Reddit has entered into a licensing agreement with Google, allowing the tech giant access to the social media platform’s content to train its artificial intelligence models. The deal, valued at approximately $60 million annually, signifies Reddit’s strategic move to boost revenue ahead of its anticipated initial public offering, amidst stiff competition from platforms like TikTok and Meta, Facebook’s parent company.
While specific details regarding the duration of the agreement and the content provided by Reddit remain undisclosed, the collaboration aims to enhance user experience by enabling easier content discovery and engagement on the platform. Google, on the other hand, will leverage Reddit’s data to integrate artificial intelligence through its Vertex AI tool.
This partnership marks Reddit’s initial venture with a major AI corporation, following its recent shift to a paid model for third-party apps. The platform’s decision to transition the financial burden of operating APIs to the API itself caused some backlash among users, leading to temporary shutdowns of numerous subreddit forums in protest.
Despite these challenges, Reddit’s revenue surged to over \(800 million in 2023, primarily driven by advertising. The introduction of a subscription model for premium content at \)5.99 per month aims to further monetize the platform. Additionally, Reddit’s foray into AI-driven profitability is poised to attract investors, potentially bolstering its upcoming IPO.
Founded in 2005 by Alexis Ohanian and Steve Huffman, Reddit has garnered a valuation of approximately $10 billion, with plans to offer around 10% of its shares in the IPO. The company’s imminent stock market debut is highly anticipated, positioning it as a significant player in the social media landscape, reminiscent of Pinterest’s IPO in 2019.
With a substantial user base exceeding 850 million monthly active users in 2023, Reddit has emerged as a prominent platform, surpassing the likes of Pinterest, Snapchat, and LinkedIn. Noteworthy for its role in driving “meme stock” rallies, Reddit has been instrumental in fueling the meteoric rise of companies like GameStop and AMC Entertainment through user-generated content on platforms such as r/WallStreetBets.
As Reddit gears up for its IPO filing, scheduled to unveil its financial performance and growth trajectory, the platform stands on the brink of a significant milestone in its journey towards public listing.
