Reddit Strikes A $60 Million Content Licensing Deal With An AI Company Before IPO Launch!

UPDATE: At the time of writing (21st February), the AI company remained unnamed. However, according to three people familiar with the matter, the AI company in question is Google!

The sources declined to be named, as they were not authorized to speak to the media. Till the time of the update, Google and Reddit declined to comment.

The popularity of artificial intelligence (AI) is at an all-time high. A big factor in its rise to prominence is the capability of generative artificial intelligence tools that can create unique content in the form of text, images, music and even videos using simple text prompts.

Recently, industry leader OpenAI launched its text-to-video AI model, Sora, to great praise, while Google’s latest large language model, Gemini 1.5, hunted for problems in the AI-generated videos.

However, all this is possible only if the developers have massive amounts of data to train their AI models on.

In fact, the larger the data the better. This principle also applies to the relevance and recency of the data. The newer the data the better.

Sitting at the center of the Venn diagram covering both criteria is Reddit, the popular social media platform that hosts conversational forums on a range of topics including gaming, sports, business, crypto, television, art and a whole lot more.

Reddit, one of the world’s most popular social media platforms, recently revealed its intention of an AI-centric initiative? Let’s explore!

What Is Reddit Doing?

According to reports, Reddit has signed a contract with an unnamed AI company to train AI models using the social media platform’s content, as per people familiar with the matter.
As per the report, the deal will see Reddit earn $60 million per year annually.
The reveal comes just before the company’s planned IPO launch, which is expected to happen in March, making it the first IPO launch of a major social media company since 2019 (Pinterest).
Reddit didn’t provide a comment on the matter. However, the company has been planning an IPO launch for over three years.
With over 850 million monthly active users in 2023 and 70 million annual daily active users in 2023, Reddit has earned an annual revenue of $810 million in 2023 with a large part coming from advertisements on the platform.

TechDogs-"An Image Showing Reddit's Annual Monthly Active Users 2013 to 2023"

Source

As such, the platform’s valuation increased from $3 billion in 2019 to $6 billion in February 2021 and then to $10 billion in August 2021.
This hasn’t been the first mention of Reddit aiming to make money from its content by selling to AI companies, with mention of the plan coming in April 2023.

Why Is There Pushback To The Decision?

At the time, Steve Huffman, Founder and Chief Executive of Reddit, said, “The Reddit corpus of data is really valuable ... But we don’t need to give all of that value to some of the largest companies in the world for free.”
The announcement was met with criticism from users who said many Redditors may be reluctant to share their comments and content with AI engines.
Over the last few years, Reddit has made some decisions that haven’t been well-received by users, including its plan to start charging for access to its APIs, which witnessed Reddit forums being temporarily shut down in protest.

Do you think other social media platforms will follow suit and make similar deals with AI developers? Do you think this deal will benefit Reddit’s valuation before its IPO launch?

Let us know in the comments below!

First published on Wed, Feb 21, 2024

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