Reddit stated on Friday that the United States Trade Commission wrote to the firm regarding its artificial intelligence information for the training authorization program. In a revised IPO proposal, Reddit stated, ”On the 14th of March 2024, the company got an email from the Federal Trade Commission informing us that the FTC’s team had started a private investigation concerning our transaction, authorization, or exchange of content created by users with other companies for use in training AI models.” In February, Reddit submitted an initial public offering application. It proposes to trade under the ticker ”RDDT” symbol on the stock exchange in New York.
Reddit is primarily an online advertising platform, but the paperwork additionally stated that the firm is looking for alternative revenue streams and is just starting its data licensing initiative.
Regarding the forum’s members and site moderators, Reddit stated, “The chance to participate is not inconsistent with our core principles and the liberties of our Redditors.”
In a proposal expected to value the company at nearly $6.5 billion, the nineteen-year-old corporation has submitted paperwork to sell shares in its initial public offering (IPO) for $31 to $34 each. Reddit is attempting to go public at a time when tech IPOs are generally slow. Since the September launch of Klaviyo and Instacart, a noteworthy funded venture capital startup debut has yet to be made. The market has been mostly closed since the end of 2021, just before it.
Reddit made $804 million in revenue last year, a 20% increase—an advertisement generated ninety-eight per cent of its revenue. The data licensing accounts are included in the remaining 2%.
According to Reddit’s revised filing, these projects could expose us to changing approaches to data regulation and include intricate and growing regulations, rules, and laws related to theft, property rights, and data privacy and protection.
A representative for the Commission did not respond to inquiries.
Reddit reported signing several data-licensing agreements in January, totalling $203 million over two to three years. In 2024, it anticipates recognizing a minimum of $66.4 million through these agreements.
Google and Reddit announced an expanded relationship the same week as Reddit filed for an initial public offering (IPO). This partnership would allow Google to use Reddit’s data to train its artificial intelligence models.
The company stated in its prospectus that it “believes that our expanding network information is going to be an important component in the educational process of top large language models (“LLMs”) and contribute as a supplementary monetization mechanism for Reddit.”
Reddit stated that given the relatively new nature of these kinds of technologies and business agreements, it is not unexpected that the Federal Trade Commission is interested in the situation.
Reddit stated, “We don’t think we’ve participated in any illegal or dishonest trade activities.” The letter said that the Federal Trade Commission officials wanted to meet with us to discuss our intentions in more detail. They planned to ask for our documents and information for their ongoing investigation.
Reddit warned that interaction with authorities could drawn out and unpredictable in addition to high costs and other investigations and modifications to the product that could require our team to modify our guidelines or procedures, redirect administration and additional funding from our company, or negatively affect our company’s performance, results of actions, financial standing, and potential clients.
Displeased with the company’s announcement of a pricing shift that affected sure third-party developers utilizing its software programming user interface or the Application Programming Interface to create apps, Reddit moderators launched a broad protest against the company’s data-licensing business during the summer.
The company stated then that the API pricing hike was necessary to ensure it was compensated fairly by internet giants like Google and OpenAI, whose artificial intelligence models get trained and improved using massive amounts of Reddit material. However, several developers voiced their displeasure, claiming that the Reddit apps which some Redditors relied on for assistance in moderating discussions, were too expensive for them to maintain after the API upgrade.
