Oct 29 (Reuters) – Reddit CEO Steve Huffman outlined a plan on Thursday to make signing-in mandatory for most content as the company grapples with data scraping and declining search referral traffic in recent months.
Huffman warned that total daily active unique visitors (DAUq) could fall by a low double-digit percentage in the fourth quarter from about 130 million currently, if search referral traffic continues to decline further. Shares of the company fell more than 9% in extended trading.
Search engine referrals to Reddit decreased by more than one million on average each week during October, he said. In the US, its biggest market by revenue, DAUq fell 2% to 50.7 million.
Reddit, which licenses its data to OpenAI and Alphabet’s Google, has sued IPO-bound Anthropic, Perplexity AI and three data scraping companies, accusing them of illegally collecting Reddit’s data.
The social media company’s trove of user-generated discussions is a prized asset, offering AI startups data to train models and helping marketers get insights for ads.
“We will continue licensing our corpus intentionally, but those commercial deals come with guardrails that protect our users and our business,” Huffman said.
Reddit’s 53% revenue growth slowed sequentially in the quarter ended September 30, but it is still better than rivals including Snap and Pinterest, as they compete for ad dollars with Meta in a tough market.
Huffman said Reddit is enhancing its platform for logged-in users, which make up over 80% of the monetization, by delivering more relevant advertisements and through product improvements like increased video content and better personalization.
The company plans to test the logged-in-only experience in select markets outside of US in the fourth quarter to assess its impact before wider implementation, the shift that would end two decades of allowing anyone to browse Reddit freely without an account.
The firm’s third-quarter revenue of $895 million exceeded LSEG-compiled analysts’ average estimate of $878.4 million. Its revenue forecast for the current quarter of $1 billion to $1.03 billion is largely in line with estimates.
It expects fourth-quarter adjusted earnings before interest, taxes, depreciation, and amortization to be between $480 million and $510 million, versus estimates of $512.2 million.
(Reporting by Jaspreet Singh in Bengaluru; Editing by Shailesh Kuber)
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