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Reddit's Stock Plunge and What It Means

Software2 min read

Reddit's stock fell almost 29% in one day after it warned that visits from Google search are shrinking. The sharp drop came even though its quarterly sales grew fast.

What happened

On October 30, Reddit's stock closed at $91.73, down 29.22%. It was the biggest one-day drop since Reddit went public in 2024. The company's third-quarter results were strong, but its shareholder letter said visits from Google search fell sharply, and the decline sped up late in the quarter. Investors sold because they worried about future users, not past sales.

Key numbers

  • Third-quarter sales: $895 million, up 53% from a year earlier
  • Advertising sales: $847 million, up 54%
  • Net profit: $283 million
  • Search visits fell by more than 1 million per day on average in October
  • Reddit warned daily unique visitors could fall by a low double-digit percentage in the fourth quarter

Why Google clicks matter

Many people read the AI summary at the top of a Google search and close the page without clicking any links. A study by the Pew Research Center found that users clicked a normal result on 8% of searches with an AI summary, compared with 15% without one. Reddit is especially exposed, because people often search for real experiences, such as reviews or symptoms, and AI summaries can easily repackage those answers.

Why it matters

Many websites earn money by showing ads to visitors who come from search engines. If AI answers keep visitors on Google, these sites lose their audience. Reddit had tried to prepare by selling its data to Google and OpenAI, but data sales bring in only about 5% of its revenue, and those deals may end in the first half of next year. Some companies are now collecting real-world data, such as home cleaning videos and delivery worker footage, to train home robots. The lesson is that companies need more than one way to earn money and a direct reason for customers to return.

What to watch

  • Whether Reddit's test of requiring every user to log in goes ahead, and how many casual visitors leave
  • Whether Google's AI summaries keep reducing clicks to other websites
  • Whether Reddit renews its AI data licenses when they expire in the first half of next year
  • How privacy concerns are handled in real-world data collection, such as Shift's home cleaning service

Glossary

Reddit
A large online platform where people discuss topics in many community forums.

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