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Google and Reddit both reported pressures tied to changing search behavior: Google said AI Mode makes less money than traditional search, while Reddit reported a meaningful fall in search traffic. Their disclosures came as both companies’ shares fell sharply, highlighting tensions between AI-driven search and the businesses that depend on search advertising or referral traffic.
Google and Reddit each reported a business cost tied to changing search behavior on Thursday: Google said users’ increased use of AI Mode was weighing on search revenue growth, and Reddit said search traffic had fallen meaningfully. The disclosures came as Alphabet shares dropped 12.6 percent and Reddit shares fell 15 percent, sharpening questions about how AI search affects advertising and publishers that rely on visits from Google.
On Alphabet’s earnings call, Chief Business Officer Philipp Schindler told an analyst that increased use of Google’s AI Mode was among the reasons search revenue growth had slowed, despite rising query volume. Schindler said AI Mode generates less revenue than traditional search. Search and related advertising remained a large business: the source report said revenue rose 12 percent to $63.35 billion, slower than growth of 19 percent in the first quarter and 17 percent in the second. The report said revenue was essentially flat from the prior quarter.
Alphabet’s share decline occurred amid investor concerns about the cost of its AI infrastructure expansion. The company planned to spend up to $205 billion on capital expenses this year and had indicated it would spend more in 2027. The report also cited negative $9 billion in free cash flow. Alphabet’s stock fell 12.6 percent, erasing about $500 billion in market value, according to the source.
Reddit reported that traffic from search had fallen meaningfully and said daily active users could decline by a low double-digit percentage in the fourth quarter. CEO Steve Huffman said the company would increasingly encourage visitors to sign in. Reddit shares fell 15 percent after its earnings report. The source does not provide the precise measurement period or comparison baseline for the traffic decline.
AI Search Strains the Traffic Bargain
The companies’ disclosures point to different sides of the same shift. Google can answer more queries within its own products, but AI Mode currently earns less per use than traditional search, according to Schindler. For Reddit, fewer visits from search can mean less opportunity to build an audience and sell advertising. That creates a potential conflict between keeping users on Google and sending them to sites that supply information and discussion.
The stakes extend beyond these two companies. Publishers have long depended on search engines to bring visitors, while Google has benefited from the material those sites make available to search. If AI answers reduce referrals or yield less advertising revenue, the economics of that exchange may change. The disclosures are evidence of pressure, but they do not establish how much of either company’s results is caused by AI rather than other factors.
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How Search Became a Destination
The source report describes an older arrangement in which publishers allowed Google to index their pages and received traffic in return. Google sold ads around search results; publishers sought revenue from visitors who reached their sites. Over time, Google added answers and other information directly to results pages, reducing the need for some users to click through. Its AI Overviews and AI Mode extend that approach.
Reddit benefited from search visibility as Google highlighted forum discussions. The report says Reddit’s search traffic surged and that Google reportedly agreed to pay $60 million a year to license Reddit data after Reddit restricted bots’ access to its forums. The report also notes that a U.S. antitrust case found Google had illegally maintained a monopoly in the ad market, while saying the company retained most of its market power. This history helps explain why lower referrals and weaker AI monetization are being watched together.
“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
How Much AI Explains the Declines
The disclosures do not quantify how much of Google’s slower search growth is attributable to AI Mode, or how much of Reddit’s lower search traffic reflects AI features rather than other changes. Reddit’s reported traffic decline lacks a stated comparison baseline in the source, and its possible fourth-quarter user decline is a forecast, not a reported outcome. It is also unclear how many visitors Reddit will require to log in, when any changes will take effect, or how users will respond.
Google’s statement about AI Mode’s lower monetization does not establish that every AI search product earns less than traditional search. Nor do the companies’ one-day stock declines prove that investors reached a single conclusion about AI: the source also ties Alphabet’s selloff to spending plans and cash flow.
Earnings and Login Changes Ahead
Investors will be watching subsequent earnings reports for evidence of whether Google can raise revenue from AI-driven searches while funding its infrastructure plans. The source provides no date for a specific monetization change or next corporate milestone. Reddit, meanwhile, has said it will increasingly push people to sign in, but has not specified the timing or scope of that effort in the material provided.
Future reports from both companies may clarify whether search traffic and user engagement continue to shift, and whether those shifts affect revenue. Until then, the figures show a tension—not a settled outcome: Google is adopting AI search while reporting lower monetization for AI Mode, and Reddit is responding to weaker search referrals by seeking more direct, logged-in relationships with users.
Key Questions
What do Google and Reddit have in common in this report?
Both reported pressure linked to search behavior: Google said AI Mode earns less than traditional search, while Reddit said search traffic had fallen meaningfully.
Did Google say AI Mode caused all of its slower search growth?
No. Chief Business Officer Philipp Schindler named increased AI Mode use as one of the reasons for slower growth. The report does not quantify its contribution or say it was the only factor.
What does Reddit plan to do about falling search traffic?
CEO Steve Huffman said Reddit would increasingly push visitors to log in or create accounts. He cited advertising signals, engagement, data access and adaptation to regulation as reasons.
How much did the companies’ shares fall?
According to the source report, Alphabet shares fell 12.6 percent, while Reddit shares fell 15 percent on the reported earnings day.
Is AI the confirmed cause of Reddit’s traffic decline?
The report does not establish that. Reddit said search traffic had fallen meaningfully, but the source does not quantify the causes or provide a comparison baseline for that decline.
Source: platformer.news
