Reddit Posts 54% Ad Growth and Tests Login Requirement Outside the U.S.
Key Facts
Reddit reported third-quarter results alongside plans to begin testing a login-focused experience outside the U.S. this quarter, according to Axios. Advertising revenue grew 54% year over year, signaling continued strength in the ad business as the company reconsiders how visitors access its content. CEO Steve Huffman said the change is "about giving people the best version of Reddit," denying it was a response to changes in Google Search. The company also acknowledged that search referrals fell materially in the third quarter. The test comes as Reddit seeks to convert more visits into an experience tied to user accounts while preserving some open access routes.
Huffman said the test aims to improve the user experience, strengthen ad activity and limit bots’ collection of platform data, according to Axios. Reddit plans to gather data from the test before gradually expanding the change, making its initial scope outside the U.S. a phase for measuring its impact before any broader rollout. The change will not close the platform to all visitors who are not logged in: the homepage will remain available to them, as will links they reach through search engines or posts. Commenting on and voting on content, by contrast, will require logging in. The company is thus drawing a line between browsing some content and interacting with it, while keeping direct paths that take users to a specific page.
The decline in search referrals adds pressure to this shift. Reddit said the trend, if it continues, could reduce daily active users by a low double-digit percentage in the fourth quarter. The warning follows a material decline in referrals in the third quarter, according to the company, but does not establish that requiring users to log in will reverse that decline. Huffman stressed that the plan is not a response to changes in Google Search but aims, in his words, to "give people the best version of Reddit." The distinction highlights the gap between the company’s stated rationale and search’s effect on visitor traffic: Reddit acknowledged the decline in referrals but described the access change as part of product and advertising development. Any potential drop in daily active users next quarter will remain linked to the persistence of the referral trend, according to the warning reported by Axios.
The company’s push to attract logged-in users rests on the fact that the vast majority of engagement and more than 80% of monetization come through the app and users who are logged in, according to the shareholder letter published with its third-quarter results. That puts the known user base at the center of the business model Reddit is seeking to strengthen, while logging in also limits bots’ ability to collect platform data, as Huffman explained. But the company generates revenue from sources beyond advertising: non-advertising revenue, which includes data licensing, totaled 48 million dollars in the third quarter, up 35% year over year. The figures show that data-licensing activity grew during the period, although the company continues to classify it as non-advertising revenue. Reddit’s plan to restrict some forms of browsing therefore intersects with its efforts to protect its data and grow advertising and content-related revenue streams.
Results from technology companies around the platform show a mixed picture for digital advertising in the same quarter. Google Search and other advertising revenue rose 12% to 63.3 billion dollars, while YouTube ad revenue increased 9% to 11.2 billion dollars, according to the Associated Press. Alphabet revenue grew 25% year over year to 127.58 billion dollars, but fell short of the average analyst estimate of 127.97 billion dollars. The agency said Google’s search and advertising growth came in below some expectations and raised concerns about slowing growth, despite CEO Sundar Pichai saying year-over-year growth in search queries reached its fastest pace in five years. After the results were announced, Alphabet shares fell more than 10% to 289.95 dollars in after-hours trading on October 28, the agency reported. At the close, Reddit shares stood at 134.7 dollars on October 28, while Alphabet closed at 284.74 dollars on October 29; the two prices reflect different closing dates from Alphabet’s post-results move.
The next step remains the start of the test outside the U.S. this quarter, followed by data collection and gradual expansion, according to the company’s announcement as reported by Axios. During this phase, the homepage and direct links from search results or posts will continue to make content available to visitors who are not logged in, while commenting and voting on content will remain conditional on logging in. The company is also watching the effect of declining search referrals on daily active users, after warning they could fall by a low double-digit percentage in the fourth quarter if the trend continues. The information reported by Axios did not specify a start date beyond the current quarter or a timetable for expansion. Available third-quarter results show ad growth of 54% and non-advertising revenue growth of 35% year over year, with no other financial results figures among the available facts.