(Reuters) – Alphabet’s Google on Monday expanded its partnership with Reddit amid concerns that the social media platform’s user growth relies heavily on traffic from Google Search.
Redburn Atlantic analyst James Cordwell initiated coverage on Reddit’s stock with a “sell” rating, saying the company’s growth in daily active users (DAUs) — a key metric in determining traffic on a web-based platform — is vulnerable to algorithm changes by Google.
Google’s algorithm change has already started to affect Reddit. It saw a sequential decline of 600,000 users in U.S.-based DAUs arriving on Reddit via Google search in the fourth quarter, Cordwell wrote in a note.
Shares of Reddit were down 5.6% in afternoon trading on Monday.
The expanded partnership now enables Reddit to use Google’s Vertex AI – an AI development platform by Google Cloud that enables its users to build, deploy and scale machine learning models and AI applications – to enhance search on the Reddit platform.
Mountain View, California-based Google said it will integrate Reddit content more effectively across its products, making it easier for users to find helpful information.
Google will now have access to Reddit’s API — a set of rules and protocols that allows different software applications to communicate with each other — for real-time, structured content, improving the accuracy and relevance of displayed information.
Cordwell said growth of Reddit’s organic users, the ones who log in on the platform to use it more than seeking an answer to a single question, has largely been unchanged over the past six months, signaling there has been little structural changes in the appeal of Reddit.
(Reporting by Rishi Kant in Bengaluru; Editing by Maju Samuel)
