Steve Huffman has spent years defending one of the last open doors on the internet. Reddit, he said repeatedly, would keep letting people read it without an account, a policy he described as a personal conviction rather than a growth strategy.
On Thursday, the company said it will test closing that door.
The disclosure came with third-quarter results that beat expectations on revenue and profit and a forecast for the holiday quarter that did not. Reddit projected revenue of $1 billion to $1.03 billion for the three months ending in December, against analysts’ estimates of $1.05 billion. The shares fell 29.22% on Friday, the steepest one-day decline since the company’s March 2024 listing and worse than its previous record, a 20.99% drop on July 31.
The quarter itself was strong by most measures. Revenue rose 53% to $895 million, ending a run of eight consecutive quarters in which growth exceeded 60%. Earnings per share of $1.40 beat forecasts of $1.35. Average revenue per user reached $6.87, above the $6.50 analysts expected, and the segment that includes data licensing grew 35% to $48 million. Daily active uniques rose 12% to 130.3 million, short of the 133.7 million Wall Street had modeled.
The number that mattered was smaller and more specific. In the United States, daily active uniques fell 2% to 50.7 million, well below the 53.5 million analysts had projected. Reddit’s home market is where advertising rates are highest and where the company’s growth story has been least tested.
Huffman put the cause in plain terms. Referral traffic from Google search, he told CNBC, was “down meaningfully in this quarter,” with the decline accelerating as the period wore on. The damage concentrated in logged-out visitors arriving from search results, though he said some of it flows through to logged-in and app traffic, since a search referral is often the first step toward an account.
The mechanism is familiar to anyone who runs a website. For most of the past decade, Google’s index was the front door to the open web, and Reddit was one of its favored tenants. A 2023 change meant to surface “authentic” discussion from forums pushed Reddit threads to the top of results and helped the company add users at a rate that carried it through its IPO. Then Google began answering questions itself. AI Overviews and AI Mode summarize the web on the results page, and the click that used to travel downstream stays home.
“I think fundamentally that relationship between Google and the rest of the internet is evolving,” Huffman said. Previous algorithm updates, he noted, would “kind of come and go.” The current shift is different in kind: Google’s product has moved, in his description, “from being a traffic driver to whatever’s going on now.”
Reddit’s response is to stop depending on the door it does not control. The company will begin testing a requirement that visitors log in, starting outside the United States in the fourth quarter, with an eventual plan to require accounts across the platform. Executives have not said which parts of the site will remain visible to anonymous readers, a detail that will decide how much of Reddit stays indexable.
The trade-off is arithmetic. Logged-out visitors are cheap to serve and lightly monetized. Registered users are more active, more targetable and more valuable per impression, which is why Reddit’s advertising business has been shifting toward them for two years. Shrinking the anonymous audience cuts reach and inventory in the short run and raises revenue per user if the conversion works. It also reduces the volume of public pages that search engines and AI crawlers can read, which matters for a company that sells access to its corpus.
That business is not incidental. Reddit’s licensing deals with Google and OpenAI sit inside the $48 million “other revenue” line, and the Google agreement has been reported at roughly $60 million a year. Huffman said Thursday that the company remains in negotiations over renewing it and will “only do a deal that makes sense for Reddit.” A smaller public footprint weakens the asset being negotiated.
Analysts cut ratings and price targets on Friday, most of them citing the same tension: a company that grew faster than almost anything else in digital advertising now depends on a partner whose product is designed to keep users on its own page. Reddit is not alone in that. News publishers, recipe sites and reference works have reported similar declines in referral traffic over the past eighteen months, and several have responded by putting content behind registration or paywalls.
The difference is that Reddit spent a decade arguing the open web was worth defending, and built a business on the traffic that openness attracted. Huffman, who described himself as having grown up on the open internet, called the change “a sign of the times” and said users would arrive at the same understanding he had. The market reached its own conclusion in a single session, subtracting roughly a third of the company’s value on a forecast whose top end sat $20 million below the consensus estimate, and a sentence about search referrals.
