Reddit Enters Content Licensing Agreement with AI Firm Prior to IPO Launch

Reddit Inc. has reportedly finalized a contract permitting a company to utilize its platform’s content for training artificial intelligence models, a move that comes as the social media giant approaches the potential launch of its highly anticipated initial public offering (IPO).

Sources familiar with the matter disclosed that Reddit, headquartered in San Francisco, disclosed the agreement to potential investors as part of its IPO preparations. The deal, valued at approximately $60 million annually, was signed earlier this year. Reddit’s partnership with an undisclosed major AI firm sets a precedent for potential future agreements of a similar nature, according to one insider.

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Reports suggest that Reddit generated over $800 million in revenue last year, marking a notable 20% increase from its 2022 figures. The company’s strategic move to capitalize on the burgeoning AI trend in the corporate sector could help fuel investor interest in its IPO and potentially boost its market value.

Sources have indicated that Reddit has been advised to consider a valuation of no less than $5 billion for its IPO, which could potentially launch as early as next month, according to Bloomberg News. However, deliberations regarding the IPO, as well as specific details regarding the listing and the AI agreement, are still ongoing and subject to change, insiders cautioned, requesting anonymity due to the confidential nature of the information. A Reddit representative declined to provide comment on the matter.

In recent times, AI companies seeking data to train their algorithms have been striking data licensing deals with content providers looking for alternative revenue streams. In December, OpenAI inked a significant contract with German media giant Axel Springer SE for AI training purposes, reportedly valued at tens of millions of dollars, as per Source.

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Additionally, the startup responsible for the ChatGPT text generation tool has been in discussions with prominent publishers such as CNN, Fox Corp., and Time to license their content. This initiative aims to enhance the accuracy, relevance, and timeliness of AI chatbot responses by providing them with up-to-date data sources.

Approximately 16 banks, spearheaded by Morgan Stanley and Goldman Sachs Group Inc., are collaborating on Reddit’s IPO. Other major financial institutions involved in the deal include JPMorgan Chase & Co., Bank of America Corp., and Citigroup Inc.