Reddit shares sink on weak sales guidance and plans login requirement test as Google search traffic shrinks

Reddit plans to require all users to create official accounts to access the social media platform, marking a major departure for the site known as "the front page of the internet."

The company revealed the change Thursday as part of its third-quarter earnings, in which it beat on the top and bottom lines, but provided weak fourth-quarter sales guidance. The company's shares dropped over 11% after its numbers were released.

Reddit CEO Steve Huffman told CNBC in an interview that the company's shrinking search-referral traffic from Google played a major role in its planned efforts to require people to become "logged-in" users.

A previous Google search update designed to surface "authentic" content from internet forums helped Reddit grow its user base over the past few years, but the search giant's continued push on AI overviews and related chatting features has negatively impacted referral traffic .

"I think fundamentally that relationship between Google and the rest of the internet is evolving, and so for us, this means a continued focus on our core users that come to Reddit directly," Huffman said.

Previous Google algorithm changes would "kind of come and go," Huffman said, but the company's AI efforts represent "a fundamental shift in how the Google product works, from being a traffic driver to whatever's going on now."

Huffman didn't provide any specific timing on when Reddit plans for the platform registration change, saying only that implementing it through the site would involve a lot of complexity . The company will begin testing in the fourth quarter outside of the U.S.

He said that Reddit is still determining what parts of the service logged-out users will be able to see, and will iron out the details as part of its upcoming testing.

Reddit said that daily active uniques, or DAUq, rose 12% year-over-year to 130.3 million in the third quarter, trailing Wall Street estimates of 133.7 million. U.S.-specific DAUq dropped 2% year-over-year to 50.7 million, which was below analyst projections of 53.5 million.

Huffman said that "search referral traffic is down meaningfully in this quarter" and that the trend will continue in the fourth quarter.

He said that Reddit is continuing its effort to make its platform "a daily habit" for users. "So that's where our focus is: growing those app users and logged-in users," Huffman said.

"The vast majority of our revenue comes from our app users and logged-in users are direct traffic, and both of those are up Q. over Q. and so that's where our focus is," Huffman said.