Reddit Shares Fall 29% After Warning of Impact from Google’s AI-Powered Search
Key Facts
Reddit shares fell 29% on Friday, October 30, marking their biggest one-day decline and reaching their lowest level in more than a year, according to Reuters. The drop followed a warning from the company that Google’s AI-powered search is weighing on referrals to its platform, with its user base potentially shrinking. EMARKETER said search engine referrals to Reddit fell by more than one million per week on average in October. The decline concerns referrals from search engines, not total visits to the platform. RDDT shares also closed at $129.6 on October 29, according to EL7 data.
EMARKETER attributed part of the decline to the development of Google’s AI-powered search products, including AI Overviews and AI Mode. The firm said the biggest impact was among logged-out users and in web traffic. These referrals represent a channel through which users reach Reddit, one affected when users get an answer within the search experience itself. In Reuters’ report, Reddit’s warning coincided with Google search revenue growth slowing to 12% in the September 2026 quarter. The report noted questions about monetizing AI-powered search.
The warning puts pressure on search in the context of the differing effects of this shift on platform reach and engagement. Management said on the third-quarter earnings call that about 80% of Reddit’s monetization comes through the app and logged-in users. It added that the change would balance reach and engagement, while CEO Steve Huffman said the company would test a logged-in-only experience outside the United States. This comes as monetization figures point to the importance of audiences already using the app or signing in. But the company did not provide a figure in these remarks quantifying the impact of the login experience on new user acquisition.
On advertising, Chief Operating Officer Jen Wong said more than 60% of Reddit’s business is performance-based, an advertising model tied to clicks and conversions. She said click volume rose by more than 50% year over year in the third quarter of 2026, while conversion volume tripled. These figures show growth in advertisers’ measurable activity alongside concerns about external referrals. But they do not remove the warning about user traffic coming from search, which was linked to the stock’s decline on October 30. The market response recorded that day focused on the referral warning and the possibility of a shrinking user base.
Reddit is beginning a test of a fully logged-in experience in markets outside the United States this quarter, Huffman said. The company will gather data on the best approach before introducing broader changes gradually, according to his comments reported by Axios. The test raises for management the question of balancing reach among a wider audience with engagement among logged-in users. That balance is tied to the importance of the app and logged-in users for monetization, and to the reliance of a large share of advertising activity on performance. Huffman did not specify a timeline beyond starting the test this quarter, or a schedule for gradual expansion.