Mateusz
Slodkowsk
|
Lightrocket
|
Getty
Images
Reddit
said
on
Friday
that
the
Federal
Trade
Commission
sent
a
letter
to
the
company
about
its
data-licensing
business
related
to
the
training
of
artificial
intelligence
systems.
“On
March
14,
2024,
we
received
a
letter
from
the
FTC
advising
us
that
the
FTC’s
staff
is
conducting
a
non-public
inquiry
focused
on
our
sale,
licensing,
or
sharing
of
user-generated
content
with
third
parties
to
train
AI
models,”
Reddit
said
in
an
updated
initial
public
offering
prospectus.
Reddit
filed
for
an
IPO
in
February,
and
plans
to
trade
on
the
New
York
Stock
Exchange
under
the
ticker
symbol
“RDDT.”
Although
Reddit’s
core
business
relies
on
online
advertising,
the
company
is
seeking
to
make
money
in
other
ways,
and
is
in
the
“early
stages”
of
its
“data
licensing
efforts,”
the
filing
said.
Reddit
said,
“the
opportunity
does
not
conflict
with
our
values
and
the
rights
of
our
Redditors,”
referring
to
its
users
and
forum
moderators.
The
19-year-old
company
has
filed
to
sell
shares
in
its
IPO
at
$31
to
$34
each
in
an
offering
that
would
value
the
business
at
close
to
$6.5
billion.
Reddit
is
trying
to
hit
the
public
market
during
a
historically
slow
period
for
tech
IPOs.
There
hasn’t
been
a
notable
venture-backed
tech
debut
since
Instacart
and
Klaviyo
in
September.
Before
that,
the
market
had
been
largely
shuttered
since
late
2021.
Reddit’s
revenue
rose
20%
last
year
to
$804
million.
About
98%
of
its
sales
came
from
advertising.
The
remaining
2%
includes
data
licensing.
“These
programs
may
subject
us
to
evolving
approaches
to
the
regulation
of
this
data
and
implicates
complex
and
developing
data
privacy
and
data
protection,
misappropriation,
and
intellectual
property
laws,
rules,
and
regulations,”
Reddit
said
in
the
updated
filing.
An
FTC
spokesperson
declined
to
comment.
Reddit
said
it
entered
into
some
data-licensing
deals
in
January
with
a
total
contract
value
of
$203
million
over
two
to
three
years.
It
expects
to
recognize
at
least
$66.4
million
from
these
agreements
in
2024.
The
same
week
that
Reddit
filed
for
its
IPO,
Google announced an
expanded
partnership
with
the
company,
giving
the
search
giant
access
to
data
to
train
its
AI
models,
among
other
uses.
“We
believe
our
growing
platform
data
will
be
a
key
element
in
the
training
of
leading
large
language
models
(“LLMs”)
and
serve
as
an
additional
monetization
channel
for
Reddit,”
the
company
said
in
its
prospectus.
Reddit
said
it’s
“not
surprised
that
the
FTC
has
expressed
interest”
in
the
matter,
considering
“the
novel
nature
of
these
technologies
and
commercial
arrangements.”
“We
do
not
believe
that
we
have
engaged
in
any
unfair
or
deceptive
trade
practice,”
Reddit
said.
“The
letter
indicated
that
the
FTC
staff
was
interested
in
meeting
with
us
to
learn
more
about
our
plans
and
that
the
FTC
intended
to
request
information
and
documents
from
us
as
its
inquiry
continues.”
Reddit
noted
that
any
dealings
with
regulators
could
be
“lengthy
and
unpredictable”
and
could
result
in
“substantial
costs”
and
other
probes
and
product
changes
that
could
“require
us
to
change
our
policies
or
practices,
divert
management
and
other
resources
from
our
business,
or
otherwise
adversely
impact
our
business,
results
of
operations,
financial
condition,
and
prospects.”
Reddit’s
data-licensing
business
was
at
the
center
of
a widespread
protest
from
Reddit
moderators,
who
were
upset
over
the
summer
when
the
company
announced
a
pricing
change
affecting
some
third-party
developers
using
its
application
programming
interface,
or
API,
to
build
apps.
The
company
said
at
the
time
that
the
API
price
hike
was
necessary
to
ensure
it
was
adequately
compensated
by
tech
companies
such
as
Google
and
OpenAI,
which
siphon
massive
amounts
of
Reddit
data
to
help
train
and
improve
the
capabilities
of
their
AI
models.
But
several
developers complained that
the
API
update
proved
too
costly
for
them
to
continue
operating
their
Reddit
apps,
which
some
Redditors
used
to
help
them
moderate
discussions.
