Reddit, a popular social media platform, is being investigated by the Federal Trade Commission (FTC) for the company’s AI data-licensing practices. The inquiry, centered on the site’s selling, licensing, or sharing of user-generated content to train AI models, arises ahead of the firm’s planned initial public offering (IPO), which could value it at $6.5 billion, with shares planned to be priced between $31 to $34.
Reddit, hosting 850 million average monthly users, owns an immense amount of digital content. The company’s plan to sell posts and comments has sparked controversy among its users, leading to discussions about the safety of user data. Despite user concerns, Reddit remains firm in its stance, with an insistence that its practices align with its principles and do not infringe user rights.
The platform’s financial status seems sound, supported by a 20 percent increase in revenue, reaching $804 million primarily via advertising. As part of their disclosed monetary details, Reddit reported signing data licensing agreements worth $203 million, which it expects to result in a minimum revenue of $66.4 million in 2024. These figures, though a relatively modest portion of the company’s total income, could potentially grow exponentially.
Reddit’s collaboration with Google to train AI models is testament to the significant role of its data. This partnership represents the shift in tech companies’ willingness to pay for data rather than seeking questionable “public use” sources.
Reacting to the FTC’s interest in its data licensing practices, Reddit expressed its lack of surprise, attributing the scrutiny to the new nature of the technologies and commercial arrangements involved. It is adamant about the legality of its practices, refuting any involvement in unfair or deceptive trade practice. Adding on, Reddit revealed the ongoing dialogue with the FTC, discussing the agency’s interest in understanding more about its plans, as well as its intention to request for documents and information as the inquiry process continues.
This FTC scrutiny reflects the agency’s increasing scrutiny of tech deals, particularly after newly granted investigative powers over AI companies were authorized last November.
The landscape of AI training is rapidly changing with websites increasingly blocking AI web crawlers, facing substantial copyright lawsuits and tighter data practices due to regulatory measures like the EU AI Act. Other platforms, such as Automattic, the parent organization of WordPress and Tumblr, are also recognizing the value of their content and negotiating potential data deals.
The scrutiny by regulators and Reddit users alike will surely be noteworthy as it will affect the trajectory of Reddit’s impending IPO. This ongoing investigation will give insight into the evolving dynamics between social media platforms, AI companies, and regulatory bodies.
