Steve Huffman, co-founder and CEO of Reddit, speaks during WSJ Tech Live conference hosted by the Wall Street Journal at the Montage Laguna Beach in Laguna Beach, California, on October 21, 2024.
Frederic J. Brown | Afp | Getty Images
As Google continues pushing AI-powered summaries to users, sites like Reddit aren’t getting the kind of referral traffic they did in the past.
Reddit CEO Steve Huffman said in an interview on Thursday, coinciding with his company’s quarterly earnings report, that Google’s artificial intelligence offering called AI Overviews has created uncertainty when it comes to search-derived traffic.
Reddit has historically been a major beneficiary of Google search referrals, which have helped the company obtain users. But with Google providing more information on its own page and pushing blue links further down, the economics of the internet are changing.
“Search is volatile, and we see those changes, we’ve been through those many times,” Huffman said.
Although Reddit reported second-quarter revenue and earnings that soared past estimates and issued a better-than-expected forecast, the stock plummeted 11% in extended trading, underscoring Wall Street’s concerns about what Google’s alterations mean for the future.
“If we look at the Google ecosystem, the 10 blue links have driven a tremendous amount of value for the whole ecosystem,” Huffman said. “AI Overviews has yet to make a similar level of positive impact, and that seems consistent across the broader landscape.”
Google didn’t respond to a request for comment.
Reddit’s ad revenue in the latest quarter jumped 61%, marking an eighth straight quarter above 60%. The company has benefited from improvements to its platform, overseas expansion and user growth.
Reddit has big data licensing partnerships with OpenAI and Google, which use the site’s vast catalog of information to help train their models. Reddit’s “other revenue,” which includes that business, rose 24% from a year earlier to $43 million.
Earlier this month, the Wall Street Journal reported that Reddit was considering cutting off Google’s access to its data amid rising concerns from publishers like USA Today and Politico about shriveling search-referral traffic. Huffman said on Thursday that the company’s “thinking hasn’t changed.”
While Google is “going through this transition in their products,” Reddit is “still just looking for that that win-win,” Huffman said. He said the world of blue links “helped the ecosystem grow and thrive over the last two decades.”
In looking for alternative ways to acquire users, Huffman said Reddit has been focusing on product updates and user retention to help with “converting some of the web traffic into direct traffic, where it becomes more valuable for us.”
“We’re thinking about all of our options,” Huffman said. “Our goal is to maximize the long-term value for Reddit.”
Meanwhile, Reddit doesn’t have the same kind of cost structure as online ad rival Meta, which is pumping money into building out data centers for AI. Meta and its hyperscaler peers are collectively pouring hundreds of billions of dollars into capital expenditures this year.
“We’re a low-spend company,” Huffman said, noting that capex was about $1.1 million in the latest quarter. “We’re trying to deliver the AI returns without the AI cost.”
When it comes to Reddit users, Huffman said that people often want human voices rather than AI-generated summaries.
“Some of the the tension is that people want Reddit, they don’t necessarily want a summary of Reddit,” Huffman said. “They want the human perspective, the multiple perspectives, the lived experience that we provide.”
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