Reddit is testing ads in its search results pages as the company confronts declining traffic and user growth concerns. The ads will appear based on contextual relevance to users' search queries, with examples showing espresso machine ads appearing for "espresso station" searches and office furniture ads for "home office setup" queries. The company said it is running an initial test with a select group of eligible advertisers.
The ad test follows Reddit's third-quarter earnings report last week, which revealed declining search traffic referrals tied to Google's shift toward AI-powered search. Google's AI Mode provides answers directly on search result pages, reducing clicks to other websites. Despite beating Wall Street's revenue and earnings estimates, Reddit's stock dropped after the company issued weak fourth-quarter guidance, predicting sales of $1 billion to $1.03 billion versus expectations of $1.05 billion.
Reddit also reported flat global daily active users at 130.3 million in the third quarter, while U.S. daily active users fell from 53.2 million in the second quarter to 50.7 million, a 2 percent year-over-year decline. The company warned that if the trend continues, daily active users could decline by a low double-digit percentage in the fourth quarter.
To extract more revenue from its existing user base, Reddit announced plans to shift gradually toward a logged-in experience, starting in markets outside the U.S. The company said this move protects its site from unauthorized AI scraping and increases advertiser value. Logged-in users provide better signals about interests and behavior, enabling more targeted and profitable ads.