Reddit has begun testing advertisements in its search results as the social media platform looks for new ways to generate revenue amid concerns over declining search traffic and slowing user growth.
The company announced on Tuesday that a select group of eligible advertisers would be able to place ads alongside search results, targeting users looking for products, recommendations and other information.
The test will allow Reddit to assess how users respond to sponsored placements and how advertisers engage with the new format.
“Ads in search may appear based on a range of factors, including contextual relevance to a user’s search query,” the company said in its announcement.
For example, a search for an espresso station could display advertisements for coffee machines, mugs and coffee products. Users searching for a home office setup might see promotions for monitors, desks and office chairs.
Reddit faces pressure from declining search traffic
The advertising experiment comes as Reddit adjusts to changes in how people discover information online, particularly through Google’s growing use of artificial intelligence in search.
AI-powered features, including Google’s AI Mode, increasingly provide answers directly on search results pages, reducing the number of users clicking through to external websites.
Reddit has warned investors that declining referrals from search engines are affecting traffic to its platform.
The company reported better-than-expected revenue and earnings per share for the third quarter, but its shares fell after it issued a weaker-than-expected revenue forecast for the following quarter.
Reddit projected fourth-quarter revenue of between $1 billion and $1.03 billion, below analysts’ expectations of approximately $1.05 billion.
US daily active users decline
Reddit also reported 130.3 million global daily active users in the third quarter, unchanged from the previous quarter.
Its US daily active user base fell from 53.2 million in the second quarter to 50.7 million in the third quarter, marking a 2% decline compared with the same period last year.
The company warned that if the trend continues, daily active users could decline by a low double-digit percentage in the fourth quarter.
These figures have increased pressure on Reddit to generate more revenue from its existing audience rather than relying primarily on continued user growth.
Logged-in experience could boost advertising revenue
Reddit is also planning a gradual shift towards a logged-in experience, initially focusing on markets outside the United States.
The move, announced alongside its quarterly results, is intended to protect the platform’s content from unauthorised AI scraping while increasing the value of its audience to advertisers.
Users who are logged in provide platforms with additional information about their interests and behaviour. This can help advertisers deliver more targeted campaigns and potentially increase advertising revenue.
The search advertising test and planned login changes reflect Reddit’s efforts to adapt its business model as AI reshapes online search, content discovery and the digital advertising market.
