Reddit has begun testing ads in its search results, offering advertisers a way to reach users looking for products, recommendations and other information on the platform. The test follows the company’s warning to investors about falling search referrals and a weaker-than-expected revenue outlook.
The initial trial is limited to a select group of eligible advertisers. Reddit says ads may be matched to search queries based on factors such as contextual relevance, and that it will assess user responses before refining the experience. For example, a search for an espresso station could bring up ads for coffee machines or mugs, while a home office search might show monitors, desks or chairs.
The move comes as Reddit contends with changes to Google Search that have reduced visits to publishers’ websites. Google’s AI-powered features, including AI Mode, can answer questions directly on search results pages, meaning users may be less likely to click through to sites such as Reddit.
Reddit beat Wall Street estimates for third-quarter revenue and earnings per share, but its shares fell after the company forecast fourth-quarter sales of $1 billion to $1.03 billion, below expectations of $1.05 billion. The outlook was linked to declining search traffic referrals.
User figures also showed signs of strain. Reddit reported 130.3 million global daily active users in the third quarter, unchanged from the previous quarter. Daily active users in the U.S. fell from 53.2 million in the second quarter to 50.7 million in the third, down 2% year over year. The company said the trend could lead to a low double-digit percentage decline in daily active users by the fourth quarter if it continues.
The search ads are one way Reddit could generate more revenue from its existing audience. Their value may increase as the company gradually moves toward a logged-in experience, a plan announced alongside its earnings results and set to begin in markets outside the U.S.
Requiring users to log in is intended both to protect Reddit’s content from unauthorized AI scraping and to make its audience more valuable to advertisers. Logged-in users provide more information about their interests and behavior, which can support more targeted advertising.
Sources: TechCrunch.