Last Friday, Reddit had its worst day since its IPO, with a drop of almost 30%1. It didn’t matter that they beat their third-quarter estimates; what mattered most was a weak Q4 forecast and the quote from Reddit CEO Steve Huffman, “Our search referral traffic was down meaningfully in Q3, with the decline accelerating later in the quarter.” He also wrote, “During October, we have seen that search traffic has dropped by more than 1 million referrals on average per week.”
There’s no baseline to understand whether 1 million referrals is a lot or a little, but there is no doubt a stock dropping 30% in a day is a lot.
Reddit, which I am certain looks at the data daily, has seen this coming for years; hence their other announcements that shape a larger strategy:
- Testing a logged-in-only experience outside the U.S.
- Shutting down RSS feeds
- Shutting down the public API
- Moving data access to its Developer Platform, which makes all Reddit data access paid only.
The Three Dots Are Pretty Easy to Connect
Dot #1: Traditional Google search: you search for X, Google searches for X and provides a list of high-quality X links, which — if the links are high quality — means you click on X, which is a Reddit post about X.
Google would greatly prefer if you didn’t click on X because the moment you do, you’ve left Google and they’ve mostly lost their ability to present you with advertising. You read that right: the reason you go to Google is to find other high-quality stuff that they don’t want you to actually see. My favorite attempt was AMP, Accelerated Mobile Pages, where publishers built lightweight copies of their content, and Google served them from their own servers. Yes, you were promised a traffic advantage, but you lose control over design, ads, and analytics.
Google dropped AMP’s search perks in 2021 in the face of continued criticism, but all they really had to do was wait a few years because a vastly better solution would present itself.
Dot #2: I’m guessing sometime in 2022, all the AI players started sucking down all the data in order to train ever-improving models. The more data? The better the models. It’s vastly more complicated than that, but alarms at Reddit apparently started going off in April of 2023, when they moved to charge for API access. The CEO quote: “… [w]e don’t need to give all of that value to some of the largest companies in the world for free.”
While content producers perhaps saw a massive theft of intellectual property, content consumers did not. What they eventually saw was the eerily accurate answer to the dumb throwaway question they typed into their first chatbot. They thought, “Golly, that’s cool.”2 Sub-dot thought: Like Google, AI players have paradoxical motivations: the goal is to get you to use the services so they can help, but helping doesn’t pay the bills. Using more tokens is the business, which means that, like Google, the gig is to keep helping whether you want the help or not.
Dot #3: Present day. Google has a feature called AI Overviews, which you’ve already seen. It’s a human-sounding summary that attempts to answer your questions. There is no way to turn it off — it exists to keep you on Google. The research shows that when an AI Overview shows, clicks on the first result drop 58%. More than half the folks who would have clicked that top result are no longer leaving, which means more sweet, sweet ad revenue.
That’s Not the Dot
I’ve spent the past decade watching the blogging community vanish. There are the stalwarts, but the vast majority of bloggers either stopped or left for lighter-weight walled gardens. Sure, blogging was a fad. Writing, however, is not. I get it — it’s easier to write a pithy one-line Reddit post than a fully fleshed-out thought. Guilty as charged.
I giggle when folks mention Google is in trouble because of declining search usage. First, decades of search habits will take time to disassemble and reassemble. Second, if you are using Google Search less, I’m guessing you’re still using Gmail and similar Google services. If you’re like me and have wired the robots into Gmail, you’re using Gmail significantly more. Yes, I’ve turned off every switch that says “don’t train on me,” but go throw those switches yourself and report on how confident you are that you flipped them all successfully.
I started this piece with Reddit because the company provides a service that creates tremendous value, and I’m not talking about the monetary value; I’m talking about the social value. Early on in my robot journeys, I asked Claude to source any fact it shared with me. I skimmed the sources and was surprised to see how often a random Reddit post was the source of the robot’s thoughts.
Yes, the robot sucked down all the books (including all of mine). Yes, they did the same with countless images, as well. I feel we haven’t yet seen the full set of legal consequences, but that’s not the dot: it’s the value of humans talking with other humans, building things for each other — often simple, frequently hilarious, and doing the work to document why they did what they did… because they want to help.
This was supposed to be a brief introduction to a new feature I’m launching on Rands on Tuesday, but it turned into a whole bunch of dots explaining the disproportionate value of what happens when humans hang with other humans.
See you Tuesday.
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