Key facts
- Reddit said ads in search may appear based on factors including contextual relevance to a user's search query.
- Reddit said the test is an initial one with a select group of eligible advertisers.
- Reddit said US daily active users fell to 50.7 million in the third quarter from 53.2 million in the second quarter.
- Reddit said US daily active users were down 2% year-over-year in the third quarter.
- Reddit said daily active users could decline to a low double-digit percentage by the fourth quarter if the trend continues.
- Reddit said it plans a gradual shift to a logged-in experience, initially in markets outside the US.
Reddit said on November 3 that it began testing ad placements in its search results pages, letting advertisers reach users as they search for products, recommendations and other information on the platform. The company said the test is an initial one with a select group of eligible advertisers.
"Ads in search may appear based on a range of factors, including contextual relevance to a user's search query," Reddit said in its announcement. "This is an initial test with a select group of eligible advertisers. During this test, we will evaluate and understand how users respond to these ads so we can refine the experience for users and advertisers over time."
Reddit offered examples of what sort of ads might appear, suggesting that a search for "espresso station" might display ads for espresso machines, coffee or mugs, while a search for "home office setup" could surface ads for monitors, desks and office chairs.
The test follows third-quarter results reported last week. Reddit beat Wall Street's estimates for revenue and earnings per share, but its stock dropped after it guided fourth-quarter revenue to $1 billion to $1.03 billion, below the $1.05 billion expected. The company tied the outlook to declining search traffic referrals resulting from Google's move to an AI-powered search experience, which sends less traffic to publishers' websites by providing answers directly on its search results pages.
Reddit said global daily active users were flat quarter-over-quarter in the third quarter at 130.3 million. US daily active users fell to 50.7 million from 53.2 million in the second quarter and were down 2% year-over-year. The company said that if the trend continues, daily active users could decline to a low double-digit percentage by the fourth quarter.
Reddit also said during earnings that it plans a gradual shift to a logged-in experience, initially in markets outside the US. The company said the move protects its site from unauthorized AI scraping and increases its value to advertisers, because logged-in users provide additional signals about their interests and behavior.