• Reddit CEO Steve Huffman said the site saw "volatility" in traffic in Q4 due to Google's algorithm change.
• The impact shows how some users still rely on an external search engine to get answers from Reddit.
• Reddit saw 39% user growth between 2023 and 2024.

Reddit's stock dropped more than 15% after hours on Wednesday after the company reported user growth below analyst expectations in its fourth-quarter earnings.

The site averaged 101.7 million daily active unique users in the fourth quarter, a 39% year-over-year increase but below Wall Street analysts' estimates of 103.8 million.

User growth is a critical metric for Reddit because so much of its business relies on advertising. Before the company went public in March, Reddit said in a filing that it generates "substantially all of our revenue from advertising."

Reddit reported $428 million in revenue for the fourth quarter, a 71% year-over-year increase from 2023. About 92% of that fourth-quarter revenue came from advertising. The rest came from Reddit's "other revenue" segment, which includes content licensing deals.

Steve Huffman, Reddit's CEO, said on an earnings call that it's become common for people to use search engines like Google to peruse Reddit. But Huffman said the site saw "volatility" in traffic in the fourth quarter after Google tweaked its search algorithm.

Huffman said he was not worried about the traffic volatility and that it did not impact revenue.

"We feel very good about the pace that we're on from Q1," Huffman said. "We see volatility from Google all the time, as does everybody."

A Google spokesperson did not immediately respond to a request for comment sent after business hours.

Huffman said during the call that the algorithm change primarily impacted "logged-out users" — people browsing Reddit without an account.

Logged-in user numbers grew 27% in 2024, the company said in its earnings release.

The CEO also said the number of Google search queries that include "Reddit" increased, suggesting more users are seeking answers from the thread-based platform. The company moved away from forcing searchers to download the Reddit app and began showing all public posts, even to logged-out users, Huffman said.

The CEO said the solution to gaining loyal users is building tools such as Reddit Answers, an AI-powered search tool that generates answers based on input from users on the platform.

Reddit has made a number of AI-related investments and partnerships in the past year.

The company announced a content licensing deal with Google and OpenAI, allowing the makers of Gemini and ChatGPT to train their models on Reddit data.

It's unclear how much those deals contributed to Reddit's revenue. Google is paying Reddit $60 million a year for its licensing deal.

Reddit's "other revenue" segment, which includes the licensing deals, contributed $144.7 million in 2024.

Although Reddit's stock has seen fluctuations in the past year, the company's value has significantly climbed since its IPO in March at $46. It's up 32% this year.