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Reddit tests search advertising amid revenue and traffic pressures

The platform is limiting the initial test to eligible advertisers after issuing a fourth-quarter revenue outlook below expectations.

Illustration of a search interface with sponsored advertising placements
Photo: TechCrunch

Reddit is opening its search pages to an advertising trial as it faces declining search referrals and slower user growth. The company announced the test after forecasting fourth-quarter revenue below expectations.

Only a selected group of eligible advertisers will participate initially, Reddit said. The relationship between an ad and a user's query will be among the factors determining which promotions appear. Reddit said it would study users' responses and use the findings to adjust the service.

In examples outlined by the company, someone looking for ideas for an espresso station could encounter advertising for coffee or mugs. A home-office search could bring up promotions for desks, monitors or office chairs.

Reddit's fourth-quarter sales guidance ranged from $1 billion to $1.03 billion, below expectations of $1.05 billion. Its shares fell following the third-quarter results, even though revenue and earnings per share exceeded Wall Street estimates.

Worldwide daily active users numbered 130.3 million in the third quarter, holding steady from the previous quarter, Reddit said. The U.S. figure fell to 50.7 million from 53.2 million in the second quarter and was down 2% from a year earlier.

Alongside its earnings, Reddit also outlined a plan to make signing in a requirement for accessing its content. The company said that change would proceed gradually, with markets outside the U.S. going first.

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Hao Chen

Technology Editor

Edits and reviews technology business stories: artificial intelligence, chips, big tech, software, cybersecurity incidents, start-ups and platform regulation.