Reddit plans account requirement as Google traffic dwindles, shares fall on weak guidance

The planned registration requirement marks a significant departure for Reddit, which has historically offered unfettered logged-out access. CEO Steve Huffman told CNBC the change is driven partly by shrinking search-referral traffic from Google, as the search giant's push into AI overviews and related features reduces the number of visitors it sends to other sites.

"I think fundamentally that relationship between Google and the rest of the internet is evolving, and so for us, this means a continued focus on our core users that come to Reddit directly," Huffman said. He described Google's AI efforts as "a fundamental shift in how the Google product works, from being a traffic driver to whatever's going on now."

Reddit will begin testing the login requirement in the fourth quarter outside the United States. Huffman said the company is still determining what parts of the service logged-out users will be able to see and will work out details during testing. He called the plan a "big change" for himself, adding, "I grew up on the open Internet. Reddit is the last platform to provide basically unfettered logged-out access, and that's largely because of me, I've been holding that line."

In its third-quarter results, Reddit reported earnings per share of $1.40, above the $1.35 LSEG estimate, and revenue of $895 million, above the $878 million estimate. However, fourth-quarter sales were forecast in a range of $1 billion to $1.03 billion, below Wall Street expectations of $1.05 billion. The company said daily active uniques rose 12% year over year to 130.3 million, missing the 133.7 million analysts had projected. US-specific daily active uniques fell 2% to 50.7 million, also below estimates.

Third-quarter revenue grew 53% year over year, a slowdown from the more than 60% growth the company had reported in the previous eight consecutive quarters. Average revenue per user came in at $6.87, above the $6.50 expected. Reddit's "other revenue" segment, which includes data licensing, rose 35% to $48 million. Huffman said Reddit is still in negotiations with Google over its data-licensing agreement and said it is "only going to do a deal that makes sense for Reddit" if it chooses to continue the partnership.

Reddit is able to monetize logged-in users better than logged-out users because registered users are more active and valuable to advertisers. Huffman acknowledged the search-referral headwind but said the guidance remains "strong" and that Reddit is "still growing at an industry leading rate."