Reddit Shares Plunge 25% as AI Search Disrupts Traditional Web Traffic Model
Key Takeaways
- •Reddit's stock, trading under ticker RDDT, dropped around 25% on Friday as traffic concerns and a weaker outlook overshadowed its earnings report.
- •Reddit's weekly search referrals declined by more than 1 million visits on average in October, according to figures shared by Coin Bureau on X.
- •CEO Steve Huffman said during the earnings call that AI-powered search does not generate traffic for Reddit or, as far as he knows, for any other website.
- •The decline highlights concerns that AI search tools may answer user questions directly without sending visitors back to the websites supplying the underlying content.
- •The available data does not establish that AI alone caused the referral drop or quantify its revenue impact, so future referral trends and disclosures will be key metrics to watch.
Reddit shares dropped roughly 25% on Friday as concerns over declining website traffic and a weaker outlook overshadowed the company's earnings, highlighting the mounting challenge that artificial intelligence poses to the internet's long-standing traffic model.
According to information shared by Coin Bureau on X, Reddit's search referrals — the visits that arrive when users click through from search results — fell by more than 1 million per week on average in October.
Huffman: AI Search Is Not Sending Visitors
Reddit CEO Steve Huffman addressed the issue during the company's earnings call, saying that AI-powered search experiences were not generating traffic for Reddit or, to his knowledge, for other websites. His comments underscore a broader concern about how the growing use of AI in search could affect publishers and online platforms that depend on visitors arriving through search engines.
“AI mode does not drive traffic. Not for us and not to anybody as far as I know,” Huffman said during the call.
The remark points to a potential disconnect between how people use AI-powered search tools to find information and how many visits those tools actually send back to the websites that supply the underlying content.
The reported drop in search referrals puts a number on the pressure facing the platform: weekly referrals declined by more than 1 million on average in October, according to the figures shared by Coin Bureau. The report did not specify the total number of search referrals Reddit received, nor did it identify how much of the decline was directly attributable to AI-powered search.
The market reaction was sharp. Shares of Reddit, which trades under the ticker RDDT, fell around 25% on Friday as investors weighed the traffic concerns and the weaker outlook against the company's earnings results.
The Internet's Traditional Traffic Model Under Strain
For decades, much of the internet's commercial model rested on a relatively straightforward exchange: websites produced content, search engines directed users to that content, and the resulting visits generated revenue through advertising, subscriptions and sales. That arrangement linked the creation of online information with the distribution of audiences, allowing publishers and platforms to attract visitors through search results and then monetize those visits through advertising placements, paid memberships or purchases.
AI-powered search experiences raise questions about how that relationship may change. If users can obtain answers directly within AI interfaces without visiting the original websites, those sites may receive fewer referrals even when their content helps inform the answers. Huffman's comments reflect the concern that AI search is not currently replacing traditional search referrals with an equivalent flow of visitors.
It is worth noting the limits of the available information: the data shared by Coin Bureau does not establish that AI alone caused Reddit's referral decline, nor does it quantify the impact on the company's revenue. What it documents is the decrease in weekly search referrals, Huffman's comments on AI-driven traffic, and the market's reaction to Reddit's earnings and outlook.
Why the Traffic Shift Matters
Reddit's experience illustrates the potential challenge facing internet businesses whose commercial models depend in part on attracting users from external search engines. A change in how people discover information can erode the flow of visitors that supports advertising, subscriptions and sales, even when a platform continues to produce content.
The immediate market response was reflected in RDDT shares, which fell around 25% on Friday amid the traffic concerns and the company's weaker outlook. Huffman's assessment of the situation was direct: “AI mode does not drive traffic. Not for us and not to anybody as far as I know.” With October as the documented baseline, the data points to watch are whether weekly search referrals decline further, stabilize or recover in the months ahead, and whether future disclosures quantify how much of the drop stems from AI-powered search.
