Reddit’s first year as a publicly traded firm is going great. The company, which is nearly 20 years old, shared an extremely strong earnings report this week: Revenue is up 68 percent year over year, daily active unique visitors are up 47 percent, an Reddit turned a profit for the first time in its entire history. The earnings exceeded analyst expectations, and the stock price shot up more than 40 percent.
Reddit had no shortage of other good numbers to share. Ad revenue increased 56 percent year over year to $315 million, while “other” revenue, mostly from AI licensing deals, went up 547 percent to $33 million, a number that’s comparatively small but that contributes heavily to the company’s profitability. Its revenue per user is also up slightly, meaning that visits are being monetized more effectively on average. After years of slow growth and a stubborn inability to make money despite its size and influence, Reddit is blowing up.
Reddit’s growth and trajectory are undeniable. In its news release and letter to investors, though, they’re also somewhat underexplained. Why might a mature, mostly unchanged platform suddenly start growing like a viral start-up? (Reddit’s last quarterly report included similarly eye-popping growth numbers.) The company suggests a number of factors — machine translation to localize content for new markets, better posting interfaces and tools for users — but ends up talking around the obvious answer: Google, the most popular website in the world and largest traffic referrer on the internet by far, is sending more people to Reddit. Way more.
The backstory here is a bit fuzzy and contested, but the basic outline is this: Late last year, Google began prioritizing certain sources of user-generated content in Search in an effort to surface more “first-person perspectives” in response to queries. This, among other less clearly explained changes, seemed to result in more visibility for forumlike sites like Quora and especially Reddit, which some users were already adding to queries as a sort of hack to make search results better (“best iphone battery reddit,” for example).
It also corresponded with a massive drop in traffic to a range of online publishers, caught the attention of Google analysts and search-engine optimization (SEO) experts, and sent waves of panic through online media, which depends heavily on Google for finding readers. “Reddit’s surge is unprecedented,” says Lily Ray, a VP at marketing consultancy Amsive. “We’ve never seen anything like it in the SEO space.” Between July and August of 2023, Ray says, Reddit “really started to take off” in terms of visibility across thousands of popular searches. Now, for informational searches — a term of art referring to queries in which the user has a specific question to answer — “you’re going to see reddit.com ranking near the top.” (Among web publishers and SEO experts, there’s a widely held belief that this change is related to Google’s AI licensing deal with Reddit, which was disclosed earlier this year; the companies deny that the two are related.)
The source of Reddit’s growth is also evident in its official numbers, although it doesn’t break out Google or search traffic specifically. For example, its logged-in daily active-unique-visitor numbers are up 27 percent globally, while its logged-out daily active-unique-visitor numbers are up 70 percent. In Q3 of last year, logged-in users accounted for a slim majority of daily unique visits to Reddit; this year, logged-out visitors have taken the lead. This is consistent with growth driven by people tapping on Reddit links in Google rather than organic growth from people seeking out Reddit specifically.
In his letter to investors, CEO Steve Huffman mentions how important Reddit has become to Google — “Reddit was the sixth most Googled word in the U.S.,” he notes — but is somewhat more oblique in talking about how important Google has become to Reddit. This is as close as he gets (bolding mine):
Looking ahead, improving the search experience on Reddit is a key part of our strategy. We want to ensure that all users have the best experience possible. This includes users coming to Reddit from external search and those searching directly on Reddit looking for recommendations on what to buy, what to watch, or which products or services are the best. We know many users are looking for more than just answers; they are looking for authentic, real-world insights and advice from the communities on Reddit. We are focused on making the experience of navigating conversations and content on Reddit easier and more intuitive.
Again, things are going well for Reddit, and getting lots of new visitors, some of whom will become active users and contributors to the platform, making it more useful and valuable, is good news in multiple ways. But getting a majority of your traffic — your main source of revenue as an ad-supported business — from a much larger partner is not without risks. Just ask those websites that just watched their previous visitors get redirected to Reddit en masse. Or the collapsing American news media!
Reddit built its reputation as a community of communities, a site where people intentionally spend time and occasionally contribute in the form of posts, conversations, or volunteer moderation. Its users were motivated by the presence of other users; relatedly, for better or for worse, the company had to be at least somewhat responsive to the demands of Redditors, whom it depended on both for advertising revenue and as a source of free content and labor. (In the run-up to its IPO, however, Reddit ran out of patience for this dynamic and reasserted its authority over a restless mod community.) If Reddit begins to function more as a de facto extension of Google — as a website full of highly searchable content rather than a mostly self-contained community — it will have to deal with different challenges.
Already, spammers trying to take advantage of Reddit’s visibility in Google are pumping the site full of inauthentic and often AI-generated “parasite SEO” content, creating new work for already-beleaguered volunteer moderators. In 2007, Demand Media, a company that existed to get Google traffic, rode a mutually beneficial arrangement with the search engine to a valuation that briefly exceeded that of the New York Times. Demand Media was a fairly cynical content farm that paid freelancers small fees to produce huge quantities of passable search fodder, which for a brief period filled gaps in Google’s results pages. Reddit, which couldn’t be more different in terms of history, its role within the broader web, and its relationship with users, nonetheless finds itself performing a similar function and deriving similar benefits. It’s not a bad deal! But it’s potentially a risky one, especially now that Reddit is refusing indexing from other search engines with connections to AI firms, which is basically all of them.
Reddit’s new success is at Google’s mercy, in other words, a fact of which both firms are acutely aware: If the search giant decides to start showing fewer Reddit links, or perhaps starts summarizing more of them with AI — it paid for access to all that data, after all — the company’s wild growth could stall or reverse, which is a bit more of a problem now that it has a ticker symbol.
Reddit’s current task is to try to convert its new traffic into users who’ll stick around, talk to one another, and keep producing enough actual credible, interesting, or useful content to keep other users around — but also for Google to harvest and advertise against. For years, Reddit had to answer to its investors and its users, whose desires weren’t always aligned. Now, it has to answer to the most powerful website on the internet.
