Reddit Signs AI Training Deal Ahead of IPO
Reddit Inc. has reportedly signed a contract allowing a company to train its artificial intelligence (AI) models on the platform’s content, as it edges closer to its highly anticipated initial public offering (IPO). People familiar with the matter revealed that Reddit informed potential investors in its IPO that it had signed the deal earlier this year, amounting to approximately $60 million annually. The company’s agreement with a prominent AI firm may serve as a blueprint for future contracts of a similar kind, insiders added.
According to reliable sources, Reddit recorded over $800 million in revenue last year, representing a 20% increase from 2022. Capitalizing on the current AI wave sweeping the business world could enable Reddit to harness investors’ enthusiasm for the technology and bolster its IPO prospects.
Reports suggest that Reddit has been advised to consider a valuation of at least $5 billion for its IPO, potentially launching as early as next month. However, details surrounding both the IPO and the newly signed AI deal remain subject to change, with ongoing deliberations underway. As the information remains confidential, Reddit declined to comment on the matter.
AI companies are actively seeking data to train their programs, leading them to strike data licensing agreements with content providers, who are eager to explore new revenue streams. For instance, OpenAI secured a contract in December with German media giant Axel Springer SE for AI training, worth tens of millions of dollars. Other reports indicate that the startup behind the ChatGPT text generation tool is in talks with renowned publishers such as CNN, Fox Corp., and Time to license their work. The objective is to supply AI chatbots with accurate, relevant, and up-to-date data to enhance their results.
For its IPO, Reddit has enlisted the support of 16 banks, with Morgan Stanley and Goldman Sachs Group Inc. leading the efforts. JPMorgan Chase & Co., Bank of America Corp., and Citigroup Inc. are among the other players involved in the deal.
As the IPO plans progress and negotiations for the AI contract continue, the landscape may change. Nevertheless, these developments highlight Reddit’s efforts to leverage AI technology and data collaborations to enhance its platform and attract potential investors.
