Reddit stock falls 29% to $91.73 on user drop warning

The drop came after Reddit's chief executive, Steve Huffman, said that the AI Mode does not drive traffic, and that searches sent Reddit over 1 million fewer visits a week in October. That admission matters because Reddit's posts also feed AI systems: market account Bull Theory claims AI pulls about 40% of its answers from Reddit threads, and Google and OpenAI reportedly pay about $60 million and $70 million a year to license them, as its Google licensing deal nears expiry. Even so, Reddit's defense is its loyal users, with COO Jen Wong saying over 80% of its money comes from logged-in and app users.

The pressure is not confined to Reddit. Publishers, travel sites, and image platforms have told investors the same Google traffic is drying up. People Inc. (PPLI), publisher of People magazine, saw Google search traffic fall 40% in a year. Tripadvisor CEO Matt Goldberg blamed AI Overviews for fewer drive-by visitors. Pinterest warns that its search traffic sits outside its control, and its shares fell nearly 8% Friday after an earnings miss. Homework-help company Chegg sued Google over AI summaries, and its shares slid from $113 in 2021 to about $1.

Alphabet itself lost about $500 billion on Thursday in its own post-earnings selloff, as search growth slowed to 12%, showing that even the company behind the AI summaries is not immune to the market's reaction. Even after the crash, Reddit trades at 19 times expected earnings, against 7.5 for Snap, Reuters data shows, leaving this quarter's user count as the key signal of whether loyal users can replace the clicks that no longer arrive.