On Friday Reddit’s shares fell 29 percent, the largest one-day decline in the company’s history, taking the stock to its lowest level in more than a year. The drop followed Reddit’s warning that Google’s AI-enhanced search results are materially reducing traffic to the site.
What happened and why it matters
Although Reddit still appears in Google search results, users are clicking external links less frequently because Google’s AI tools are answering queries directly. Reddit warned that if traffic from external referrals continues to decline, daily active unique users could fall by more than 10 percent in the fourth quarter.
Citing a lead market analyst at Capital.com, the report notes that Google’s AI is costing over one million clicks per week, raising investor concerns about Reddit’s ability to retain its audience over the longer term.
Broader impact across the web
This loss of referral traffic is not limited to Reddit. News sites, education platforms such as those similar to Chegg, travel sites and product review platforms are also facing significant traffic declines as search behavior changes.
Simultaneous development: extended cloud contract with Google
At the same time, Reddit announced it has extended its cloud services agreement with Google through 2029. Under the deal Reddit will spend $580 million on Google Cloud services over three years.
Google/Alphabet’s monetization challenge
Google is also encountering difficulties monetizing AI-driven search. In the quarter ended September, search revenue growth slowed to 12 percent, and Alphabet’s shares fell sharply, erasing roughly $500 billion of market value, according to the report.
Conclusion
Reddit warned of near-term traffic and user risks from Google’s AI-powered search while committing to a multi-year cloud agreement with Google. The developments underscore both the immediate business risks for referral-dependent platforms and the wider industry shift driven by AI-based search.
Source: Reuters. An AI assistant contributed to preparing this article; the final content was edited and verified by our journalist.
