(Reuters) - Alphabet's Google on Monday expanded its partnership with Reddit ( RDDT ) amid concerns that the social media platform's user growth relies heavily on traffic from Google Search.
Redburn Atlantic analyst James Cordwell initiated coverage on Reddit's ( RDDT ) stock with a "sell" rating, saying the company's growth in daily active users (DAUs) - a key metric in determining traffic on a web-based platform - is vulnerable to algorithm changes by Google.
Google's algorithm change has already started to affect Reddit ( RDDT ). It saw a sequential decline of 600,000 users in U.S.-based DAUs arriving on Reddit ( RDDT ) via Google search in the fourth quarter, Cordwell wrote in a note.
Shares of Reddit ( RDDT ) were down 5.6% in afternoon trading on Monday.
The expanded partnership now enables Reddit ( RDDT ) to use Google's Vertex AI - an AI development platform by Google Cloud that enables its users to build, deploy and scale machine learning models and AI applications - to enhance search on the Reddit ( RDDT ) platform.
Mountain View, California-based Google said it will integrate Reddit ( RDDT ) content more effectively across its products, making it easier for users to find helpful information.
Google will now have access to Reddit's ( RDDT ) API - a set of rules and protocols that allows different software applications to communicate with each other - for real-time, structured content, improving the accuracy and relevance of displayed information.
Cordwell said growth of Reddit's ( RDDT ) organic users, the ones who log in on the platform to use it more than seeking an answer to a single question, has largely been unchanged over the past six months, signaling there has been little structural changes in the appeal of Reddit ( RDDT ).