Google's 'AI Mode' could be bad for Reddit
Google launched a new AI search mode in the US, and it could impact Reddit's growth.
Reddit's stock fell as analysts predicted a decline in traffic thanks to Google's AI.
Reddit said its most loyal users were key to its business and is refining its own AI search engine.
Google announced last week that it is rolling out a new search tool powered by AI that it's calling, simply, AI Mode.
That could be bad for Reddit.
Reddit has grown significantly over the past year, thanks in large part to Google prioritizing Reddit links in its search results and because searchers are often looking for human input on an internet increasingly dominated by AI and automated bots.
At Google I/O last week, Google CEO Sundar Pichai described AI Mode as a "total overhaul" of the company's search tool. AI Mode will offer users a more conversational experience, rather than the traditional list of links. That means Google can give a user information found on Reddit, without that user ever having to visit the site.
This will mostly affect Reddit's logged-out users, who are more casual visitors without their own accounts. Logged-in users are Reddit's everyday fans. Much of Reddit's growth is with logged-out users coming through Google Search.
On Monday, Reddit's stock dropped about 5% after Wells Fargo said it expected Reddit traffic to decrease as "Google more aggressively implements AI features in search."
It wasn't the first time that changes to Google's search feature caused Reddit's stock to fall. Shares of the company fell by over 15% in February after Huffman said in an earnings call that the site saw traffic "volatility" in the fourth quarter after Google tweaked its search algorithm.
While algorithms are often shifting (just ask a digital news organization), Wells Fargo said recent user disruptions on Reddit are "likely more permanent" as search behavior changes in response to Google's AI advancements.
Reddit, however, says that its logged-in users, who come to Reddit directly, are the primary driver of its business.
"A lot of our product work allows us to develop and consistently grow those logged-in users, which are the bedrock of our impressions and inventory because of their very long engagement on Reddit," Reddit Chief Operating Officer Jen Wong said at the Morgan Stanley Technology, Media, & Telecom Conference in March. "It's not existential for us … I think the business is extremely healthy because, again, it's powered by the logged-in users."
Reddit also has its own internal AI search tool, Reddit Answers, which replies to searches with a list of relevant information found in posts on the site.
Ultimately, Huffman says he is confident that Reddit will hold its place on the internet because of the human interactions it provides.
"There's no doubt LLMs will evolve search on the internet. We can all see that. It's awesome," he said in an earnings call with investors earlier this month. "Sometimes people will want the summarized, annotated, sterile answers from AI, and we're even building this ourselves in Reddit Answers. But other times, they want the subjective, authentic, messy, multiple viewpoints that Reddit provides."
"So in the same way that Reddit for the last decade has been an alternative to social media — social media being performative and manicured, and Reddit being the opposite — Reddit communities and conversations will be an alternative to AI search answers," he added.
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