Reddit's performance in the fourth quarter missed market expectations for daily active unique visitors, largely due to recent changes in Google's search algorithm, which affected visibility. Despite a decline of 16% in stock after the news, CEO Steve Huffman reassured that search traffic has rebounded in early Q1. With strong AI content licensing deals and increased digital ad spend, Reddit projects Q1 revenue between $360-$370 million. While daily active unique visitors grew by 39% to 101.7 million, it fell short of the anticipated 103.3 million, raising concerns but highlighting broader strengths for the platform.
Reddit shares are down in part due to Daily Active Users missing expectations, but it's not the best reason for anyone to lose faith in the company.
The company forecast first-quarter revenue above estimates, driven by its AI content licensing deals with Alphabet's Google and Microsoft-backed OpenAI.
Huffman added that the algorithm changes impacted users that browse the platform without signing into an account.
Its conversation placement ads format allows brands to advertise directly into discussion threads within interest-based communities known as subreddits.
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