Reddit took a hit.
This is something we predicted albeit not specific to any one company. Reddit is, however, the first one to have it showing up in the numbers.
The reality is that social media only platforms are a dying animal. Perhaps no social media outlet better exemplifies this than Reddit.
It is one of the leading applications. At the same time, it is also rather limited. People can post links (and posts) to information around the Internet. That has served it well in driving traffic over the years.
That said, there isn't much else to it. While there are more features, it is basically a one trick pony. In other words, it is the antithesis to Elon's "Everything App" idea.
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Reddit: Showing The Death of Social Media (Only) Platforms
Reddit had it earnings call which led to discussion about the number of users. Here is what was said about the lower than expected growth:
A Google search algorithm change caused some "volatility" with user growth in the fourth quarter, but the company's search-related traffic has since recovered in the first quarter, Reddit CEO Steve Huffman said in a letter to shareholders.
"What happened wasn't unusual — referrals from search fluctuate from time to time, and they primarily affect logged-out users," Huffman wrote. "Our teams have navigated numerous algorithm updates and did an excellent job adapting to these latest changes effectively."
Is this fatal? Most likely not. Will this be a temproary situation? Perhaps with regards to the algorithm.
The problem for Reddit is that search is changing completely. Google, the king of search, is integrating its AI (Gemini) servies into its platform. This is going to radically alter the information that is provided to users.
When people search, they typically are not looking for websites in particular. Instead, they seek informaiton. Due to the design of the Internet, i.e. hyperlinking, Google because the defacto provider of websites. Search takes the information on the site, categorizes it, and provides it to users in the form of a list.
What happens when Google can simply provide the answer to the information provided?
This is a reality that all platforms are facing. Meta, Google, and xAI all have enormous AI operations underway. They are the epitome of the blending of social media and AI. Each of these companies has a continuous flow of data which to train their models. At the same time, they have applications to integrate said AI services.
Catering To Your Community
Reddit has a large number of users. They had an average of over 100 million users for the quarter (daily). This is a healthy sum. As a comparison, Google and Meta are near (over) 2 billion and X tops 600 million. Nevertheless, 100 million is nothing to sneeze at.
The problem is in what is being provided. Platforms will become like towns (or nations). To keep the people there, a full range of services needs to be offered. Of course, Reddit could integrate features from organizations like ChatGPT. This extends, however, past simply having AI services.
We have the entire realm of finance. The ability to make payments and access financial applications is something that these platforms will require. Simply put, those that lack it will be left behind.
To some, this might seem absurd. After all, who would turn to a social media site to get a mortgage? There was a time when many asked that about news. The prevailing wisdom was that news had to come from professional media outlets.
Today, the claim is that X is the number 1 source for news.
We also see YouTube as the leading streaming platform, topping all the Hollywood studios by a significant margin. This is a long way from broadcast television.
Web 3.0 offers the opportunity to cause massive disruption. When tied to blockchain, payments are inherent. On top of this, DeFI applications can be built to service the different needs of the community members. The focus has to be upon expanding the number (and variety) of offerings.
The reality is that Google and other entities will cease sending traffic to other sites. That company realizes the value of controlling the userbase. The desire to send people elsewhere to gather information is not what Google seeks. Instead, it aims to be the provider.
This is what is happening with every platform. Those that are dependent upon outside pathways will struggle. Instead, the "town" needs to be built, providing the goods and services the community requires.
If that doesn't happen, people will simply head elsewhere.
Rapid Change
It is sometimes hard to see disruption, especially when the numbers are still growing.
We saw this in the automotive industry. For years, there was no disruption as ICE sales where holding strong. Outside the COVID situation, things were operating well.
Unfortunately, that was not the case. The disruption was taking place from EVs, something scoffed at. Once China, the largest market, started to see a major portion of new car sales going electric, legacy companies that were making billions in that market saw a vanishing act. The money just disappeared.
Today, we see many automakers in freefall. They are on the fast track to bankruptcy. It took years for people to realize but it is no longer hidden.
It will be the same with social media. A lot of what is written here will be pushed aside. Look at the numbers, they tell a different story than what I am outlining here.
The problem is disruption can happen rapidly, especially in the digital world. There is a low barrier to switching when it comes to online applications. The biggest obstacle tends to be human habit. Outside of this, the ability to engage is similar on many platforms.
Disruption, once it starts, accelerates. It is hard to see in the early stages as thee is little impact. This lulls those involved into a sense of security. In other words, it is business as usual. There is nothing that is "as usual" when it comes to what we are seeing with technology.
Social media will not be destroyed. Instead, it will evolve to simply being a part of a larger platform. The ability to interact and engage will remain. That will not, however, be the sole focus. There are going to be a lot of other services that help to keep people returning.
The big platforms will be the last to get hit. If we want to see the origins, look at some of the applications on the fringes. They will likely be the first to lose out.