Reddit Tests Search Ads as AI Search Changes Online Traffic
The platform is experimenting with sponsored search placements as declining referrals and slowing US user growth increase pressure to expand advertising revenue.
Reddit tests sponsored advertisements in search results to expand its digital advertising business.
Reddit has begun testing advertisements in its search results as the social media platform explores new ways to increase revenue amid concerns over declining search traffic and slowing user growth.
The company announced on Tuesday that selected eligible advertisers would be able to place sponsored content alongside search results. The new format targets users looking for products, recommendations and other information.
The trial will help Reddit assess how users respond to sponsored placements. It will also allow advertisers to evaluate the effectiveness of the new advertising format.
“Ads in search may appear based on a range of factors, including contextual relevance to a user’s search query,” the company said in its announcement.
For example, users searching for an espresso station could see advertisements for coffee machines, mugs and other coffee products. Similarly, searches for home office setups could display promotions for monitors, desks and office chairs.
AI search puts pressure on Reddit traffic
The advertising experiment comes as Reddit adapts to changes in online information discovery.
Google’s growing use of artificial intelligence in search has increased competition for online attention. Features such as AI Mode can provide answers directly on search results pages, potentially reducing clicks to external websites.
Reddit has warned investors that declining search engine referrals are affecting traffic to its platform.
Meanwhile, the company reported better-than-expected third-quarter revenue and earnings per share. However, its shares fell after it issued a weaker-than-expected revenue forecast for the following quarter.
Reddit projected fourth-quarter revenue between $1 billion and $1.03 billion. Analysts had expected approximately $1.05 billion.
US daily active users decline
Reddit reported 130.3 million global daily active users in the third quarter, unchanged from the previous quarter.
However, its US daily active user base declined from 53.2 million in the second quarter to 50.7 million in the third quarter.
The figure also represented a 2% decline compared with the same period last year.
The company warned that continued weakness could result in a low double-digit percentage decline in US daily active users during the fourth quarter.
Consequently, Reddit faces growing pressure to generate more revenue from its existing audience rather than relying mainly on user growth.
Reddit plans a stronger logged-in experience
Reddit is also preparing to gradually expand its logged-in experience, initially focusing on markets outside the United States.
The company announced the strategy alongside its quarterly results. It aims to protect platform content from unauthorised AI scraping while making its audience more valuable to advertisers.
Logged-in users provide platforms with additional information about their interests and activity. This data can help advertisers deliver more relevant campaigns and improve advertising performance.
The search advertising trial and planned login changes reflect Reddit’s broader efforts to strengthen its business model.
As artificial intelligence reshapes online search and content discovery, the company is seeking new ways to protect traffic, engage users and expand advertising revenue.
