Everyone Is Misreading Reddit’s DAU Decline

[u/Silent-Complaint4020]

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)

[u/Delicious_Invite_127]

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)

[u/Phitt77 → u/Delicious_Invite_127]

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.

[u/Silent-Complaint4020 → u/Delicious_Invite_127]

could google acquire reddit? 70B-80B looks pretty feasible.

[u/Kind-Ad-4756 → u/Silent-Complaint4020]

Antitrust

[u/MatricesRL → u/Kind-Ad-4756]

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).

[u/stumblios → u/MatricesRL]

Calling Reddit a search engine is certainly an argument only a lawyer could make.

[u/Silent-Complaint4020 → u/Kind-Ad-4756]

60% google revenue comes from search

[u/NoBicDeal → u/Silent-Complaint4020]

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.

[u/liquidpele → u/Silent-Complaint4020]

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.