Reddit shares dropped 6% after an RBC analyst reported 'challenging' feedback from small and medium-sized business ad agencies. Analyst Brad Erickson noted that while macro conditions are positive for giants like Google and Meta, the outlook is 'less positive' for Reddit. The platform saw mixed feedback with low pricing and conversion rates.

Erickson highlighted that some small brands are shifting toward building organic presence rather than spending on ads. He cautioned that 'much is expected' from the platform's advertising business, which is still developing. This comes as larger competitors like Meta are seeing 'outsized inflation' in their ad auctions, suggesting stronger demand.

The report indicates an improving macro environment for digital advertising overall, with agency concerns about consumer softness dropping significantly. However, Reddit appears to be benefiting less than its established rivals. A key factor is that Google's partnership renewal with the platform likely won't happen until 2027, leaving Reddit to navigate a competitive ad landscape on its own.