Reddit has begun testing the placement of advertisements within its search results pages to generate more revenue from its current user base. This new ad format targets users actively searching for products, recommendations, and other information on Reddit’s platform. The initial test will involve a select group of advertisers, with ads appearing contextually based on the user’s query. For example, searching for “espresso station” might show ads for coffee machines or mugs. Reddit plans to evaluate user response during this phase to improve the ad experience for both users and advertisers.

This move comes shortly after Reddit’s recent warning to investors about declining search traffic and a lower-than-expected revenue forecast for the fourth quarter. The company reported a mixed third-quarter performance with revenue and earnings surpassing Wall Street expectations, but its guidance for the upcoming quarter projected sales between $1 billion and $1.03 billion, below the anticipated $1.05 billion. The revenue concerns are largely tied to the impact of Google’s AI-powered search changes, which have decreased traffic referrals to external sites like Reddit by delivering direct answers on its own search result pages.

Reddit’s user growth also showed signs of stalling, with global daily active users remaining flat at 130.3 million in Q3, while U.S. daily active users fell from 53.2 million in Q2 to 50.7 million. Year-over-year, U.S. users declined by 2%, and if this trend continues, Reddit expects daily users to drop further by the fourth quarter. These declines intensify the company’s need to monetize its existing audience more effectively, making the introduction of ads in search a strategic step to bolster revenue without depending solely on user growth.

Additionally, Reddit is preparing for a shift to a logged-in user experience, initially rolling out outside the U.S., which will restrict content access to those with accounts. This change aims to reduce unauthorized AI scraping of Reddit’s content and enhance ad targeting by providing advertisers with richer user data. Logged-in users offer more detailed signals about their interests, enabling Reddit to deliver more personalized and valuable ad placements, including those in its search results. This combined approach seeks to navigate the challenges posed by the evolving AI search landscape while maximizing revenue potential.