u/No-Base-2384

Reddit has the human answers to all questions. Reddit needs to promote and drive habit formation around using the Search functionality here instead of going to Google first so it becomes habit.

For instance, when someone opens the app, they need to serve users with a marketing prompt with walkthrough of how to use search effectively native within Reddit.

Not everyone knows it exists, and certainly, not everyone knows that it has improved.

My significant other recently told me they don’t want AI recommendations to a question because they don’t trust AI since they saw an influencer recently talking about how they created a fictitious brand and within 2 weeks ChatGPT started recommending it.

So I told them to search directly in Reddit, they found great conversations related to their inquiry, and will be using it as their default Search mechanism for finding human experience from now on.

Time to promote the Search function before the surface gets monetized later this year or 2027 per the rumors.

Reddit is moving too slow.

They are focusing on profitability and vanity financial metrics at the expense of user growth.

They are squeezing every last dollar out of the machine instead of pouring money into R&D to move faster and capture attention, eyeballs, and engagement.

There is an endless sea of fabulous ideas to make Reddit more relevant and expand the user pie. Spez has acknowledged as much.

The management team seems to erroneously believe that investors want to see explosive EPS growth now. They don’t, at least not necessarily at this magnitude. They want to see massive user and engagement growth right now because they understand the profit margins will come with scale.

This isn’t to say we can’t have both. Profitable growth and moving quicker need not be mutually exclusive.

Look at Meta as a case study and investors already know that beautiful FCF and profit margins await for an ad business like Reddit. We are willing to be patient for the profits if we can invest in explosive user growth.

The fact that management is hesitant to spend to grow has shaken confidence in investors because in the absence of proof otherwise, investor sentiment is that management has no convincing strategy in which to deploy this capital to ignite the user growth.

And that is the problem for investors, and has been for several quarters now.

Reddit management team - I challenge you to convince shareholders at the next earnings call that you have a high conviction strategy and roadmap to execute on over the next 12-24 months to improve user growth.

The worst that happens is your plan fails to meet your goals, which you are already doing in the eyes of investors.

I view this news as the management team growing up and not chasing the dollar. They are taking a step back and evaluating their competitive moat and structural advantages. They are realizing what makes Reddit, Reddit.

AI is a threat to Reddit’s traffic from Google. Google has historically had a symbiotic relationship with us. But given AI, we need to look into the future and imagine how this relationship could change over time.

Google will not jeopardize its cash cow search business by not employing AI. The overviews are reducing traffic to Reddit, and that won’t stop. If anything, it could get worse over time as agents are deployed to run tasks, research, and run our day to day.

Reddit’s competitive moat is its human conversation. They should never have commoditized that for a few bucks.

Alas, they couldn’t see the future when these deals were struck, and that’s important to understand and not judge them. Now, they have new information. It’s clear the impact that AI, and Google AI Overviews (this is just the beginning…) specifically, will have on traffic now.

We must preserve our moat and keep Reddit conversations on Reddit. Even if that means sacrificing short term revenue.

We’re in it for the long haul.

I was busy and missed it. Would’ve loved to add more there. Broader market sell off has us down temporarily imo and the 200 day moving average is at $181. If we stay firmly above that point today despite the selling pressure, I’d have loved to add at $173 given the new search ads announcement.

The thesis continues to be de-risked.

Have a great Friday fellow baggies.

Earlier today I posted an article announcing the launch of ad inventory in Search by end of this year.

I sized the 2027 revenue opportunity from this net new surface launch. Sharing with the community for pressure testing. Apologies in advance for poor formatting as I’m writing this on my phone.

TL/DR: Search Ads provide a low-risk path to roughly $350-$580M of net-new revenue growth in 2027. This could grow to a $1B business by 2029.

If management can find a way to increase Search adoption, the business could be much, much larger and acts as a call option for equity holders.

Two ways to triangulate:

1. Impressions method : ~2B queries/month at 2027 launch (~24B/year), 40% commercial coverage, ~1.5 impressions/query, $10–20 CPM → ~$430–580M at launch.

2. Google revenue per query benchmark method : Google earns ~$0.03–0.05/query. Reddit at 25–50% of that on ~24B annual queries → ~$240–480M.

Average the two methods to get roughly $350–580M at in 2027, scaling toward ~$700M–$1.1B by 2029 (assumes continuation of search WAU growth at 30%)

Where the inputs come from:

- Search WAU ~80M (Q4 2025), up from 60M (Q4 2024), ~30% YoY from Q4 2025 earnings call / Q1 2026 call by Spez

- ~1B monthly search queries (2024 per management) grown ~30% YoY similar to WAU above = ~1.5B (2026), ~2B (2027 launch)

- 40% commercial search coverage, assumed to be Reddit’s figure that ~40% of conversations are commercial in nature (S-1 / Reddit-commissioned survey; applied here as a proxy for commercial query share)

- $10–20 CPM from third-party ad-buyer benchmarks (Reddit doesn’t disclose CPM); feed CPMs run ~$6–7 median, search assumed at a premium for higher intent

- ~1.5 impressions/query, assumes multiple ad slots per commercial results page (Google shows 3-4 at top and 3-4 at bottom of search)

- Google Revenue per Query ~$0.03–0.05 derived from ~$200B+ search revenue over ~4–5T annual queries per third party estimates

Cheers

This is big news. This is one of the ad surfaces that has remained untapped and has the most potential. Imagine if Google were launching search ads for the first time.

I am glad that the launch is planned for later this year : early 2027. It tells me that they see a path to maintaining 70% revenue growth rates until then without needing to rush the launch of the ad load.

Additionally, it gives them more to time to continue to:

1. Improve the search experience with ML
2. Drive further adoption and awareness of search on Reddit among core users

To me, this is some of the biggest news yet.

Bullish

For so many reasons.

I hope they are in serious talks with them.

The last minute of trading strong move above $160 is very bullish.

The stock has tested the $160 support 3 times and failed to close below it each time.

The test at $157 today may be the lowest buying opportunity for a long time.

Hope you were in a position to take advantage and average down.

Cheers all, this is not investment advice, do your own due diligence.

Just the opinion of a neckbeard living in his mom’s basement