Reddit's User Growth Disappoints, Stock Drops
Key Metrics:
* Daily active unique visitors: 101.7 million (below analyst expectations of 103.8 million)
* Revenue: $427.7 million (exceeded estimates of $405 million)
* Net income: $71 million (36 cents per share)
Google Algorithm Change Impacts Growth:
Reddit's user growth slowed after Google modified its algorithm, reducing search traffic to the site. Google's influence on Reddit's traffic reached 50% on certain days.
Stock Performance:
Reddit's stock declined 8.9% premarket after the Q4 results missed estimates. However, the stock has outperformed the market since its IPO in March 2022.
Analyst Commentary:
Analysts suggest that large language models and search providers may be diverting traffic from Reddit, leading to stagnant growth in US daily users. Reddit is exploring AI capabilities to minimize its reliance on external search engines.
Advertising and AI Strategy:
Reddit continues to invest in advertising technology to compete with Google and Meta. New ad formats and partnerships with sports leagues aim to attract more advertisers.
Additionally, Reddit is diversifying its business with AI partnerships. Data-licensing deals with major players like Google and OpenAI provide revenue streams beyond advertising. The company is also developing its own AI models and search capabilities to enhance user experience.