Reddit signs content licensing deal with AI company ahead of launching IPO

Reddit Inc. has signed a contract allowing a company to train its artificial intelligence models on the social media platform’s content, according to people familiar with the matter, as it nears the potential launch of its long-awaited initial public offering.

Reddit is set to launch its IPO this year(REUTERS)
Reddit is set to launch its IPO this year(REUTERS)

The San Francisco-based firm told prospective investors in its IPO that it had signed the deal, worth about $60 million on an annualized basis, earlier this year, the people said. Reddit’s agreement with an unnamed large AI company could be a model for future contracts of a similar nature, one of the people said.

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Reddit had more than $800 million in revenue last year, about a 20% increase over its 2022 figure, people familiar with the matter have said. The ability to profit from the AI wave sweeping the corporate world could help Reddit tap into investors’ enthusiasm for the technology, and boost its IPO.

The company has been advised to consider a valuation of at least $5 billion in an IPO, which could launch as soon as next month, Bloomberg News has reported.

Read More: Reddit Revenue Up 20% Before IPO Even as Profit Remains Elusive

Deliberations around the IPO are ongoing and details of both the listing and the AI deal could change, the people said, asking not to be identified as the information isn’t public. A representative for Reddit declined to comment.

AI companies hungry for data to train their programs on have been striking data licensing deals with content providers eager for new sources of revenue. OpenAI agreed a contract in December with German media giant company Axel Springer SE for AI training worth tens of millions of dollars, according to a Bloomberg News report.

The startup behind the ChatGPT text generation tool is also in talks with publishers including CNN, Fox Corp. and Time to license their work, Bloomberg News has reported, to feed its AI chatbots data to make their results more accurate, relevant and up to date.

About 16 banks, led by Morgan Stanley and Goldman Sachs Group Inc., are working on the IPO. JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. are also among the banks on the deal.

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