Reddit Says Google AI Mode Cut a Million Visits a Week

Welcome to the DX Today Podcast, your daily deep dive into the AI ecosystem. I'm Chris, and joining me as always is Laura. Hey Chris, happy Halloween to everyone listening. And I have to say, today's story is genuinely a little spooky because it is about a huge website watching its traffic quietly disappear.

Right, so let's set the scene. Reddit reported its quarterly earnings this week, and the headline was not really the money at all. It was the chief executive pointing a finger directly at Google. Exactly.

Steve Huffman, the chief executive of Reddit, told investors that referrals from Google search fell by more than 1 million visits per week on average during October, and he blamed Google's AI features. So give me the scale here because I want listeners to understand whether this is a scratch or a real wound. Good instinct. Reddit had about 130.

3 million daily active unique visitors in the third quarter. Roughly 76.8 million of those were logged out, and about 53.5 million were logged in.

So the majority of people who show up on Reddit every day are not even signed in. I am guessing a lot of those logged out folks arrive by typing a question into Google. That is precisely the pipeline. You search for the best budget hiking boots, Google shows a Reddit thread, you click, you read, you leave.

That logged out visitor is the one most exposed when Google stops sending clicks. And the company actually put a number on how bad it could get, right? They did not just complain, they warned investors about the next quarter in fairly specific terms. They did.

Reddit said that if the trend continues, daily unique visitors in the fourth quarter could fall by a low double-digit percentage from that 130 million level. That is a striking thing for a growing company to say out loud. Okay, now let me hear the actual quote, because I understand Huffman was unusually blunt about Google, and that kind of directness from a chief executive is pretty rare on an earnings call. He was very blunt.

He said, quote, AI mode does not drive traffic. Not for us and not to anybody as far as I know. And quote, he named AI overviews and AI mode as the biggest factor behind the decline. Let me play devil's advocate for a second, because I think that is my job today.

Is it possible Reddit is just using Google as a convenient villain to explain a weak traffic quarter? It is a fair challenge. And to his credit, Huffman called these hypotheses not proven facts. Reddit did not give any measurement that separates the causes, so we should hold the claim with a little caution.

You said causes, plural. So what is the other suspect in this mystery? Besides Google's AI answers, simply giving people what they wanted without a click-through to Reddit. The second factor he named is that Google appears to be ranking Reddit's machine translated content lower.

That mainly hurts markets outside the United States, where Reddit had been showing automatically translated threads to local searchers. That actually makes sense from Google's side. If I search in Spanish and land on a clumsy machine translation of an English thread, I probably have a worse experience than reading a native page. Right, and that is why the honest answer is that both forces are probably at work at once.

One is a quality judgment about translations, and the other is a structural shift in how search itself works. Interesting. So part of this could be a ranking change rather than AI eating the click. What does Google say about all of this?

Because surely they have a very different version of the story. Google says it sends billions of clicks every week through its AI features, and that Reddit does not get any special ranking preference. And Huffman himself noted that Google still crawls Reddit, quote, as hard as ever. That detail's kind of the heart of it for me.

Google is still reading everything Reddit has, as hard as ever, but sending back fewer visitors. That sounds like the deal changed without anyone signing anything new. That is exactly how many publishers feel. The old bargain of the web was simple.

Let the search engine index you, and in return it sends you traffic. AI answers break that bargain because the answer itself keeps the user on Google. Now here's the twist I find fascinating. Google is not exactly celebrating either because the same week Alphabet admitted that these AI searches make less money than the old style of search ads.

Yes, and this is the part that makes the story bigger than Reddit. Alphabet said search revenue grew 12% to about $63 billion, but a year earlier that growth rate was 14.5%. So growth is clearly slowing down.

So growth slowed, and they actually said out loud that AI mode was the reason? I would have expected a company that size to blame something vague like the economy or currency swings instead. Their chief business officer Philip Schindler pointed to, quote, lower monetization we were seeing in AI mode, end quote. Alphabet shares fell almost 10% on Wednesday after that comment.

Investors really heard it. And this is happening while Google is spending staggering amounts on the infrastructure behind these AI answers. Give me a sense of how much money is going into the machines right now. Alphabet spent about $51.

4 billion on capital investment in the third quarter alone, and it still expects between $195 and $205 billion for the full year with significantly more next year. So we have this strange situation where AI search is hurting the websites that supply the answers. And it is also hurting the company providing the answers. Who is actually winning in this arrangement right now?

In the short term, arguably the user who gets a quick answer for free. Schindler argued that most AI mode queries are incremental, meaning new searches people would not have made before, and Google has now started showing ads inside AI mode worldwide. That is the optimistic case then. More questions overall.

Ads eventually catch up, everybody grows. But I suspect Reddit is not willing to just sit around and wait for that to happen. Not at all, and this is the biggest strategic news. Huffman published a post called About That Login Screen saying Reddit will move to a primarily logged-in experience.

The first full test start this quarter in select markets outside the United States. It seems like a company would try marketing its way out of a traffic dip before taking such a drastic step. They did. Reddit raised marketing to international users to offset the lost search reach and shifted domestic web marketing toward app install campaigns.

They also noted that only about 13% of eligible mobile web users even see the prompt to switch to the app. Wait, so the answer to losing visitors from Google is to put up a wall that makes visitors sign in? That feels backwards on the surface. Walk me through the logic because I am skeptical.

It sounds backwards until you look at the money. The chief operating officer, Zen Wong, said more than 80% of Reddit's monetization comes from logged-in users inside the app. The drive-by visitor from Google is worth much less. So the casual Google visitor reads one thread, sees maybe one ad, and disappears.

The logged in app user scrolls for half an hour and sees dozens of targeted ads, losing the first hertz less than I assumed. Right, and Huffman said it directly. Okay, but there is another reason for a login wall. And I suspect it is about AI as well.

If everything sits behind a login, the AI companies have a much harder time scraping it for free. You nailed it. Huffman said a logged in only Reddit will, quote, for sure make scraping harder, though not impossible. And Reddit also plans to close access to its public data interface in March of 2027.

That connects to the licensing side of the business. Reddit famously sells its data to AI companies. How does that fit? Because a wall makes the data scarcer and maybe a lot more valuable at the same time.

Exactly that logic. Reddit's deal with Google was reported at about $60 million a year. Huffman said licensing talks are active, but he was candid that they could end without a deal. Scarcity strengthens his negotiating hand either way.

So let me summarize the strategy as I understand it. Google keeps the answers on its own page, so Reddit stops giving the answers away and forces anyone who wants them, human or machine, through the front door. That is a crisp way to put it, and it is not a crazy business. Reddit guided fourth quarter revenue to between 1 billion and 1.

03 billion dollars, which is 38 to 42% growth. Hold on, revenue is growing around 40% and the stock still collapsed? That seems like a disconnect. What did investors actually react to if the core business numbers look that healthy?

They reacted to the future. The stock closed at about $129 on Thursday, then dropped around 18% after hours, and several reports say the total decline ran past 25%. Investors are pricing in years of reduced reach, and they are worried that the user base, which drives every future ad dollar, could actually shrink for the first time in a long while. I want to zoom out now because I think every listener who runs a website, a blog, an online store, or a local business should be paying close attention to the story, not just Reddit shareholders.

Completely agree. If a site as beloved by Google as Reddit can lose more than a million weekly referrals, then any business that depends on search traffic carries the same structural risk. That is the real lesson for the rest of the web. Whether you are a national newspaper, a recipe blogger, or a plumber who gets most of his calls from people searching nearby.

So what do you actually do about it? If I am a small company owner listening right now and my leads come from Google, what is the practical move this week rather than in some distant future? First, measure it honestly. Look at your search referrals week by week since AI answers expanded.

Second, build direct relationships like email lists, apps, and communities that you own and that no algorithm can take away overnight. And I would add a third point, which is to think about whether AI systems are citing you at all. Being the source in AI answer quotes might become the new version of ranking on page one. Yes, and that shift is already creating a whole new discipline around being visible inside AI answers.

But be careful, because even being cited does not guarantee the click. Reddit is cited constantly and the visits still fell. That is a sobering point. Let me push back one more time on the doom here, though.

Couldn't AI search eventually send higher quality visitors, people who already know exactly what they want before they arrive. That is Google's argument, and it might be partly true. Fewer visits, but more intent per visit. The trouble is that businesses pay bills with volume two, and nobody has shown yet that the quality gain fully offsets the lost quantity.

And I suppose there is an irony in all this. The AI answers are built partly on Reddit conversations. And now those conversations may vanish behind a login, which could make future AI answers worse over time. That is the feedback loop that keeps me up at night.

If the open web closes its doors to protect itself, the models that depend on fresh human discussion lose their best source of real experience. Everyone ends up poor. So the takeaway for today is that the bargain of the open web is being rewritten in real time. And Reddit just became the first giant to openly say it is walking away from the old terms.

Well said. Watch the fourth quarter numbers, watch those login tests overseas, and watch whether other big publishers follow Reddit behind a wall. If they do, the internet we search every day could look very different by next year. That's all for today's episode of the DX Today Podcast.

Thanks for listening, and we'll see you next time.