Reddit announced during its third-quarter earnings on Thursday that it is transitioning to a primarily logged-in experience. The company has long brought in millions of visitors through Google search, but search traffic is drying up amid the shift to AI-powered search.
This strategy aims to safeguard company data from AI scraping and secure profitable licensing agreements with model providers. It could also help increase revenue while daily active users decline in the United States, its largest market.
Global daily active users remained flat quarter-over-quarter at 130.3 million during the third quarter. U.S. daily active users fell from 53.2 million in the second quarter to 50.7 million in the third quarter, marking a 2% year-over-year decrease.
Reddit is not alone in facing these drops, as the evolution of the AI-centered web has reduced click-through rates for many websites and publishers. Search referrals fell by more than 1 million on average per week in October. The company warned that daily active users might drop to a low-double-digit percentage by the next quarter.
Despite weaker user growth, monetization has improved. Revenue grew 53% year-over-year to reach $895 million, surpassing Wall Street expectations of about $875 million. Net income increased 74% to $283 million, while advertising revenue climbed 54% to $847 million. Non-advertising revenue, which encompasses AI data-licensing, rose 35% year-over-year to $48 million.
Average revenue per daily active user in the U.S. jumped 53% to $13.82 despite the user decline. Globally, this figure grew 36% year-over-year to $6.87.
Transitioning to a logged-in experience may elevate these figures further because signed-in users offer more data regarding their interests and behaviors, allowing for better ad targeting and personalization.
These signals will also support personalized feeds, community recommendations, and participation prompts, including a new algorithmic For You feed announced recently.
Reddit co-founder and CEO Steve Huffman addressed the change in a post on the platform. "I don't know about you, but as someone whose life has been defined by the open internet, it's a big change for me," he wrote, adding, "But I've come to the conclusion that this is the right decision for our platform and the right decision for our business."
The transition will not happen overnight. Tests will run in select markets outside the U.S. during the fourth quarter, though a full global rollout timeline has not been set. The company acknowledges the importance of a logged-out front page and noted that logging in does not require losing anonymity, with an incognito mode currently being rebuilt.
"There are still plenty of questions that are unanswered, particularly around where the boundaries should be between logged-in and logged-out experiences," Huffman wrote. "This is a big evolution for Reddit, and not one we're taking lightly. But I believe it's the right next step for the platform and for our future."
