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Google and Reddit both reported pressure tied to changing search behavior: Google said AI Mode generates less revenue than traditional search, while Reddit said search traffic had fallen and could lead to fewer daily users. Their disclosures came as both companies’ shares fell, highlighting tensions between AI-driven search and the businesses that depend on advertising or referrals.
Google and Reddit each reported a cost of changing search behavior on Thursday: Google said people using its AI Mode generate less revenue than traditional search users, while Reddit said traffic from search had fallen and could contribute to a low-double-digit percentage decline in daily users by the fourth quarter. The disclosures, accompanied by sharp share-price declines, point to a common pressure on companies built around the web’s search-and-referral economy.
Alphabet shares fell 12.6 percent, wiping about $500 billion in market value, according to the source report. Investors were concerned about the scale of Google’s AI infrastructure spending: Alphabet planned capital expenditures of up to $205 billion this year and had indicated it would spend more in 2027. The company also reported negative $9 billion in free cash flow, with the decline accelerating from the previous quarter.
On Alphabet’s earnings call, Chief Business Officer Philipp Schindler said increased use of AI Mode was among the reasons search revenue growth had slowed despite rising query volumes. Google search and related advertising remained a large business: revenue rose 12 percent to $63.35 billion, but growth had eased from 19 percent in the first quarter and 17 percent in the second, the report said.
Reddit reported that its search traffic had fallen meaningfully and said daily users might decline by a low-double-digit percentage in the fourth quarter. Its shares dropped 15 percent after the results. Chief Executive Steve Huffman said the company would increasingly encourage visitors to log in, arguing accounts provide more signals for ad targeting, support engagement and help protect Reddit’s data.
Search Changes Pressure Both Businesses
The disclosures expose different sides of the same shift. Google is putting more answers inside its own AI-powered search experience, but its business chief said AI Mode currently earns less than traditional search. Reddit, meanwhile, relies in part on search engines to bring people to its discussion pages; falling search referrals threaten a source of visitors and potential advertising revenue.
For users and publishers, the consequences may extend beyond two companies’ earnings. If search answers keep people on Google, fewer visits may flow to outside sites. If Reddit responds by requiring or encouraging accounts, casual visitors may face more barriers to reading discussions. The source report argues that this puts pressure on the older arrangement in which search engines sent traffic to publishers and monetized the resulting searches. That is an interpretation of the disclosures, not a confirmed outcome for the wider web.
The numbers also need to be read with care. Google’s search advertising revenue was still growing, and the report does not establish that AI Mode caused all of the slowdown. Reddit cited falling search traffic and offered a possible fourth-quarter user decline; the scale and causes of the traffic change were not detailed in the supplied material.
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From Search Referrals to AI Answers
The source report describes a web economy in which Google historically indexed publishers’ pages and sent users to them, while earning advertising revenue from search. Over time, Google added more direct answers to results pages. Its AI Overviews appear above conventional results, while AI Mode is a separate conversational search experience. The report says Google had previously described AI Overviews as monetizing about as well as traditional search; the newer concern is the revenue performance of AI Mode.
Reddit benefited from Google referrals as forum discussions became more prominent in search results. The report says Google paid Reddit a reported $60 million a year to license data after Reddit restricted bots’ access to its forums. Reddit’s latest plan to push more visitors toward logged-in accounts is presented by Huffman as a way to improve advertising signals and protect the company’s data. The supplied material does not provide independent confirmation of the licensing figure or detail the terms of the agreement.
The report also notes that a U.S. antitrust case found Google had illegally maintained a monopoly in the advertising market. That legal finding is relevant to the wider competition debate, but it does not by itself establish the cause of the latest movements in either company’s shares.
“It also allows us to protect access to Reddit’s extremely valuable corpus of data, and helps us better adapt to emerging regulations around the world.”
— Steve Huffman, Reddit chief executive, in the same shareholder letter
Causes and Forecasts Still Unsettled
The supplied report does not give a precise measure of how much AI Mode contributes to Google’s revenue slowdown, or separate its effect from other factors. It also does not establish how much of Reddit’s search-traffic decline came from Google, other search services or broader changes in user behavior.
Reddit’s projected low-double-digit percentage decline in daily users by the fourth quarter is a forecast, not a reported outcome. The source does not specify the comparison period for that forecast. It is also unclear how quickly Reddit will change access for logged-out visitors, whether the policy will apply uniformly, or how users will respond. The source describes Google’s AI model milestone as Gemini 4 Carbon, available only to cyber defenders, but provides no independent evaluation of the model or details of its wider release plans.
Earnings and Account Changes Ahead
Investors will be watching whether Google can convert AI search usage into revenue that offsets its infrastructure costs, as well as whether search-ad growth stabilizes. Alphabet’s stated plans for substantial spending in 2027 make the returns from that investment a continuing focus.
Reddit’s next test is whether encouraging or requiring more visitors to log in can improve advertising and data controls without weakening engagement. Its fourth-quarter daily-user figures will show whether the company’s forecast is borne out. The supplied report does not give a date for any account-access change or the next earnings announcements.
Key Questions
What do Google and Reddit have in common in this report?
Both are facing pressure linked to search behavior. Google said AI Mode currently earns less than traditional search, while Reddit said traffic from search had fallen and could weigh on daily users.
Why did Alphabet shares fall?
The source report says investors were concerned about Alphabet’s planned AI infrastructure spending and negative free cash flow. Shares fell 12.6 percent on the day described; the report also discussed slower search revenue growth.
Is Reddit’s user decline confirmed?
No. Reddit said daily users might fall by a low-double-digit percentage in the fourth quarter. That is a forecast, not a confirmed result, and the supplied material does not state its comparison period.
Why does Reddit want more people to log in?
CEO Steve Huffman said accounts can provide more ad-targeting signals, support engagement and help Reddit protect access to its data. The company also cited adapting to regulations, without specifying them in the source material.
Does this prove AI search is reducing traffic across the web?
No. The report describes disclosures from Google and Reddit, but does not establish a broad, quantified effect across publishers. The extent and causes of Reddit’s search-traffic decline remain unclear.
Source: platformer.news
