Reddit’s IPO hinges on its AI partnerships, reveals $203M revenue

Reddit, the popular online forum, is gearing up for its initial public offering (IPO) next month, hoping to capitalize on its massive user base and content. But the company’s success may depend largely on its ability to monetize its data for artificial intelligence (AI) purposes. large language models

However, Reddit’s data licensing strategy also comes with some risks and challenges. For one, the company may face competition from other sources of data, such as social media platforms, news outlets, and public domain texts, that may offer similar or better quality data for LLMs. Moreover, the company may alienate some of its users and moderators, who may not be comfortable with their posts and comments being used for commercial AI purposes. Reddit says it will respect the privacy and preferences of its users and moderators, and will allow them to opt out of data licensing if they wish.

In its IPO prospectus filed with the U.S. Securities and Exchange Commission (SEC) last week, Reddit revealed that it has entered into data licensing agreements with several AI companies, worth a total of $203 million over the next three years. These deals grant the AI companies access to Reddit’s data API, as well as quarterly transfers of Reddit data, which they can use to train and improve their large language models (LLMs).

LLMs are AI systems that can generate natural language texts, such as essays, code, emails, articles, and more, based on a given prompt or context. They rely on huge amounts of data, often scraped from the web, to learn from examples and patterns. Some of the most prominent LLMs include Google’s Gemini, OpenAI’s GPT-3, and Facebook’s Blender. large language models

Reddit’s data, which consists of over one billion posts and over 16 billion comments, is a valuable source of conversational and knowledge-rich data for LLMs. Reddit claims that its data is “a foundational part of how many of the leading large language models have been trained.” The company also expects that its data will continue to play a role in the future of AI, as its content “constantly grows and regenerates as users come and interact with their communities and each other.”

By licensing its data to AI companies, Reddit hopes to generate a steady stream of revenue, as well as to establish strategic partnerships with the leaders in the AI industry. The company also hopes to avoid legal disputes over the fair use of its data, which it says some companies have used without permission or compensation in the past.

However, Reddit’s data licensing strategy also comes with some risks and challenges. For one, the company may face competition from other sources of data, such as social media platforms, news outlets, and public domain texts, that may offer similar or better quality data for LLMs. Moreover, the company may alienate some of its users and moderators, who may not be comfortable with their posts and comments being used for commercial AI purposes. Reddit says it will respect the privacy and preferences of its users and moderators, and will allow them to opt out of data licensing if they wish.

Reddit’s IPO is expected to take place in March, with a valuation of around $15 billion. The company reported a revenue of $261.7 million in 2023, up 21% from 2022, and a net loss of $90.8 million, down from $158.6 million in 2022. The company has 267.5 million active weekly users, and over 100,000 communities, covering a wide range of topics and interests.

large language models Reddit’s data, which consists of over one billion posts and over 16 billion comments, is a valuable source of conversational and knowledge-rich data for LLMs. Reddit claims that its data is “a foundational part of how many of the leading large language models have been trained.” The company also expects that its data will continue to play a role in the future of AI, as its content “constantly grows and regenerates as users come and interact with their communities and each other.”