Reddit is making another big move as the dynamics of web discovery shift beneath its feet. Just one week after announcing the considerable shift to a primary logged-in experience – as opposed to its pages existing freely on the open web – it’s made the second move in its one-two punch: paid search.
Specifically, users will see sponsored results alongside organic results for topics when they do site searches on Reddit. This differs from search traffic Reddit receives from Google and AI engines, positioning a paid search program around searches done on Reddit’s first-party search function.
Given Reddit’s rich contextual and topical segmentation that’s inherent in its content and site structure, ad placements will not surprisingly be contextually relevant to queries. Users looking for discussion threads from home-theater basics to fixing a leaky faucet will see targeted and related product ads.
One thing that jumps out from this move is a classic “didn’t this already exist?” reaction. Reddit has several ad formats and ways it monetizes traffic, including contextually relevant display ads throughout its subreddits. But a first-party paid search program was surprisingly missing from the mix until now.
Connecting the Dots
Back to the one-two punch, the timing of this move is certainly notable. Reddit’s Q3 earnings beat expectations but its stock still took a beating. That’s partly due to broader tech-world stock declines, but had more to do with Reddit’s Q4 guidance. Projected revenues fell below analyst expectations.
Usage numbers tell a similar story. Reddit reported 130.3 million global daily active users, flat quarter-over-quarter. U.S. daily active users fell from 53.2 million to 50.7 million, down 2% year-over-year. Worse, Reddit warned that it could see a low double-digit percentage decline in daily active users by Q4.
A lot of these headwinds trace back to the familiar zero-click effect that’s hitting several online publishers hard. AI Engines, including Google Overviews and AI mode, are intercepting traffic as they get better and better at answering questions directly. This is the main driver behind Reddit’s logged-in play.
But along with the registration wall is more pressure on monetization, which brings us to the paid search move. Connecting the dots, both moves point to a broader strategy: Reddit wants to become less dependent on external discovery while making its own environment more commercially productive.
Intent Signal
Stepping back, Reddit’s moves resemble another online giant that has likewise leaned in to a first-party paid search play: Amazon. It’s the largest walled garden in the world, and it has conditioned users to navigate directly, then conduct searches once inside the city walls – the basis for its paid search play.
Reddit could pull off a similar outcome given that it has several of the same pieces in place. It has a massive and highly-engaged user base, and it’s in the process of containing that activity in a walled garden. After it locks the city gates from crawlers and AI engines, it can flip the paid search switch.
It could then propel paid search on a value driver that Amazon also has: intent. Amazon visitors obviously have immense commercial intent. Though this isn’t as pronounced on Reddit, explicit topical interest that’s inherent in user searches will be a powerful intent signal for its ad targeting and performance.
And all of the above has implications for local media. As Amazon has done, topic-oriented searches on Reddit have natural local-services component (think: home services alongside DIY threads). Along with Apple and Amazon, it will be another addition to the local media mix. Things just got more interesting.
Header image credit: Brett Jordan on Unsplash
