- Reddit Inc.’s (RDDT) stock ended at $125.56 on Monday, down from an intraday low of $119.92, as Google expanded its partnership, granting Reddit access to Vertex AI for better search while integrating Reddit’s API for real-time content across Google’s products.
- Redburn Atlantic’s James Cordwell started coverage with a ‘Sell’ rating, citing a 600,000 DAU drop in Q4 from Google Search due to an algorithm change, highlighting Reddit’s vulnerability to its reliance on Google traffic.
- Despite stagnant organic user growth over six months, the Google tie-up aims to boost Reddit’s platform appeal, though Cordwell sees limited structural improvement.
Reddit Inc.’s (RDDT) stock settled at $125.56 on Monday after dipping as low as $119.92 intraday, reflecting a market grappling with the social media platform’s evolving relationship with Alphabet’s Google (GOOG, GOOGL) and its implications for user growth. Google’s expanded partnership with Reddit, as reported by Reuters, introduces access to the Reddit API for real-time, structured content and integrates Reddit’s offerings more seamlessly across Google’s products, while Reddit taps into Google’s Vertex AI to bolster its own search capabilities. This move aims to enhance information relevance and user experience, yet it comes amid concerns flagged by Redburn Atlantic analyst James Cordwell, who initiated coverage with a ‘Sell’ rating, pointing to Reddit’s heavy reliance on Google Search traffic as a vulnerability exposed by a 600,000 drop in U.S.-based daily active users (DAUs) from Google in Q4 due to an algorithm tweak.
Cordwell’s critique centers on Reddit’s user dynamics, noting that while organic user growth – those engaging beyond one-off queries – has stagnated over the past six months, the platform’s dependence on Google-driven traffic leaves it exposed to external algorithmic shifts. The sequential decline of 600,000 DAUs underscores this risk, as Google’s adjustments directly trimmed Reddit’s audience, a key metric for a web-based platform’s vitality. Meanwhile, the deepened Google partnership signals a strategic pivot, leveraging Vertex AI’s machine learning prowess to refine Reddit’s search functionality, potentially countering some of these pressures by making the platform stickier for users. Google, based in Mountain View, California, gains from richer Reddit content integration, aiming to deliver more precise answers across its ecosystem, a boon for its own user base seeking real-time insights.
Reddit’s stock price, hovering at $125.56 after a $119.92 low, encapsulates the tension between opportunity and fragility. The API access granted to Google promises a tighter symbiosis, potentially amplifying Reddit’s visibility, but Cordwell’s analysis suggests structural challenges persist, with little evidence of a broader uptick in the platform’s intrinsic appeal. This duality reflects Reddit’s position in a digital landscape where partnerships with tech giants like Google can both propel and imperil growth, especially as AI tools like Vertex AI reshape how content is surfaced and consumed. For investors, Monday’s closing figure of $125.56 marks a moment of recalibration, balancing the promise of technological enhancement against the reality of a user base swayed by forces beyond Reddit’s direct control.
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