Reddit is restricting access to logged-out users to protect data and improve ad targeting after search traffic declined due to AI. Despite a dip in US daily active users to 50.7 million, the platform reported strong Q3 revenue of $895 million, marking a 53% growth. Investors are watching whether this strategy can maintain user engagement while boosting monetization.
Reddit is significantly changing its access policy, moving toward a primarily logged-in user experience. This shift follows a decline in search engine referrals, a problem that many internet platforms are facing as AI-powered search tools start providing direct answers, which reduces the need for users to click through to external websites. By requiring users to log in, Reddit aims to protect its content from unauthorized AI scraping while positioning its platform for better data-licensing deals and targeted advertising.
Financial performance remains a bright spot for the company. In its third-quarter report, Reddit announced revenue of $895 million, a 53% increase compared to the same period last year. This figure surpassed market expectations of $875 million. The company also reported a net income of $283 million, representing a 74% increase. A key factor in this growth is the rise in average revenue per daily active user in the U.S., which climbed 53% to $13.82. This suggests that the company is effectively increasing the value it extracts from each active user, even as it navigates changes in how people access the platform.
Despite the strong financial results, there is a clear trend in user metrics that investors may monitor. The number of U.S. daily active users fell to 50.7 million, down from 53.2 million in the previous quarter. This divergence—where revenue is growing while user numbers fluctuate—highlights the challenge of balancing accessibility with monetization. The company is relying on advertising for the bulk of its revenue, which reached $847 million, up 54% from the prior year. Additionally, non-advertising revenue, which includes data-licensing agreements, rose by 35% to $48 million.
This new strategy aims to make better use of authenticated user signals to improve ad targeting and feed personalization. The platform is also rolling out an algorithmic feed, intended to integrate more smoothly with the logged-in experience. CEO Steve Huffman has acknowledged that leaving the open-web structure is a difficult change but emphasized that it is necessary for the long-term health of the business. The platform intends to keep some form of anonymity through a revised incognito mode.
Moving forward, the success of this transition will depend on whether Reddit can limit the decline in user traffic while growing its data-licensing revenue. The company plans to roll out these changes in phases, starting with testing in non-U.S. markets during the fourth quarter. Investors may track future quarterly results to see if the drop in user growth stabilizes or continues as these restrictions are enforced globally.