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Alphabet shares fell 12.6% on the day Google highlighted a new AI model, as investors focused on heavy AI spending and weaker growth in search advertising. Reddit shares dropped 15% after it reported declining search traffic and warned daily users could fall by a low double-digit percentage in the fourth quarter. The shared pressure is that AI-powered search may keep users on platforms while bringing less revenue or referral traffic to businesses that depend on the old search bargain.
Alphabet shares fell 12.6% on a day Google celebrated the performance of a new AI model, while Reddit shares dropped 15% after the company reported weaker search traffic. The two declines had different immediate causes, but the results exposed a shared strain: as search shifts toward AI experiences, platforms may keep users on their own services while delivering less value through advertising or referrals to other sites.
Platformer reported that Alphabet’s stock lost about $500 billion in market value, its largest one-day percentage decline since the 2008 financial crisis. Investors focused on the cost of Google’s AI infrastructure expansion: the company plans to spend up to $205 billion on capital expenses this year and has signaled still higher spending in 2027. Alphabet also reported negative $9 billion in free cash flow, extending a decline that began in the previous quarter, according to the report.
On an earnings call, Google chief business officer Philipp Schindler said increased use of AI Mode was among the reasons search revenue growth was slowing despite higher query volume. AI Mode generates less revenue for Google than traditional search, he said. Search and related advertising revenue was still substantial: it grew 12% to $63.35 billion, down from growth of 19% in the first quarter and 17% in the second, according to Platformer.
Reddit’s results pointed to a different exposure. The company said search traffic had fallen meaningfully and warned that daily users could decline by a low double-digit percentage in the fourth quarter. CEO Steve Huffman said Reddit would increasingly require people to log in, citing advertising signals, engagement, protection of Reddit’s data and adaptation to regulations. The source does not provide a precise traffic decline or specify the comparison period.
AI Search Pressures Both Businesses
The declines highlight how the spread of AI search can complicate the economics of the web on more than one side. Google’s AI Mode may satisfy a query within Google’s service, but Schindler’s comments indicate it currently earns less than conventional search. For publishers and platforms such as Reddit, fewer search referrals can mean less incoming traffic and fewer opportunities to turn visitors into engaged users or advertising revenue.
This matters because the companies are not facing identical problems. Google’s concern is monetization and investment: the market is weighing whether returns from AI will justify major infrastructure costs, while some AI search activity appears less lucrative than traditional search. Reddit’s concern is reach and access: the company says search traffic is weakening and is responding by asking more visitors to create accounts. The common pressure is a change in how people find and consume information online, not proof that either company’s business model has failed.
For users, the shift could mean more answers delivered directly by search services and more websites asking visitors to sign in. For businesses that rely on search advertising or referral traffic, the results raise practical questions about whether audiences will still arrive in the same volume and whether AI-led interactions can be monetized at comparable rates. The reported figures show risks, but do not establish how durable those trends will be.
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From Search Referrals to AI Answers
The earlier search relationship sent users from Google results to outside websites. Google made money from ads around search, while publishers could earn from visitors who arrived through those links. Over time, Google added answers and other features directly to results pages, reducing the need for some users to click through. AI Overviews and the separate AI Mode continue that shift by offering generated responses within Google’s products.
Reddit had benefited from Google referrals as forum discussions became more visible in search results. Platformer reported that Google agreed to pay Reddit $60 million a year to license its data after Reddit restricted access by scraping bots. The source frames that history as part of a changing relationship between search platforms and publishers, but the current earnings reports do not establish that AI alone caused Reddit’s traffic decline.
Google has argued that AI answers can encourage broader searches and lead to higher-quality clicks. Platformer’s report describes the new comments about AI Mode revenue as evidence that this argument is under pressure, while also noting Google’s search advertising business remains large and continued to grow. The report is an analysis by Platformer, whose writer disclosed that their fiancé works at Anthropic; its interpretations should be distinguished from company-reported results and executive statements.
“Increased usage of Google’s AI Mode is hurting the company because it makes less money than traditional search.”
— Philipp Schindler, Google chief business officer, as described in Platformer’s report
How Persistent Are the Search Shifts?
The reports do not establish how much of Reddit’s traffic decline is attributable to AI search, rather than other changes in search rankings, user behavior or platform traffic. Reddit’s warning of a low double-digit percentage decline in daily users refers to a possible fourth-quarter outcome; the source does not give the precise baseline or measurement details.
For Google, the source does not quantify how much less revenue AI Mode generates than traditional search or how quickly that gap might change. It also does not show whether the planned infrastructure spending will produce returns sufficient to ease investor concerns. The reported share-price moves reflect market reaction on one day, not a settled judgment about either company’s long-term prospects.
Companies Face Tests in Coming Quarters
Google’s next test is whether it can grow AI use while improving the economics of those interactions and showing investors that its infrastructure spending can generate returns. Future earnings updates can clarify whether search advertising growth continues to slow, how AI Mode contributes to revenue and whether free cash flow recovers.
Reddit’s next test is whether requiring more visitors to log in can strengthen engagement and advertising while limiting the loss of people who arrive through search. Its fourth-quarter daily-user results will show how its warning compares with actual performance. Until then, the scale and causes of the traffic changes remain unsettled.
Key Questions
Why did Alphabet shares fall?
Platformer attributed the selloff mainly to investor concern about Google’s planned AI infrastructure spending and weakening growth in search revenue. Alphabet’s shares fell 12.6% and the company reported negative $9 billion in free cash flow, according to the report.
Why did Reddit shares fall?
Reddit shares dropped 15% after the company reported meaningfully lower search traffic and warned daily users could decline by a low double-digit percentage in the fourth quarter. The source does not give a precise traffic decline or prove that AI caused it.
What do the Google and Reddit declines have in common?
Both point to pressure from changes in search. Google said AI Mode makes less money than traditional search, while Reddit said search traffic had fallen. These are different effects, but both challenge parts of the older model in which search generated advertising revenue and sent visitors to other sites.
Is Google’s search business shrinking?
The report says search and related advertising revenue grew 12% to $63.35 billion. Growth was slower than in the first and second quarters, but the reported figure is still an increase, not a decline in revenue.
What is Reddit changing?
CEO Steve Huffman said Reddit would increasingly push visitors to log in. He cited better advertising signals, higher engagement, protection of Reddit’s data and adapting to regulations as reasons for the policy direction.
Source: platformer.news
