Reddit faces pressure to rely on search and AI for growth

In short: Reddit is adding users fast, but a Financial Times analysis says it may struggle to turn search visitors into steady ad revenue as search and AI change how people find information.

What's going on

Reddit is one of the most visited sites in the US, with over half of Americans visiting weekly, according to the Financial Times. The company went public in March 2024 at $34 a share, and the stock is still far above that level.

The analysis says Reddit’s daily active users are now a bit over 120 million, based on SensorTower data. Many Wall Street analysts rate the stock a “buy,” but at least one firm, Rothschild & Co Redburn, argues Reddit has a weak spot.

That weak spot is how people use Reddit. A lot of visits come through web search, like when someone types a product question into Google and adds “reddit” at the end. This can bring quick clicks, but it does not always lead to people opening the Reddit app and sticking around, which matters because Reddit earns most of its money from ads.

The FT piece also points to a growing risk from AI search summaries. These are short answers shown directly in search results (like getting the takeaway without opening the book). If people can read advice pulled from Reddit without visiting Reddit, Reddit may lose page views, and ads.

What to watch

Reddit is trying to grow ad revenue while staying “distinctly human,” and it is licensing some of its discussions to AI companies for training. It is also in legal fights with Perplexity and Anthropic over alleged improper use of its data. The big question is whether Reddit can keep search traffic flowing while convincing more visitors to become regular users, without upsetting the communities that make the site valuable.

Source: Financial Times