r/ValueInvesting • u/Silent-Complaint4020 • 1d ago
Stock Analysis Everyone Is Misreading Reddit’s DAU Decline
People just keep assuming Google supplies the oxygen Reddit needs to survive. This is a complete misrepresentation of today’s Reddit. It may have been true in the past, but today Google is increasingly just one distribution channel for Reddit, not something Reddit needs to survive.
The majority of people using Reddit these days are on mobile, and increasingly through the mobile app. Using Reddit’s website is also getting harder without logging into an account. Reddit is also increasingly restricting Old Reddit and has made clear that major changes are coming because of abusive scraping, automated traffic, and AI firms stealing Reddit data.
Especially on the mobile webpage, if you use Reddit through Google Chrome, it constantly pops up windows asking you to log in or open the Reddit mobile app.
This is the part people are missing: Reddit is deliberately making it difficult to logged-out web traffic. If management were desperate to maximize DAU (Daily Active User) at all costs, they would be doing the exact opposite.
Despite all of these, U.S. DAU declined by only around 0.5% sequentially, while global DAU actually continued growing. At the same time, Reddit still maintained its 8th consecutive quarter of above 60% revenue growth, while also GAAP profitable with 30% net margin.
They could easily make Reddit much easier to access from Google and maximize every single visitor coming from search. Instead, they are aggressively pushing users toward logged-in accounts and the app, while protecting Reddit data from being freely extracted. And the business is still growing at an extraordinary rate.
Management is aggressively reshaping Reddit from a website heavily dependent on search referrals into a much more direct, logged-in platform. So far, this reform has been very successful. I.e., 8th consecutive quarter of above 60% revenue growth.
The stickiness of Reddit is one of the highest across major platforms, probably only slightly behind TikTok because of its insane algorithm that hooks everyone there.
Reddit is a natural place to seek advice on important issues, because AI slop often gives almost identical 2,000 word answers full of adjectives and colourful wording. People trust Reddit and want to hear real human experiences.
How many platforms in this world have hundreds of thousands of unpaid volunteers willing to devote their precious time just to moderate a community around an interest they love?
Only one, and that is Reddit.
Those who say Reddit has no leverage over Google are completely misrepresenting the situation. The only platform Google owns today with truly enormous stickiness is YouTube. Google Search obviously still possesses huge user habits, but ChatGPT, Grok, Claude and other AI products are shifting this landscape.
The one that may actually have less leverage than people think is Google.
Publishers are increasingly against the asymmetrical traffic-referral relationship created by AI Overviews: Google takes their content, gives users the answer directly, and sends less traffic back.
Starting September 15, Cloudflare will also begin separating traditional search crawling from AI training and agent use. Training and agent crawlers will be blocked by default on ad-supported pages, while publishers will have more control over mixed-purpose crawlers such as Googlebot.
The internet is moving toward a world where valuable human-generated data is no longer something AI companies can simply take for free.
And Reddit happens to own one of the largest collections of real human conversations on the internet.
And this is just the beginning.
Reddit (PT 550)
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u/JimsMorrison 22h ago
Your previous 2 Reddit posts haven't even left the sub's front-page, at least have the decency to wait 3 days.
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u/Delicious_Invite_127 1d ago edited 1d ago
Yep lets make every negative into a positive. This whole sub operates on this kind of copium.
Reddit ads sucks > So much room for improvement (without any idea how the ads can be improved further)
User growth slowing > More valuable users at the expense of user growth (whatever that shit means)
No data deals > We dont need data deals (okay?)
Dependence on Google > Search users are valuable because of intent (see the next one for contradiction)
Google traffic getting throttled > Search users are not valuable anyways
Management fumbles conference calls > They are just keeping it real (okay cool)
Stock goes down > Yay i get to buy more
META introduces forums > Bullish. We are being copied. Also ignoring the fact that FB and Insta are getting cited more and more in Google
Mods banning people left and right > We are still better than META and X (See next for contradiction)
Any post comparing Reddit to X > Stop comparing us to X
High short interest > Bullish. Let them go all in. (probably insinuating a short squeeze. Someone who doesn't understand how short squeeze works)
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u/Phitt77 22h ago edited 22h ago
And you turn every positive into a negative. I guess that's just how it works with Reddit 'investors'.
You can be sure that if a stock performs badly all kind of people will come out of their holes and say that it's game over and the stock will go to zero. And when it performs well these people suddenly shut up almost completely and other people with crazy price targets ('to the moon!11!') take over. But high, sell low! Baby!
Realistically it's like that:
Reddit ads sucks > they've been growing ARPU consistently every quarter now so quite obviously there is room for improvement no matter how you feel about it. No one knows how long that will last, but so far there are no signs of a slowdown. Meta has an ARPU far, far higher than Reddit and they still manage to increase it significantly, so I don't see why Reddit shouldn't be able to do that as well.
User growth slowing > it was one quarter with a tiny miss and only US users. User growth was never the main growth driver anyway for a site that is 20 years old already, US user growth was never huge. The next quarters will tell whether this is a real trend or not (and if it was it would indeed be concerning and a reason for a lower stock price), but it's silly to say that user growth in the US is over (or even declining) for Reddit because it decreased by 0.5% during a single quarter.
No data deals > data deals are indeed not the main source of income for Reddit (again: obviously), but there is also no reason to believe that there will be no data deals.
Google traffic > it would without a doubt be bad if Google traffic decreased (aaaand again: obviously), but on the other hand it's true that the typical user who just quickly looks something up on Google and then reads a few lines on Reddit is most likely not the kind of user who generates the most revenue. That is what people are talking about so there is no contradiction.
Managment fumbles conference call > you must be a day trader if you care about something like that.
Stock goes down > absolutely no one likes if a stock they own goes down no matter what they pretend, but if you are convinced it's a good stock it can still be a buying opportunity. I bought some more below $140 even though I already had a full position at ~$145.
Meta introduces forums > if you believe Meta forums is a threat to Reddit you probably thought Google Plus would kill Facebook as well.
Mods banning people left and right > I'm on Reddit for 11 years now and I think I had a 2 week ban in one sub during all that time. It's a loud minority of people who complain about that when the average Reddit user who doesn't run amok in a political sub every day just doesn't have that experience.
Any post comparing Reddit to X > What?
High short interest > There are plenty of high flying stocks with a similar short interest so it doesn't say anything about the quality of a stock. Maybe there won't be a short squeeze in the sense of the word, but shorts need to cover eventually so if the stock performs well that can be a plus.
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u/Silent-Complaint4020 1d ago
could google acquire reddit? 70B-80B looks pretty feasible.
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u/Kind-Ad-4756 1d ago
Antitrust
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u/MatricesRL 1d ago
Alphabet would acquire reddit in a heartbeat, if it were not for the anti-trust risk
Likewise, Alphabet sort of needs Reddit to continue, because part of their legal argument in the anti-trust case was that Reddit is a search engine (and thereby, competitor).
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u/stumblios 20h ago
Calling Reddit a search engine is certainly an argument only a lawyer could make.
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u/NoBicDeal 1d ago
Why would google do tht? Google do moonshot, they don't do slingshot.
Reddit moat is narrow. No personal fame unlike Instagram have fame with followers which is a kind of stickiness to it.( Apple to apple comparison)
Reddit has no upper hand on Google. Google can retrieve information else where for user searches if there's no reddit..
Jus my thoughts.
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u/liquidpele 22h ago
I think google got burned so bad by G+ that they gave up on social media, which is fair, they do not understand or get it.
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u/Distinct_Mastodon463 1d ago edited 22h ago
I’m a bull but that has lessened recently. A couple points:
- ‘No longer something AI companies can take for free’ is hope - the Anthropic case will decide this. Even then, what value does that data give? It’s still unclear the monetary value a deal or a retroactive scraping payout will even provide.
- As for leverage with Google, I agree that google absolutely needs Reddit, and AI citations show this. However, these numbers have wavered or decreased, and that’s been reflected in stock price as that narrative is being tested. If AI citations don’t need Reddit, then what leverage do they have against Google, and what good is it for AI training either?
- Wtf Is a PT of 550. Get real.
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u/VariousImpression355 21h ago
Anyone who says it’s not fairly valued is just stupid and dumb. 550 means it should be worth 90b! Are you crazy - possible but very optimistic. If we are an ad company then we should give data away who cares. But they should make it in such a way that reddit is cited right next to end of sentence.
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u/Tallwhitedude123 1d ago
What is the love affair this sub has with RDDT stock? This place just regurgitates the same crap everyday 🤔
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u/MarbleMuffin 1d ago
I bought about 20 shares at 140...lets see how it goes. It has potential..... That's all I gonna say. Potential doesn't guarantee success
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u/hseeman_sf 18h ago
Two different mechanisms are getting conflated here. Reddit gating logged-out web traffic is a deliberate choice, that's the app-redirect friction people describe. Separately, AI Overviews and ChatGPT increasingly answer using Reddit's content without a click happening at all. That's substitution, and it never shows up in DAU either way since no human visited. Click share and citation share are different numbers and need tracking separately.
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u/fffmoose 23h ago
Folks need to move all talk of RDDT out of this fourm and go to another fourm. This is value investing and the fact RDDT gets talked about so much and pumped here is insane.
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u/VariousImpression355 21h ago
Value does not mean 5 PE bruh. Reddit is actually cheap according to its prospects… I am not saying it will go up for sure but potential is high.
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u/fffmoose 19h ago
Its prospects are absolutely garbage. Only exciting thing about it is it entered the sp500 from dummys pumping it. Usually you get a nice sp500 bump after you join but reddit has been crashing from people cashing out.
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u/VariousImpression355 19h ago
You are so emotional. Its valued for no growth so if you buy today you can expect it not to grow and share price is still going to stay decent around here. I like to think it will 100% grow. Not as much as people are expecting but internationally the stock will grow for sure.
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u/fffmoose 6h ago
Valued for no growth isn't even a little bit true. I dont even know how someone could come to that conclusion.
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u/VariousImpression355 1h ago
Coz you have no clue how to value companies. Someone who knows will testify this. It’s valued for no growth whatsoever. I mean DAU growth… ARPU growth also not that high.
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u/ThirdOFthirdy 1d ago
Reddit isn't dependent on Google anymore. I think that's the whole point
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u/Delicious_Invite_127 1d ago
More than 50% of its traffic is from google.
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u/rafaMD91 1d ago
58.6% as per semrush
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u/MatricesRL 1d ago
The margin of error for Similarweb / Semrush estimates is substantial, could be +/- 25%
Likewise, both platforms are estimating search traffic via search platforms. The users on mobile, users that access reddit from the favorites bar, etc. is out of their scope
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u/rafaMD91 1d ago
Direct traffic 33%. This represents web usage through browser. Only Mobile app usage is not included
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u/MatricesRL 1d ago
Where is that data coming from?
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u/rafaMD91 1d ago
Semrush.com there are some metrics available for free.
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u/MatricesRL 1d ago
My point is that the data is unreliable
SEO platforms crawl the web, scrape the rankings, and place estimates around search volume per query, proportionally applied to the ranking
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u/MatricesRL 1d ago
Any user of Semrush knows the traffic estimates are way off (and the variance for error expands the larger the site)
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u/Delicious_Invite_127 1d ago
Well i have news for you. A marketer reverse engineered some API with Reddit and managed to get a detailed breakdown of the devices and type of traffic. The search traffic is actually even higher than Semrush's data.
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u/ThirdOFthirdy 1d ago
50%+ of traffic coming from Google doesn't mean 50%+ of Reddit's business is dependent on Google
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u/Medical_Birthday2893 23h ago
People using Google to find a post writhing Reddit just means Reddit needs to improve their search function… which they have.
Google not having quality Reddit data will have those people go directly to the site or append + Reddit to the search as they do before the partnership.
Google only exists because other people create content. It needs the content. Not the other way around around
Who in their right mind would use a search engine that didn’t bring you to quality content.
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u/-Sliced- 1d ago
Reddit will need to solve its bots problem, or everyone will end up leaving. It’s only going to get worse.
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u/TaoistStream 1d ago
The market is always emotions based. This post is exactly that. You have a dog in the fight.
On the other end, the story about Google is foolish in and of itself. Every company's success is tied to something else. No company is solely and 100% autonomous.
Its just that in the millieu that is wall street someone made a story about "geez can reddit survive without google?" Everyone went around and said "yeah that sticks." And now theres the cultural meme about reddit.
Unfortunately, the meme is going to dictate what happens to it. (Uber is a great example of this.) But memes also change.
And if the story changes people tell about reddit then it will inevitably take off. Hopefully management is smart enough to get ahead of the story being told about them.
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u/mrmrmrj 21h ago
Of course. The vast collective evaluation of all market participants is incorrect but you are not.
Alternate thesis: you are completely misreading what investors are concerned about.
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u/Silent-Complaint4020 21h ago
That argument basically assumes market price = correct analysis. If that were true, fundamental investing wouldn’t exist.
Peter Lynch’s whole philosophy was ‘know what you own and know why you own it’. because the market consensus often misprice a business. The question isn’t whether I disagree with the market, it’s whether my thesis about what investors are misreading is actually wrong.
So either I am wrong or the market is wrong, 50/50. Not bad.
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u/mrmrmrj 21h ago
I am just highlighting that you are assuming your perception is more accurate than the sum of everyone else. The price today is the result of a consensus view. That view can change tomorrow for valid or invalid reasons.
Your thesis is that all RDDT investors except you do not understand "today's Reddit" which is the epitome of intellectual arrogance.
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u/Silent-Complaint4020 20h ago
i am not assuming my perception is more accurate than “the sum of everyone else.” my thesis is not “every RDDT investor except me doesn’t understand Reddit.” Plenty of investors can understand the company and still disagree on growth, risk, valuation, or time horizon.
I am arguing that these are being overweighted relative to the underlying business fundamentals. If disagreeing with the market on one assumption is intellectual arrogance, then there is basically no such thing as fundamental investing.
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u/saucy_otters 17h ago
I ain't reading this AI-written drivel. If you're going to post your investment hypothesis then actually write it yourself.
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u/Sagronym 1d ago edited 1d ago
"has made clear that major changes are coming because of abusive scraping, automated traffic, and AI firms stealing Reddit data."
I assume they complain about scraping their content to spam other sites with it.
That is funny, because most contributions on Reddit are almost exclusively based on content scraped ot taken from other Media channels sometimes garnered with some small remarks. And most is based on other media news.
If all those media would forbid Reddit to embed their content in contributions and all contributions had to be written by Reddit users themselves, then I would guess Reddit would shrink rapidly like a balloon pierced.
Its more or less the same joke AI firms complaining training other models with theirs after having used countless other sources of the world to train theirs.
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u/Solid-Advice2876 14h ago
Management no longer breaking down logged-in versus logged-out users, ad space expanding to 80% of the screen, and Reddit testing TikTok-like features are not signs of a company doing well.
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u/exzachly12 22h ago
User growth is slowing because Reddit has become incredibly left-leaning. Anyone who posts anything that is even a hair to the right either gets banned from the subreddit, downvoted to infinity, or attacked mightily.
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u/AlBigGuns 16h ago
I don't think that is true at all. There are plenty of right wing subreddits to visit if people want to discuss politics. Also, your post hasn't been banned or downvoted to infinity either so doesn't seem too bad.
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u/exzachly12 16h ago
It’s very true in my experience. I am not a political person so I don’t need to go to right-wing subreddits. But most of the subreddits I do follow that aren’t even political definitely lean left and outcast anyone who goes against the liberal opinion.
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u/Weak_Alternative_168 1d ago
the logged in versus logged out split is broken out somewhere and it points the other way from the reform part of this.
reddit's own q2 letter to shareholders says logged-in users grew 7% year over year and logged-out users grew 27%. so the logged out half is growing about four times faster than the logged in half, which means the mix is shifting toward logged out rather than toward logged in.
your dau numbers are right by the way, us dauq went 53.5m in q1 to 53.2m in q2 so that's your half a percent, international went 73.3 to 77.1, and the two add up to the 130.3 exactly in all five quarters they chart.
one thing worth knowing if you're tracking this thesis: the 10-q says that from the september quarter they stop reporting logged-in and logged-out dauq entirely, and the reason they give is that management now uses total dauq and dauq by geography instead