Reddit starts selling ads in its search box as Google's AI cuts referrals by more than a million a week
Days after guiding the fourth quarter below the street and losing 29.2% in a session, Reddit began testing ads against its own search results. The bet: a logged-in user's query is worth more than the anonymous visitor Google's AI search stopped sending.
Richard Tang · 3 min read
Reddit+3.99% — Reddit, up 3.99 percent today began testing ads inside its own search results on November 3, 2026, matching placements to queries like "espresso station" for a select group of advertisers 1. The test landed days after a third-quarter report that beat on revenue and earnings, guided fourth-quarter sales below the street anyway, and cost the stock 29.2% in a single session 2. Read the two moves together: the login wall we covered on Monday is the defense, and the search box is where the lost revenue is supposed to come from.
The lost traffic is structural, not a slow month
On last week's earnings call, chief executive Steve Huffman attributed the decline to Google's AI Overviews and AI Mode, which answer the question on the results page instead of sending the click onward; referrals to Reddit fell by more than a million a week on average in October, and the slide accelerated through the quarter 3.
Global daily users were flat at 130.3 million, and United States users fell 2%, the first decline since the 2024 listing 4. If the pace holds, management said, daily users could fall by a low-double-digit percentage this quarter 3.
Nothing in that reads temporary. Schools that switch Google's−0.46% — Google, down 0.46 percent today AI features off now lose Search as well, because the AI is, in the company's word, deeply integrated into it 5. As Huffman put it, web search is turning from a gateway into a destination 6.
Search intent is the inventory Google left behind
A query typed into Reddit's search box is declared purchase intent, the same inventory Google sells against its own results, and Reddit has started selling it against its own 1. The test starts small, with contextual matching and a select advertiser group 1.
It matters more sitting on the login wall that begins in non-United States markets this quarter: logged-in users carry identity and behavior signals, and they already generate more than 80% of Reddit's monetization 3. Average revenue per user rose 36% in the quarter the user count flattened 3.
The wall also makes Reddit's archive harder to scrape, which strengthens its hand in open licensing talks with Google and OpenAI$1.18T — OpenAI, private, latest valuation $1.18T, talks that reportedly include second thoughts about the roughly $60 million a year Google pays today 37.
February prices the trade between users and revenue per user
The bear case is one trend: revenue growth has slowed every quarter this year, and management guided the fourth quarter lower still 38. The bull case is that price is doing the work, with ad rates rising faster than impressions and operating margin at 29.2% of revenue even as growth decelerated 38. The fourth-quarter print, due in February 2027, settles the exchange rate between a shrinking user base and rising revenue per user 2.
Revenue growth has slowed every quarter this year, and Q4 is guided lower still
- Revenue growth, year over year
- Estimate
Data
| Revenue growth, year over year | |
|---|---|
| Q4 2025 | 69.7% |
| Q1 2026 | 69.1% |
| Q2 2026 | 61.1% |
| Q3 2026 | 53% |
| Q4 2026 (guide) (estimate) | 40% (38–42%) |
Operating margin sits near 29% even as revenue growth decelerated
Data
| Operating margin | |
|---|---|
| Q1 '25 | 1% |
| Q2 '25 | 13.6% |
| Q3 '25 | 23.7% |
| Q4 '25 | 31.9% |
| Q1 '26 | 27.6% |
| Q2 '26 | 28.8% |
| Q3 '26 | 29.2% |
The direction of the business does not wait on that print. The web's old bargain, content indexed in exchange for visitors, is being rebuilt behind login walls where intent and identity are sold together. Reddit can make that trade because it owns the query, the account, and an archive AI firms will pay to license 37.
The referral economy is not coming back
A mid-sized publisher owns none of the three, and that asymmetry is the distribution problem AI search creates as it decides who gets paid 4. The referral economy is not coming back. Reddit is right to stop waiting for it and start selling the search.
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