Reddit has started testing ads on its search results pages. In an announcement on 3 November, the company said the ads may appear "based on a range of factors, including contextual relevance to a user's search query". A search for "espresso station" could bring up ads for espresso machines, coffee beans or mugs; a search for "home office setup" could bring up monitors, desks or office chairs.
Reddit called it "an initial test with a select group of eligible advertisers" and said it will study how users respond before refining the format. It did not say which advertisers qualify, which countries the test covers or when the placements could open to everyone. The company says search pages on Reddit carry "high purchase and search intent", and claims half of its users say the platform helps them discover something new.
Why now
The test comes days after Reddit's third-quarter results on 29 October, when it warned investors about falling search traffic. According to TechCrunch, referrals from search dropped by more than 1 million a week on average in October, and Reddit said daily users could fall by a low double-digit percentage next quarter if the trend continues. Chief executive Steve Huffman put the decline down to Google's AI Mode and AI Overviews, which answer questions on Google's own page instead of sending people to other sites, CNBC reports.
The business itself is still growing fast. Revenue rose 53% to $895 million in the quarter, advertising revenue rose 54% to $847 million and net income rose 74% to $283 million, according to TechCrunch. But global daily active users were flat on the previous quarter at 130.3 million, and US daily users fell from 53.2 million to 50.7 million. Reddit guided fourth-quarter revenue of $1.00 billion to $1.03 billion, below the $1.05 billion analysts expected, and its shares fell more than 15% after the results, CNBC reported.
Related · Growth StakOpenAI Opens ChatGPT Ads to Magnite and PubMatic BuyersOpenAI has signed ad-tech firms Magnite and PubMatic to sell unused ChatGPT ad space, The Information reports, sending both companies' shares up.Reddit also said it will move to a mainly logged-in experience, with tests starting in select markets outside the US this quarter. Logged-in users give advertisers more signals about their interests, and the change makes it harder for AI companies to scrape the site without a licensing deal.
