Reddit shares fall 9% as $60m Google AI deal nears expiry
Reddit's 9% share drop reflects growing investor alarm that Google's AI search tools are cannibalizing web traffic, threatening the fundamental business models of digital publishers.
Reddit shares fell 9% on Wednesday following reports that the social media company is weighing whether to sever a $60 million annual agreement allowing Google to train its artificial intelligence models on its content. The 2024 deal is approaching its expiration, though renewal talks between the two firms remain ongoing.
The internal debate highlights a fracturing relationship between AI developers and content creators. Reddit's leadership is reportedly concerned that Google's AI-generated search responses are diverting traffic away from third-party websites, undermining the publishers that supply the training data.
This tension is not unique to Reddit. Major outlets including USA Today, Politico, the Economist, People Inc. and Reuters are reassessing their ties to Google. Data covering the twelve months through June 2026 shows USA Today's organic U.S. Google search traffic plunged nearly 50%, while Business Insider lost more than 85%.
CNN and Politico saw declines of roughly 25% and 23% respectively over that same period. "This is existential for some categories of publishers," said David Buttle, CEO of media consulting firm DJB Strategies. Google disputes this characterization, stating its AI tools direct substantial traffic across the web and support audience growth for creators.
For Reddit, the financial math of the Google dispute is nuanced. Data licensing generated just $39 million in the first quarter, a fraction of the company's $663 million in total revenue, which was driven primarily by advertising. Reddit also maintains a separate data licensing pact with OpenAI.
Speaking on a recent earnings call, CEO Steve Huffman struck a diplomatic tone regarding both tech giants. "We have important partnerships with both Google and OpenAI," Huffman said. "Those are very meaningful to us, and I think it's mutual. We continue to value those."
Despite the relatively small direct licensing revenue, investors are pricing in the broader threat to digital advertising ecosystems. Reddit's stock has now lost roughly 27% since the start of the year. The company is scheduled to report second-quarter earnings on July 30, where management will likely face sharp questions about its traffic trajectory.
