Reddit plans to test requiring users to log in, as shrinking Google search referrals weigh on the platform. The company beat third-quarter estimates, but its fourth-quarter sales forecast fell short of Wall Street expectations and the shares dropped.
Reddit plans to require all users to create accounts to access its platform, a major departure for the site. The company disclosed the change Thursday alongside its third-quarter results.
Reddit's shares dropped over 15% after the numbers were released, even though the company beat on both the top and bottom lines.
Beat on earnings, miss on guidance
Reddit reported earnings per share of $1.40, against $1.35 expected by LSEG estimates. Revenue reached $895 million versus $878 million expected.
Yet the fourth-quarter forecast disappointed. Reddit guided sales to a range of $1 billion to $1.03 billion, below Wall Street estimates of $1.05 billion. Third-quarter sales grew 53% year-over-year, ending eight straight quarters of revenue growth above 60%.
User numbers also trailed. Daily active uniques rose 12% year-over-year to 130.3 million, short of the 133.7 million analysts expected. U.S. daily active uniques dropped 2% to 50.7 million, below projections of 53.5 million.
Google traffic drives the login push
CEO Steve Huffman told CNBC that shrinking search-referral traffic from Google played a major role in the plan. Huffman described Google's AI efforts as "a fundamental shift in how the Google product works", saying search referral traffic is down meaningfully this quarter and the trend will continue in the fourth.
Reddit therefore wants to focus on users who come directly. Huffman said logged-in users are direct traffic and that both they and app users are up quarter over quarter.
Testing begins in the fourth quarter outside the U.S., with no specific timing for a wider rollout. Reddit is still determining what logged-out users will be able to see.
Source: CNBC
Trading involves risk.
Risk Disclaimer
