How AI Made Reddit Profitable | Google and OpenAI Deals Explained
After decades of financial struggle, Reddit has finally done the impossible — it just reported its first-ever quarterly profit: $89 million. For the first time in its history, Reddit is in the black. The surprising twist? The platform owes its success to artificial intelligence.
Both Google and OpenAI are paying Reddit tens of millions of dollars every month for access to its treasure trove of human conversations. But despite the excitement, there’s something deeply contradictory about this new chapter. Reddit is more profitable than ever — yet paradoxically, more fragile than it has ever been. The very deals fueling its rise could also trigger its downfall.
From Struggle to Salvation: Reddit’s Long Road to Profit
In February 2024, Reddit struck a landmark deal with Google:
- Google would pay $60 million annually to use Reddit data to train its AI models like Gemini.
- In return, Reddit could access Google’s AI tools such as Vertex, to improve its notoriously poor search function.
The timing was perfect — Reddit’s IPO followed just a month later. Shares opened at $34, soared 70% on day one, and Reddit raised $750 million, reaching a market cap of $9.5 billion.
Two months later came another massive deal — this time with OpenAI, reportedly worth $70 million per year.
So why are all major AI companies obsessed with Reddit data?
Why AI Can’t Quit Reddit
If you’ve ever used ChatGPT or Gemini, chances are you’ve seen Reddit links pop up constantly. In fact, around 40% of AI-generated answers reference Reddit — more than even Wikipedia.
Why? Because Reddit hosts an ocean of natural, conversational data.
People post real questions, opinions, fixes, and debates — everything from “Why is my code breaking?” to “Should I buy this laptop?” That kind of informal, human back-and-forth is gold for training AIs that aim to talk like humans.
Reddit’s upvote/downvote system also provides a built-in quality signal, helping AIs distinguish valuable content from junk. And crucially, Reddit’s Terms of Service allow it to license user content to third parties, giving it the perfect legal foundation to strike deals with AI firms.
But there’s a dark irony here: LLMs don’t learn facts — they learn patterns. They predict the most likely next word, not the most accurate one. So when an AI says something confidently wrong — like telling users to eat rocks or glue pizza — it’s not lying intentionally. It’s simply echoing patterns it learned… often from Reddit itself.
The Money Problem That AI Didn’t Solve
For all its traffic, Reddit has always struggled to make money.
In 2022, it lost $158 million.
In 2023, it lost another $90 million.
That shows up in one brutal metric: Average Revenue Per User (ARPU).
- Facebook: $43
- Instagram: $35
- X (Twitter): $10
- Reddit: just $1.19
Despite being one of the most visited websites on Earth, Reddit’s revenue model has always lagged far behind.
Why? Because Reddit users hate ads. The community is notoriously anti-corporate. A marketing guide even warns:
“Reddit is a self-moderated battlefield. Traditional marketing tactics will get you roasted alive. If your ad feels like a press release, prepare for downvotes.”
Combine that with the fact that 22% of top subreddits are NSFW, and you see why advertisers stay cautious — no one wants their brand next to explicit content.
This left Reddit in a bind: ads don’t perform, and users don’t engage long enough to boost ad revenue. The average visit lasts 12 minutes, users view just 2.8 pages, and 63% bounce off after one click.
So when the AI licensing deals came along, it seemed like a miracle. Finally, a way to profit without relying on ads. Except… that’s not quite the case.
The Harsh Reality Behind the AI Gold Rush
Here’s the shocking truth:
AI deals made up only 7% of Reddit’s total revenue — $35 million out of $500 million.
Advertising still brings in 93% of Reddit’s income. And the AI money doesn’t even cover their cost of revenue ($45.9M), let alone total expenses ($431M).
So yes, Reddit is profitable — but mostly because its core ad business improved, not because AI saved it.
But that brings us to the real danger: the AI boom that boosted Reddit’s valuation may also be silently eroding its foundation.
The Paradox of Success: When AI Starts to Replace Reddit
After reaching an all-time stock high in September 2025, Reddit’s shares began to plummet — down 25%, including a 10% single-day drop, wiping out $10 billion in market value.
Why? Not declining users or weak ad revenue — those remain solid.
The issue lies in something deeper: Reddit’s presence in AI search results is collapsing.
- According to Promptwatch, Reddit’s mentions in AI results dropped from 14% to just 3% in September.
- SimilarWeb reported its citation share on ChatGPT fell from 29% to 5.3% by October.
In other words, AI tools are using Reddit less.
And that matters, because Reddit’s newfound value is now tied to AI visibility. If LLMs stop referencing Reddit, its perceived relevance — and by extension, its market value — drops too.
Even worse: Google’s AI-generated answers are starting to replace Reddit traffic entirely. Users searching for solutions on Google no longer need to click Reddit links — they get AI summaries instead.
Wells Fargo has already warned that this “disruption is likely permanent”, predicting a long-term decline in Reddit’s Google-driven traffic.
And that hurts where it matters most: ad revenue.
Reddit is effectively helping build the AI models that are now replacing it.
Caught in the Crossfire
Reddit’s CEO Steve Huffman admitted:
“We do expect some bumps along the way from Google. Given that the search ecosystem is under heavy construction, the near-term could be more bumpy than usual.”
But that might be an understatement. The situation reflects a larger trend — companies that rushed to go “AI-first” are now facing unexpected backlash. Many are quietly stepping back after realizing that feeding the AI giants might cost them their own traffic, users, and future.
Reddit’s deals with Google and OpenAI gave it the lifeline it desperately needed — but they also tied its fate to forces it can’t control.
It’s the ultimate paradox:
AI made Reddit profitable. But it might also make Reddit obsolete.
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