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Google and Reddit both reported pressures tied to how people use search: Google said AI Mode generates less revenue than traditional search, while Reddit said search traffic had fallen meaningfully. Google shares fell 12.6% and Reddit shares fell 15% on the days described in the source report. The shared issue is a changing web economy, though the companies face different risks and the long-term effects remain uncertain.
Google and Reddit each reported a search-related business strain in the same earnings cycle: Google said its AI Mode earns less than traditional search, while Reddit said traffic from search had fallen meaningfully. The developments came as Alphabet shares dropped 12.6% and Reddit shares fell 15%, highlighting how AI-driven changes to search could affect both the company selling search ads and a publisher that has relied on search referrals.
On its earnings call, Google chief business officer Philipp Schindler said increased use of AI Mode was among the reasons search revenue growth had slowed, despite an increase in queries. The source report says AI Mode generates less revenue for Google than traditional search. Google’s search and related advertising revenue nevertheless reached $63.35 billion, up 12%; growth had been 19% in the first quarter and 17% in the second, according to the report.
Alphabet’s shares fell 12.6% in one day, wiping out about $500 billion in market value, as investors focused in part on the cost of Google’s AI infrastructure plans. The report says the company planned capital spending of up to $205 billion that year and reported negative $9 billion in free cash flow. Those figures describe the period covered by the source; it does not provide a calendar date for the earnings events.
Reddit reported that search traffic had declined meaningfully and said daily users could fall by a low double-digit percentage in the fourth quarter. CEO Steve Huffman said the company would increasingly require visitors to log in. Reddit shares fell 15% after its results. The company’s stated reasons for login requirements include improved advertising signals, higher engagement among logged-in users, protecting its data and adapting to regulations.
Search Revenue and Referral Traffic
The two companies sit on different sides of the web’s long-standing exchange. Google has sold ads alongside search results and sent visitors to other sites; publishers such as Reddit have benefited when those referrals bring users to their pages. AI answers can change both parts of that arrangement: users may get more information without clicking through, while the search company may earn less from an AI interaction than from a conventional search.
The source report interprets the earnings disclosures as evidence that Google’s AI search experience may not yet match traditional search’s monetization and that Reddit is exposed to a decline in search referrals. That is a meaningful pressure on both businesses, but it does not establish that AI alone caused Reddit’s traffic decline or that the two companies’ stock falls had a single cause. The shared concern is a changing route from search to revenue, not identical business problems.
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How the Search Bargain Changed
For years, Google indexed websites and sent users to them, while earning money from ads on its results pages. The source report describes a gradual change: Google increasingly answered questions directly on its own pages, then introduced AI Overviews and AI Mode as people began using conversational AI tools. Those features may reduce the need for a click to an outside site.
Reddit had benefited from Google referrals as forum discussions gained visibility in search results. The report says Google reportedly paid Reddit $60 million a year to license its data after Reddit restricted bots’ access to its forums. That history helps explain why a fall in search traffic matters to Reddit, while its planned login push signals an effort to build a more direct relationship with users and safeguard access to its content.
The report also notes that a US court found Google had illegally maintained a monopoly in the advertising market, while saying the resulting legal outcome left much of the company’s market power intact. That is relevant to the wider commercial setting, but the earnings figures and stock moves are the immediate developments at issue here.
“It is better for our business because we will have more signals for ads targeting, and being logged-in leads to higher engagement generally.”
— Steve Huffman, Reddit CEO, in a shareholder letter
The Causes and Costs Remain Unclear
The source does not establish how much of Reddit’s traffic decline came from Google changes, AI search, other platforms, or separate shifts in user behavior. Its forecast of a low double-digit percentage decline in daily users is a projection for the fourth quarter, not a reported final result. The report also provides no precise traffic figures or comparison baseline for the phrase “fallen meaningfully.”
For Google, the disclosure indicates that AI Mode earns less than traditional search, but does not quantify the revenue gap or say whether monetization will improve. The report describes heavy planned infrastructure spending and negative free cash flow, but does not establish how those costs will translate into returns. The timing and full causes of the stock declines are also not specified beyond the reported earnings-day context.
Watch Usage, Traffic and Returns
Google’s next earnings disclosures can show whether search revenue growth changes as AI Mode use expands, and whether the company provides more detail on AI-related monetization and infrastructure spending. Revenue growth, free cash flow and capital spending will help investors judge whether the investment is producing returns, although the source does not identify a specific next reporting date.
For Reddit, the next test is whether its forecast decline in daily users materializes and whether account requirements change engagement, advertising performance or search referrals. The company’s results can clarify whether logged-in users offset the loss of casual visitors. Neither company’s long-term outcome is settled by the reported share-price drops or the earnings disclosures described here.
Key Questions
What do Google and Reddit have in common?
Both reported pressure connected to search. Google said AI Mode earns less than traditional search, while Reddit said search traffic had fallen meaningfully.
Why did Alphabet shares fall?
The source report says investors were concerned about the scale of Google’s planned AI infrastructure spending and its negative free cash flow. Alphabet shares fell 12.6% in the reported session; the report does not attribute the move to one factor alone.
Why is Reddit asking more users to log in?
CEO Steve Huffman said logged-in users provide more signals for ad targeting and generally show higher engagement. He also cited protecting Reddit’s data and adapting to regulations.
Did AI cause Reddit’s search traffic decline?
The source reports that Reddit’s search traffic had declined, but it does not establish that AI caused the decline. The causes and their relative importance remain unclear.
Source: platformer.news
