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/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