THE CRUNCH

Reddit has announced it is moving towards a primarily logged-in experience, a change unveiled during its third-quarter earnings call. The company framed the shift as a response to shrinking search traffic: referrals from search dropped by more than 1 million per week on average in October, which Reddit attributes to the rise of AI-powered search results that answer queries without sending users to websites. CEO Steve Huffman told investors that Google's AI features have "really shifted in their relationship with the rest of the internet."

The logged-in approach serves two purposes. It should make it harder for AI companies to scrape Reddit's data, preserving the value of its licensing deals with model providers, and it should boost advertising revenue, because logged-in users offer more signals about their interests than anonymous visitors arriving from search. Reddit is also rolling out an algorithmic "For You" feed to serve personalised recommendations.

The urgency is clear in the numbers. Global daily active users were flat at 130.3 million in Q3, but US daily users fell from 53.2 million to 50.7 million quarter-over-quarter and were down 2% year-over-year. Reddit warned that if the search decline continues, daily active users could fall by a low-double-digit percentage by next quarter.

Meanwhile, monetisation is strengthening. Revenue rose 53% year-over-year to $895 million, beating expectations of about $875 million, and net income climbed 74% to $283 million. Average revenue per US daily active user grew 53% to $13.82, and Reddit's AI data-licensing business helped push non-advertising revenue up 35% to $48 million.

The change will not happen overnight. Reddit will first test the logged-in experience in select markets outside the US in the fourth quarter, with no timeline yet for a worldwide rollout. It stressed that logging in will not require giving up anonymity, and its incognito browsing mode is being rebuilt. In a post on the site, Huffman called it "a big evolution for Reddit, and not one we're taking lightly."

WHAT HAPPENS NEXT

Reddit's logged-in tests begin in select markets outside the US in the fourth quarter. The company has not set a timeline for a global rollout and says questions remain about where the boundaries between logged-in and logged-out experiences should sit.