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Google’s AI Overviews Push Reddit To Rethink Search Strategy

Reddit Chief Executive Steve Huffman said Google’s AI Overviews are making search traffic less predictable, highlighting growing uncertainty over a channel that has long been one of the platform’s main sources of new users.

Speaking after Reddit reported second-quarter results that topped expectations, Huffman said changes to Google’s search experience continue to affect referral traffic. The company also issued a stronger-than-expected outlook, although shares fell 11% in extended trading.

AI Search Changes Referral Traffic

For years, Reddit relied on Google Search to direct users to discussions and recommendations across the platform. As Google expands AI-generated summaries in search results, fewer users may need to click through to external websites.

“Search is volatile, and we see those changes, we’ve been through those many times,”

Huffman said.

Huffman said Google’s traditional search model created significant value for publishers and online platforms, while AI Overviews have yet to deliver similar benefits.

“If we look at the Google ecosystem, the 10 blue links have driven a tremendous amount of value for the whole ecosystem. AI Overviews has yet to make a similar level of positive impact, and that seems consistent across the broader landscape,”

he said.

Reddit Focuses On Direct User Growth

Huffman said Reddit is investing in product improvements, international expansion and user retention as it seeks to reduce its dependence on search referrals.

“We’re thinking about all of our options. Our goal is to maximize the long-term value for Reddit,”

he said.

He also said users visit Reddit for perspectives and discussions that AI-generated summaries cannot fully replicate.

“Some of the tension is that people want Reddit, they don’t necessarily want a summary of Reddit. They want the human perspective, the multiple perspectives, the lived experience that we provide,”

Huffman said.

Company Keeps AI Spending Low

Unlike larger technology companies investing billions of dollars in AI infrastructure, Reddit continues to operate with relatively low capital spending.

“We’re a low-spend company,” Huffman said, adding that capital expenditures totalled about $1.1 million during the quarter. “We’re trying to deliver the AI returns without the AI cost.”

Data Licensing Continues To Grow

Reddit continues to generate revenue from licensing its data to AI companies, including OpenAI and Google. Revenue from its “other” category, which includes licensing agreements, rose 24% year over year to $43 million.

Earlier this month, The Wall Street Journal reported that Reddit was considering limiting Google’s access to its data as publishers raised concerns over declining referral traffic. Huffman said the company’s position had not changed.

Shein Targets $25 Billion Valuation In Hong Kong IPO As Growth Slows

Shein is reportedly targeting a valuation of around $25 billion in its planned Hong Kong IPO, a sharp decline from the nearly $100 billion valuation the online fashion retailer achieved in a 2022 fundraising round.

Two people familiar with the plans said the company was likely to target about $25 billion, while another source put the expected range at $25 billion to $28 billion based on the proposed price band.

IPO Valuation Falls Sharply

Shein plans to sell up to 8% of its shares in the offering, according to a person familiar with the plans. At a $25 billion valuation, that would translate into an IPO of as much as $2 billion.

The latest target is also below the $30 billion to $40 billion valuation the company was seeking earlier this month as it began meeting with potential investors.

Founded in China in 2012 and now headquartered in Singapore, Shein sells low-cost clothing to consumers in about 160 countries. The company is expected to launch its long-awaited Hong Kong IPO later this week.

Trade Restrictions Weigh On Growth

Shein’s valuation has come under pressure as major markets tighten rules affecting low-cost e-commerce shipments. The European Union, for example, has moved to impose additional fees on cheap parcels from platforms such as Shein and Temu. EU Tightens Rules On Low-Cost E-Commerce Parcels

In the U.S., the removal of an import duty exemption for small packages has also affected the company. Shein reported a $99 million quarterly loss in the first quarter of 2026 as sales growth slowed, while a one-time accounting charge further weighed on its results. Shein Reports First-Quarter Loss Ahead Of IPO

Investors Question Shein’s Growth Prospects

The steep reduction in valuation reflects growing concerns over slower growth, higher trade costs, regulatory pressure and stronger competition across global e-commerce.

Some investors who reviewed Shein’s recent financial statements or attended IPO presentations told Reuters they were skeptical that the company could return to the growth rates that supported its $98.2 billion valuation in 2022. Shein’s Slowing Growth Tests Investor Appetite

A lower IPO valuation could also affect Shein’s existing investors. Under the terms of its IPO filing, the company may have to issue additional shares to certain pre-IPO investors if its valuation falls below agreed thresholds.

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