Reddit Stock Could Jump If Google AI Search Kills Online Media Traffic
Google AI Overview and AI Mode could further slash online media revenue. Will Reddit capitalize on its user-generated content to defy this trend?
AI chatbots are replacing Google search search traffic, which is devastating some online publishers' traffic.
Online publishers are cutting staff and as they struggle to find new sources of revenue.
Reddit's licensing of its content to train Google's language models and selling ads aimed at user-generated content may offset lower click-through rates.
The news business — which has suffered disruption for decades — is poised for more trouble ahead. That's because more people are using AI chatbots to find information — which is cutting into the traffic Google searches feed to online content providers, according to the Wall Street Journal.
To compete with AI chatbots, Google provides AI summaries, which give users the answers they seek without clicking on the link to the information's source.
In so doing, the content creators are getting much less traffic. Organic search traffic to Business Insider and related websites fell by 55% between April 2022 and April 2025, according to data from Similarweb featured in a Journal report.
As a result, news outlets' revenue is declining and some are cutting people to keep from burning through too much cash.
For instance, Business Insider cut 21% of its staff in May, noted the Journal. "Traffic sensitivity" and the need to adapt to a changing media landscape are key reasons for the cuts,Business Insider CEO Barbara Peng wrote in a company memo obtained by AdWeek.
On the surface, Reddit appears to be a beneficiary of the rise in Google's AI summaries. However, analysts appear divided on whether the fees Reddit receives from Google and advertisers will be sufficient to boost its stock, reported Investor's Business Daily.
Reddit is optimistic about the future. 'Ever-shifting macro environments like these create both challenges and opportunities,' Reddit CEO Steve Huffman said in a May letter to shareholders featured by CNBC. 'We're well-positioned to meet this moment.'
The news industry's business model has been under attack for decades. The rise of AI chatbots threaten to deliver a fatal blow.
Until the internet came along in the 1990s and made news available online in exchange for watching display advertising, local newspapers were a highly profitable duopoly, according to Warren Buffett and his Newspaper Investments, a business school case I co-authored.
Since then, in March 2020, Buffett shed most of those formerly prized local newspapers, according to the Nebraska Examiner. A few months later, I published Goliath Strikes Back: How Traditional Retailers Are Winning Back Customers From Ecommerce Startups.
In addition to examining the disruption of five other industries and how established companies responded, the book highlights how various internet companies — most notably Google — profited from winning the ad revenues formerly enjoyed by local newspapers. Here's a quick summary:
Since the digital disruption began decades ago, online content providers and local newspapers have changed their strategies — many have sold themselves to private equity firms and publishers.
These online content providers have struggled to keep up with changes in how their product shows up in its search results. In the last year, generative AI has taken a fresh bite out of online content revenue streams.
In the last year, Google's AI Overviews — which search the most relevant documents related to a user search and returns a summary of the content — have appeared more frequently when I conduct searches. While AI overviews include links to the sources, more users may be choosing not to click on them.
The result is plunging online content traffic. Since 2022, traffic from organic search to 'HuffPost's desktop and mobile websites fell by just over half,' noted the Journal and by 'nearly that much at the Washington Post,' according to Similarweb data featured by the Journal.
A more serious threat to online content is on the horizon — Google's AI Mode which responds to user queries 'in a chatbot-style conversation, with far fewer links,' the Journal reported. While currently optional, Google says AI Mode is here to stay. "This is the future of Google Search," Google's head of Search, Liz Reid, said according to the BBC.
Online content business leaders are not taking this threat lying down. 'Google is shifting from being a search engine to an answer engine,' Atlantic CEO Nicholas Thompson said in a Journal interview. In response to the likelihood Google search traffic will evaporate, 'We have to develop new strategies,' Thompson added.
AI Overviews cut the traffic volume Google sends to websites by between 30% and 70%, BBC reported. What's more, analyses have also found that Thompson's 'zero click' scenario is not far-fetched because 'some 60% of Google searches are now ending without the user visiting a single link,' wrote the BBC.
To be fair, AI Overviews have boosted impressions 49% across the web, according to the data analysis firm BrightEdge featured in the BBC's report. However, since people get their answers from the AI, clicks on the links have fallen 30%, BBC noted.
The new strategies Thompson advocated aim to connect news sites directly with readers. Atlantic is doing that by running live conferences, offering an improved app, printing more magazines, and investing more in events. The result is a rise in subscriptions and advertising revenue, Thompson told the Journal.
One possible remedy for content providers — which The Atlantic highlights — is to maintain direct access to their content consumers.
One such online content provider is Reddit — which went public in March 2024 and has since defied my then-gloomy view of its prospects about which I wrote in a February 2024 Forbes post.
Reddit shares have risen 191% since going public. Why? It helps that in May 2025, Reddit posted strong sales — Q1 revenue rose 61% to $392 million ($22 million more than London Stock Exchange Group projection, according to CNBC) — and upbeat guidance — $34 million more than the LSEG consensus estimate of $396 million.
Reddit benefited from recent changes to Google search and internal site improvements — such as convincing logged-out users to open accounts since 'logged-in accounts are more beneficial to advertisers,' reported CNBC.
To boost ad revenue, Reddit debuted two AI-powered marketing tools to help advertisers reach users on Reddit discussion boards, noted CNBC. These include:
The new tools may help advertisers to 'connect meaningfully with high-intent communities around the world,' according to a company release.
Reddit faces challenges ahead — most notably macroeconomic uncertainty. 'We've grown through challenging times before — people need connection and information just as much in uncertain times,' Reddit operating chief Jen Wong said during the company's earnings call. While 'there's a lot of uncertainty in the market,' it has been 'mostly business as usual,' Wong added.
In addition, Reddit and Google have a complex relationship — featuring good and bad news for investors. Google entered into a $60 million partnership in which the search giant pays Reddit content to train its AI models, reported Business Insider.
What's more, Reddit is the second most-cited website in Google AI Overviews, following Quora, according to analytics firm Semrush data featured by BusinessInsider.
Since much of that traffic comes from logged-out users, the value to Reddit is less significant than it would be if the users logged in, according to Redburn analysts quoted by BusinessInsider, and readers are less likely to click on the Reddit links in the AI Overview.
One analyst lowered his price target for Reddit from $168 to $115.
How so? With more than half of Reddit users logged out, Wells Fargo analyst Ken Gawrelski fears the company will not be able to beat and raise in future quarters despite its new tool aimed at boosting logged-in users, according to IBD.
Gawrelski is more pessimistic than his peers. The 23 Wall Street analysts with price targets see 25% upside of the company meets their average target of $147.71, noted TipRanks.
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