REDDIT will require all users to create official accounts, a strategic pivot the company announced Thursday alongside third-quarter earnings that beat revenue and EPS estimates but issued weak fourth-quarter guidance.
Shares fell 15 percent on the news. The move is a direct response to Google's pivot toward AI overviews—a product feature that has begun cannibalizing Reddit's search referral traffic, according to CEO Steve Huffman.
"Google's AI efforts represent a fundamental shift in how its product functions," Huffman told CNBC. Search referral traffic, which had buoyed Reddit's growth during years when Google prioritized forum content, is now "down meaningfully" and expected to stay depressed through Q4.
The rationale is straightforward: Reddit monetizes logged-in users far more effectively than anonymous visitors. Registered accounts generate richer behavioral data for targeted ads and tend to be more active. The company derives most revenue from app users and logged-in users—both segments showed sequential growth in Q3, underscoring the business focus.
But the user-growth numbers tell a darker story. Daily active uniques reached 130.3 million globally in Q3, up 12 percent year-over-year but 2.6 percent below Wall Street's 133.7 million estimate. U.S.-specific DAUq fell to 50.7 million, down 2 percent year-over-year and 5.2 percent below the 53.5 million estimate.
Revenue grew 53 percent year-over-year to an undisclosed figure—marking the slowest growth rate in eight consecutive quarters of 60-plus percent increases. The company is essentially telling the market: login requirements will lock in the users we can monetize and shield us from Google's ongoing traffic headwinds.
Huffman did not commit to a launch date, citing "significant implementation complexity." Reddit will test the requirement starting in Q4 outside the U.S. while deciding which service elements remain accessible to logged-out users. The company is essentially betting that daily habit formation among its core base will offset friction from forcing registration—a gamble that hinges entirely on whether users see enough value to clear that gate.
