Reddit will start requiring logins as Google's AI answers cut its search traffic

The skim

• Reddit plans to make logging in the default way to use the site, ending two decades of open browsing. Tests start this quarter in select markets outside the U.S.
• The reason: Google's AI answers are sending fewer people its way. U.S. daily users fell to 50.7 million in Q3, and Reddit warned total daily users could drop by a low double-digit percentage next quarter.
• Money isn't the problem yet. Revenue rose 53% to $895 million, but shares fell more than 15% after hours on a soft holiday-quarter forecast.

What Reddit announced

On its third-quarter earnings call Thursday, Reddit said it will move to a primarily logged-in experience. CEO Steve Huffman told analysts the company will begin "fully testing this in select markets outside the U.S." in the fourth quarter and use the results to shape a global version. There's no date for the U.S. Huffman said Reddit is still working out what logged-out visitors will see and wants shared links to keep working. The company also says its anonymous incognito mode is being rebuilt, not removed, according to TechCrunch.

"Reddit is the last platform to provide basically unfettered logged-out access, and that's largely because of me, I've been holding that line," Huffman told CNBC. He gave four reasons on the call: better personalization, better ad targeting, protecting Reddit's data from scraping, and adapting to new regulations. "The vast majority of the scraping and stealing of Reddit happens in our logged-out user base," he said.

Why it matters

Google search made modern Reddit. Many people add "reddit" to their searches, and an earlier Google update that pushed forum posts higher helped Reddit grow, as CNBC notes. Now AI Overviews and AI Mode answer many of those questions directly. Huffman told CNBC that search referrals went "down meaningfully in this quarter" because of the "shift to AI mode and AI overviews." Reddit said referrals fell by more than 1 million a week on average in October.

The numbers show the split. Global daily uniques rose 12% from a year earlier to 130.3 million but were flat from Q2, and U.S. logged-out users fell 4%. Logged-in users grew, and Huffman said they and app users drive 80% of Reddit's monetization. Revenue per U.S. user rose 53% to $13.82.

For everyone else, the change narrows one of the last big open corners of the web. It also lands as Google's own business feels the shift: Alphabet's stock just fell sharply after it said AI Mode searches earn less than classic ones.

What's next

Reddit guided fourth-quarter revenue to $1 billion to $1.03 billion, below the $1.05 billion Wall Street expected. Huffman also said Reddit is still "in negotiations" with Google over their data-licensing deal and will only sign one "that makes sense for Reddit." A login wall would make Reddit's data harder to scrape, and that makes it worth more in those talks.

Sources: Reddit, CNBC, TechCrunch and the earnings call transcript.