• Reddit is poised to sign a data licensing deal with a major AI firm, estimated at $60 million annually.
  • The move reflects a trend among AI companies seeking legitimate data sources.
  • Despite Reddit’s tough negotiating stance, its revenue fell $200 million short of the $1 billion target set two years ago, as it plans for a $5 billion IPO in March, down from the previous $10-15 billion valuation.

According to Bloomberg’s report yesterday, the social platform Reddit is set to enter into a data licensing agreement with an undisclosed “major AI company,” granting access to its user-generated content platform. The agreement is valued at approximately $60 million annually (Note by IT Home: approximately 432 million RMB currently), but specifics may vary due to Reddit’s ongoing plans for an IPO.

Previously, most AI companies trained data from open networks without permission, raising legal concerns and prompting them to seek more formal data sources. It remains unclear which company Reddit has reached the agreement with, but the deal’s value notably surpasses the $5 million annual fee OpenAI pays to news publishers for data. According to The New York Times, Apple is also seeking multi-year agreements worth “at least $50 million” with major news companies.

Also read: Reddit to discontinue blockchain-based community points reward program

Reddit has a tough negotiating stance

In October last year, there were rumours that Reddit threatened to cut off access to Google and Bing search crawlers unless they reached data licensing agreements with AI companies. Regardless of whether the rumours were true, Reddit has indeed shown a tough negotiating stance before. Last year, changes in pricing for third-party API access led to popular Reddit app developers discontinuing services, triggering the largest protest in Reddit’s history. However, Reddit ultimately withstood the pressure and did not change its established policies.

Reddit plans to have IPO in March

Bloomberg’s report states that as of the end of 2023, Reddit’s revenue grew by 20% year-on-year, but it still fell $200 million short of its $1 billion target set two years ago. According to reports, Reddit plans to go public in March with a valuation target of $5 billion, halving from the $10-15 billion valuation target set in 2021 when the IPO plans were shelved due to market downturns.