Latest news with #RedditAnswers
Yahoo
26-05-2025
- Business
- Yahoo
Google's 'AI Mode' could be bad for Reddit
Google launched a new AI search mode in the US, and it could impact Reddit's growth. Reddit's stock fell as analysts predicted a decline in traffic thanks to Google's AI. Reddit said its most loyal users were key to its business and is refining its own AI search engine. Google announced last week that it is rolling out a new search tool powered by AI that it's calling, simply, AI Mode. That could be bad for Reddit. Reddit has grown significantly over the past year, thanks in large part to Google prioritizing Reddit links in its search results and because searchers are often looking for human input on an internet increasingly dominated by AI and automated bots. At Google I/O last week, Google CEO Sundar Pichai described AI Mode as a "total overhaul" of the company's search tool. AI Mode will offer users a more conversational experience, rather than the traditional list of links. That means Google can give a user information found on Reddit, without that user ever having to visit the site. This will mostly affect Reddit's logged-out users, who are more casual visitors without their own accounts. Logged-in users are Reddit's everyday fans. Much of Reddit's growth is with logged-out users coming through Google Search. On Monday, Reddit's stock dropped about 5% after Wells Fargo said it expected Reddit traffic to decrease as "Google more aggressively implements AI features in search." It wasn't the first time that changes to Google's search feature caused Reddit's stock to fall. Shares of the company fell by over 15% in February after Huffman said in an earnings call that the site saw traffic "volatility" in the fourth quarter after Google tweaked its search algorithm. While algorithms are often shifting (just ask a digital news organization), Wells Fargo said recent user disruptions on Reddit are "likely more permanent" as search behavior changes in response to Google's AI advancements. Reddit, however, says that its logged-in users, who come to Reddit directly, are the primary driver of its business. "A lot of our product work allows us to develop and consistently grow those logged-in users, which are the bedrock of our impressions and inventory because of their very long engagement on Reddit," Reddit Chief Operating Officer Jen Wong said at the Morgan Stanley Technology, Media, & Telecom Conference in March. "It's not existential for us … I think the business is extremely healthy because, again, it's powered by the logged-in users." Reddit also has its own internal AI search tool, Reddit Answers, which replies to searches with a list of relevant information found in posts on the site. Ultimately, Huffman says he is confident that Reddit will hold its place on the internet because of the human interactions it provides. "There's no doubt LLMs will evolve search on the internet. We can all see that. It's awesome," he said in an earnings call with investors earlier this month. "Sometimes people will want the summarized, annotated, sterile answers from AI, and we're even building this ourselves in Reddit Answers. But other times, they want the subjective, authentic, messy, multiple viewpoints that Reddit provides." "So in the same way that Reddit for the last decade has been an alternative to social media — social media being performative and manicured, and Reddit being the opposite — Reddit communities and conversations will be an alternative to AI search answers," he added. Read the original article on Business Insider
Business Insider
25-05-2025
- Business
- Business Insider
Google's 'AI Mode' could be bad for Reddit
Google announced last week that it is rolling out a new search tool powered by AI that it's calling, simply, AI Mode. That could be bad for Reddit. Reddit has grown significantly over the past year, thanks in large part to Google prioritizing Reddit links in its search results and because searchers are often looking for human input on an internet increasingly dominated by AI and automated bots. At Google I/O last week, Google CEO Sundar Pichai described AI Mode as a "total overhaul" of the company's search tool. AI Mode will offer users a more conversational experience, rather than the traditional list of links. That means Google can give a user information found on Reddit, without that user ever having to visit the site. This will mostly affect Reddit's logged-out users, who are more casual visitors without their own accounts. Logged-in users are Reddit's everyday fans. Much of Reddit's growth is with logged-out users coming through Google Search. On Monday, Reddit's stock dropped about 5% after Wells Fargo said it expected Reddit traffic to decrease as "Google more aggressively implements AI features in search." It wasn't the first time that changes to Google's search feature caused Reddit's stock to fall. Shares of the company fell by over 15% in February after Huffman said in an earnings call that the site saw traffic "volatility" in the fourth quarter after Google tweaked its search algorithm. While algorithms are often shifting (just ask a digital news organization), Wells Fargo said recent user disruptions on Reddit are "likely more permanent" as search behavior changes in response to Google's AI advancements. Reddit, however, says that its logged-in users, who come to Reddit directly, are the primary driver of its business. "A lot of our product work allows us to develop and consistently grow those logged-in users, which are the bedrock of our impressions and inventory because of their very long engagement on Reddit," Reddit Chief Operating Officer Jen Wong said at the Morgan Stanley Technology, Media, & Telecom Conference in March. "It's not existential for us … I think the business is extremely healthy because, again, it's powered by the logged-in users." Reddit also has its own internal AI search tool, Reddit Answers, which replies to searches with a list of relevant information found in posts on the site. Ultimately, Huffman says he is confident that Reddit will hold its place on the internet because of the human interactions it provides. "There's no doubt LLMs will evolve search on the internet. We can all see that. It's awesome," he said in an earnings call with investors earlier this month. "Sometimes people will want the summarized, annotated, sterile answers from AI, and we're even building this ourselves in Reddit Answers. But other times, they want the subjective, authentic, messy, multiple viewpoints that Reddit provides." "So in the same way that Reddit for the last decade has been an alternative to social media — social media being performative and manicured, and Reddit being the opposite — Reddit communities and conversations will be an alternative to AI search answers," he added.
Business Insider
23-05-2025
- Business
- Business Insider
Google's AI Search is ‘Beginning of the End' for Reddit, says Wells Fargo Analyst
Wall Street is growing uncertain on Reddit (RDDT). The social media platform's stock is reeling after a Wells Fargo analyst downgraded it to Hold over concerns of Reddit's long-term traffic and monetization model. The really concerning thing for Reddit investors is that the same analyst had reiterated a bullish position merely two weeks prior. So what changed? Confident Investing Starts Here: Easily unpack a company's performance with TipRanks' new KPI Data for smart investment decisions Receive undervalued, market resilient stocks right to your inbox with TipRanks' Smart Value Newsletter The worry stems primarily from Google's (GOOGL) accelerating rollout of AI search tools, which some believe could hinder Reddit's user acquisition and advertising revenue. More specifically, Google's AI-driven approach to obtaining information could replace Reddit's model, making it largely redundant in an AI-powered world. Given Reddit's reliance on logged-out users for traffic, these trends make me bearish on RDDT. Standard Search Under Threat as AI Search Disrupts Organic Traffic We've all done it. When we have a question about something unique, we turn to Google for an answer. Often, the first result is a Reddit post. This is a feature of Google's search algorithm and a testament to Reddit's effectiveness as a source of information in organic search. Of course, the more eyes on Reddit, the more users join its site and become monetizable. This is Reddit's 'bread and butter.' However, Google's development of AI-powered features could threaten Reddit. Google's AI Overviews and AI Mode provide users with direct, summarized answers within search results, removing the need to click on a third-party website like Reddit. Ken Gawrelski from U.S. bank Wells Fargo pointed out that Google's AI advancements threaten Reddit's logged-out user base. While they only contribute around 15% of direct ad revenue, they represent about half of Reddit's user base. Critically, advertising revenue accounts for the vast majority of total revenue. Notably, in its Q1 earnings results, ad revenue was $358.6 million (up 61% year-over-year) and total revenue was $392.4 million. The expected decline in logged-out users caused Wells Fargo to revise its 2026 and 2027 ad revenue forecasts downward by 6% and 14%, respectively. This is no minor change. Beyond AI overviews, Google's newfound emphasis on E-A-T (Expertise, Authoritativeness, Trustworthiness) standards in its algorithm impacts Reddit's organic traffic. Not all anonymous Reddit posters meet these standards, which jeopardize Reddit's visibility in search results. Reddit's Internal Efforts and Data Dilemmas Reddit is aware of existing rends and is actively developing its AI-powered search, otherwise known as 'Reddit Answers.' This integrates into its primary search experience, which aims to retain users who might otherwise turn to external AI tools. There's also a sci-fi element to all this. AI-generated content and bots on the internet pose unique threats to Reddit. The company must work to preserve human interaction, especially as its users are anonymous and AI bots cannot be monetized. Ironically, Reddit's data licensing agreement with Google, reportedly worth around $60 million annually, also threatens the company's ability to keep its users within its ecosystem. While this diversifies Reddit's revenue by providing a high-margin revenue stream, it gives Google the data to strengthen its AI search capabilities. Meanwhile, Reddit is seeing steady growth in Total Daily Active Users, or DAUs. Moving forward, Reddit's ability to maintain growth in DAUs and maximize revenue from each one will be crucial for its success. Notably, Reddit is priced for success. For instance, its stock trades at a price-to-earnings (P/E) ratio of 163, over 6x Meta Platform's (META) stock. This means that investors are paying a sky-high premium for each dollar of Reddit's earnings. To justify the premium, Reddit must meet future growth and profitability expectations. Is Reddit Stock a Good Buy? On Wall Street, Reddit carries a Moderate Buy consensus rating based on 12 Buy, eight Hold, and one Sell ratings in the past three months. Reddit's average stock price target of $149.35 represents a 54% upside potential over the next 12 months. Not everyone is as cautious as Ken Gawrelski. Earlier this month, Citi analyst Ronald Josey issued a Buy rating on RDDT, noting its strong first-quarter performance. Moreover, the analyst is particularly impressed by Reddit's new features, like Reddit Answers, and international growth. Regarding that last point, Reddit posted international revenues of $78.5 million in the first quarter, representing 82% year-over-year growth. Seaport Research analyst Aaron Kessler, who also has a Buy rating on RDDT with a price target of $165, called Reddit a 'long-term opportunity,' citing the social media platform's ability to grow DAUs and monetize growth. The AI Test for Reddit's Long-Term Viability AI advancements have unexpected implications on Reddit. The emerging relevance of AI in search presents a serious problem for Reddit. Moreover, Google's E-A-T standards are squeezing out Reddit content as well. Despite strong revenue and DAU growth, perhaps this is a good time for investors to reevaluate Reddit's prospects, just like the market is currently doing. On the other hand, it's not all bleak. Reddit's proactive development of Reddit Answers could help retain users within its ecosystem. Licensing deals with Google and other AI hyperscalers do provide a high-margin revenue stream in the short term. Finally, Reddit's strong community, growing international presence, and potential for new feature adoption are compelling reasons for long-term optimism. However, for me personally, the combination of a premium stock valuation and trends in Google search is a strong reason for extreme caution.
Yahoo
21-05-2025
- Business
- Yahoo
Reddit vs. Bumble: Which Social Networking Stock is a Better Buy?
Reddit RDDT and Bumble BMBL operate social networking platforms that facilitate user-generated content and community engagement, offering investors exposure to the social networking sector. RDDT serves as a vast network of communities where users can discuss a wide range of topics, while BMBL offers dating, friendship, and professional networking services, emphasizing user interaction and Mordor Intelligence report, the global social networking market size is projected to be valued at $95.33 billion in 2025, and is expected to reach $209.82 billion by 2030, witnessing a CAGR of 17.09% during the forecast period from 2025 to 2030. RDDT and BMBL are likely to benefit from the significant growth opportunity highlighted by the rapid pace of or BMBL — Which of these Social Networking stocks has the greater upside potential? Let's find out. Reddit is benefiting from the continued expansion of its advertising business, higher user engagement, and the company's growing artificial intelligence (AI) initiatives. Ad revenues increased 61% year over year to $358.6 million in the first quarter of the reported quarter, weekly active users grew 31% to 401 million, and daily active users rose 31% to 108 million, increasing engagement and ad enhanced its search capabilities, making it easier for users to find relevant content and communities. In the first quarter of 2025, Reddit Answers, RDDT's AI-powered search tool, reached one million weekly users and expanded globally, starting with Australia and the United company's expanding portfolio has been a key catalyst. In May 2025, RDDT enhanced Reddit Pro with streamlined profile setup and new tools that allow businesses to showcase community conversations. These updates make it easier for brands to build trust, connect authentically, and engage with Reddit's vast network of communities. BMBL is benefiting from enhanced user experience through new features, AI-driven personalized matching, and strong growth in its Bumble BFF friendship on this momentum, the company is investing in new features like the Discover tab, safety tools like ID verification, date review, and an upcoming coaching hub, which are designed to improve user experience and engagement. It is also investing in Bumble BFF to grow its friendship platform, expanding the brand beyond just dating. The focus on Bumble BFF has been noteworthy, as it has become a key growth area with more than one million active users, especially popular with Gen Z and young professionals, further expanding the brand's company is also rapidly enhancing its personalized matching algorithm using AI and machine learning to deliver more relevant matches, which is already showing positive early results. Moreover, BMBL is actively removing bots, scammers, and low-quality profiles while fostering a verified, trusted community. This effort increases member trust and encourages better engagement, which is critical for long-term sustainable growth. In the year-to-date period, shares of RDDT and BMBL have lost 34% and 30%, respectively. The dip in RDDT and BMBL's share price is due to the challenging macroeconomic environment. A broader market weakness in the tech sector and persistent fear over mounting tariffs have added to the pressure. Intense competition also remained a headwind. Image Source: Zacks Investment Research Valuation-wise, RDDT shares are currently overvalued as suggested by a Value Score of F. BMBL shares are trading cheap as suggested by a Value Score of terms of the forward 12-month Price/Sales, RDDT shares are trading at 9.71X, which is higher than BMBL's 0.62X. Image Source: Zacks Investment Research The Zacks Consensus Estimate for RDDT's 2025 earnings is pegged at $1.21 per share, which has increased 16.3% over the past 30 days, indicating a 136.34% rise year over year. Reddit Inc. price-consensus-chart | Reddit Inc. Quote The Zacks Consensus Estimate for BMBL's 2025 earnings is pegged at 86 cents per share, which has risen 32.3% over the past 30 days, indicating a 118.66% increase year over year. Bumble Inc. price-consensus-chart | Bumble Inc. Quote While both RDDT and BMBL stand to benefit from the booming social networking market, BMBL offers greater upside potential with stronger earnings growth, cheaper valuation, and expanding platforms beyond dating. Its focus on expanding portfolio, AI-driven personalization, and Gen Z engagement positions it well for long-term RDDT's expanding advertising business increasing international reach, and improving the user experience with upgraded search and discovery features, the company is suffering from intense competition from other social media platforms, which is consistently affecting user engagement and market share in advertising. Stretched valuation also remains a Bumble carries a Zacks Rank #2 (Buy), making the stock a stronger pick than Reddit, which has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Bumble Inc. (BMBL) : Free Stock Analysis Report Reddit Inc. (RDDT) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
19-05-2025
- Business
- Yahoo
Reddit Stock Drops as Wells Fargo Warns Google's AI Search Tools Could Hurt Traffic
Reddit shares slid Monday as Wells Fargo analysts downgraded the company's stock and lowered its price target. Wells Fargo warned that Google implementing AI search tools has created disruptions in Reddit's traffic. Reddit CEO Steve Huffman said the company expects "some bumps along the way from Google."Shares of Reddit (RDDT) slipped Monday as Wells Fargo downgraded the stock amid concerns that Google's implementation of AI search features could hurt the social media company. Wells Fargo cut its price target to $115 from $168 and downgraded the stock to 'equal weight' from 'overweight.' Reddit shares fell close to 5% Monday to about $108, giving Wells Fargo's target roughly 6% upside. The stock is down about a third for 2025. The prevalence of AI search tools from Alphabet's (GOOGL) Google has created 'user disruptions [that are] likely more permanent,' Wells Fargo said. Traffic to Reddit from Google Search from logged-out users in the U.S. is likely to decline, the analysts added, which ultimately hurts advertising revenue. 'We do expect some bumps along the way from Google,' Reddit CEO Steve Huffman acknowledged earlier this month on the company's quarterly earnings call, according to a transcript made available by AlphaSense. "Given that the search ecosystem is under heavy construction, the near-term could be more bumpy than usual,' he added. Still, 10 of the 15 analysts tracked by Visible Alpha have a 'buy' rating on Reddit's stock. The consensus price target is over $150, well above Well Fargo's revision. After the company's first-quarter results, Citi analysts said they "believe there are several potential catalysts for Reddit to deliver continued user and revenue growth," including the wider rollout of new features like the AI-powered Reddit Answers. Read the original article on Investopedia Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
