Reddit has experienced growth since going public, but analysts from Redburn Atlantic warn that the platform's heavy reliance on Google for traffic could hinder its long-term prospects. They emphasize that much of Reddit's user growth has been driven by logged-out users coming through Google, reducing their value compared to logged-in users. While logged-in users increased by 27%, logged-out users surged by 70%. Analysts predict that this trend could negatively affect Reddit’s sustainability and control over its traffic, putting its future at risk.
Accelerated user growth has been driven predominantly by logged-out users who arrive on the platform largely via Google Search. These users are much less valuable to Reddit as they are typically just looking for an answer to a query and thus spend little time on the platform.
The company's potential, breadth of appeal and thus value as a company are being overstated, leading us to rate Reddit as 'sell'.
There is clear evidence that the boost to traffic from Reddit's recent changes is hitting a ceiling, with a risk that what Google giveth, it will taketh away.
Much of Reddit's growth over the past few years has been misconstrued because it came from logged-out users as the main driver.
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