- Reddit shares rose 13% to $63.64 following the announcement of a partnership with OpenAI, boosting market capitalisation by $1.2 billion.
- The partnership involves integrating OpenAI’s ChatGPT with Reddit’s content and could generate $50-60 million annually in advertising revenue.
- Reddit’s shares have surged nearly 90% since their IPO, and the company is exploring new monetisation channels, including data licensing and creator tools.
Shares of Reddit rose 13% following the announcement of a partnership with artificial intelligence firm OpenAI, expected to boost advertising revenue for the social media platform.
Reddit shares surge after announcing OpenAI partnership
The stock jumped to $63.64, nearing its record closing price of $65.11 set in late March. This surge puts Reddit on track to add $1.2 billion to its market capitalisation. The partnership enables Reddit to leverage OpenAI’s technology to develop new tools and features. OpenAI’s ChatGPT platform will integrate Reddit’s content in a “real-time, structured” manner, and OpenAI will also become an advertising partner for Reddit.
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The deal could generate more than $50 million to $60 million annually for Reddit, according to Piper Sandler lead analyst Thomas Champion in a note last Friday. More than half of the analysts covering the stock have a “buy” or higher rating, with a median price target of $63.
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Reddit explores new monetisation channels
The partnership aligns with Reddit’s “IPO promise of seizing opportunities to leverage AI,” said Russ Mould, investment director at AJ Bell. Reddit’s shares have gained nearly 90% since their debut in March at $34 each.
In a February filing, Reddit outlined its intentions to explore new monetisation channels beyond advertising revenue, including offering creator tools and licensing its data to third parties. Reddit already has data licensing agreements with undisclosed firms, projected to contribute at least $66.4 million in revenue this year. These licenses allow third parties to access, search, and analyse data on the platform.
