2, while the rest of the world rose 3%. The company said daily active uniques could decline by a low-double-digit percentage in Q4 from a base of 130 million if the referral pace continues.
Advertising revenue reached $847 million in Q3, up 54%. Daily active uniques among logged-in users and app users grew sequentially and accounted for more than 80% of Reddit's monetization. The company warns that weaker search traffic could reduce users and advertising reach. The referral figures add detail to EconoTimes' earlier coverage of Reddit's traffic concerns.
Reddit plans to test a logged-in-only experience in one or more international markets during Q4, with results guiding a possible global version. The company says requiring users to log in could improve recommendations and ad targeting and give it more control over access to its data, while also warning that the change could reduce user numbers or advertising reach.
