Reddit stock sinks on report it may not renew Google AI content deal

shares reddit fell 9 percent on Wednesday Wall Street Magazine reported that the company was discussing closing Google’s Access to content for artificial intelligence use.

Reddit shares are down nearly 27% year-to-date.

The two companies reached an agreement in 2024 that will allow the search giant to train artificial intelligence models based on Reddit content. But Reddit is reconsidering the benefits of the deal as Google’s AI summaries reduce traffic to their website from the search results page, according to the Journal.

According to the Journal, the search traffic trend can also be seen on other sites; Politico is seeing a 23% drop in Google traffic, CNN is down nearly 25%, and Business Insider is down more than 85%.

This is part of media and publishing companies re-evaluating their relationships with the biggest AI giants; some make it a legal goal to protect their intellectual property because their sites are subject to lower search traffic.

Last year, Chegg sued Google in federal district court, claiming that its AI summaries of search results were harming the company’s traffic and revenue.

In a statement to CNBC at the time, Google said the company was sending “billions of clicks to sites across the web, and AI Overviews are sending traffic to a greater variety of sites.”

Google responded to the Wall Street Journal with a similar statement on Wednesday, saying its AI features help creators and publishers grow their audiences.

CNBC has reached out to both Reddit and Google for comment.

Reddit’s $60 million-a-year deal with Google is expiring soon, and the companies are in talks about potentially renewing the partnership, according to the Journal.

Reddit also had a similar partnership with OpenAI; The partnership helped Reddit generate higher earnings last quarter by allowing the ChatGPT maker to train AI models on its content as part of its data licensing business.

In the first quarter, the company beat analysts’ expectations, with revenue up 69% year-over-year; Earnings per share were $1.01 versus 58 cents expected, and revenue was $663 million versus estimates of $611 million.

“We have important partnerships with both Google and OpenAI,” Reddit CEO Huffman told analysts on the earnings call. “These things mean a lot to us, and I think it’s mutual. We continue to value them.”

The company will report second-quarter earnings on July 30.