Reddit Inc said it plans to shift to a primarily logged-in user experience as the social forum seeks to deepen engagement and improve the advertising business that continues to drive its solid earnings results.
On Oct 29, as the company posted third-quarter sales that beat analyst expectations, chief executive officer Steve Huffman announced that Reddit will eventually limit how much of the platform people can access without an account. The company plans to start testing different approaches in markets outside of the US throughout the fourth quarter, and hasn’t decided yet which parts of its site will remain available to logged-out visitors.
The strategy marks a big shift for the company, which has allowed users to explore its forums without an account for two decades. Reddit executives are willing to sacrifice some of the platform’s reach to engage a smaller but more engaged audience with insights that will be valuable to advertisers.
In an interview on Oct 29, chief operating officer Jen Wong acknowledged the potential for the move to limit Reddit’s reach in the short term but said it would eventually lead to more growth. "I think that’s a trade that makes sense for the long term.”
Since going public in early 2024, the San Francisco-based company’s digital advertising business has grown rapidly. For the first time, Reddit on Oct 29 forecast US$1bil (RM4.04bil)-plus in quarterly sales. But investors’ expectations are high. Though the company said it expects fourth-quarter revenue of US$1bil (RM4.04bil) to US$1.03bil (RM4.17bil), the outlook missed the average Wall Street estimate of US$1.05bil (RM4.25bil).
Reddit reported third-quarter sales of US$895mil (RM3.62bil), beating the average analyst estimate compiled by Bloomberg, largely driven by the continued growth of its advertising business. Daily active users increased 12% year-over-year to 130.3 million, missing the average analyst estimate of 133.5 million.
Shares of Reddit, which recently joined the S&P 500, fell as much as 13%. They were down 44% before the market close on Oct 29. Even as the ads business grows, Wall Street is hyper-focused on how Reddit will attract and retain users in the age of artificial intelligence. – Bloomberg
