FTC Inquires About Reddit’s Data-Licensing Business Amid IPO Preparations

In a recent development, Reddit, the popular social news aggregation and discussion website, disclosed that it had received a letter from the Federal Trade Commission (FTC) concerning its data-licensing practices related to the training of artificial intelligence systems. The disclosure was made public through an updated initial public offering (IPO) prospectus filed by Reddit, as it prepares to go public.

The letter, dated March 14, 2024, informed Reddit that the FTC’s staff is conducting a non-public inquiry focused on the company’s sale, licensing, or sharing of user-generated content with third parties for the purpose of training AI models. This revelation comes as Reddit gears up for its IPO, with plans to list on the New York Stock Exchange under the ticker symbol “RDDT.”

While Reddit’s primary revenue stream is derived from online advertising, the company has been exploring additional avenues to monetize its platform, including data licensing. According to the filing, Reddit is still in the “early stages” of its data licensing efforts, emphasizing that such initiatives are in line with the company’s values and respect the rights of its users, often referred to as Redditors.

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The IPO filing indicates that Reddit aims to sell its shares at a price range of $31 to $34 each, potentially valuing the company at approximately $6.5 billion. This move comes amidst a relatively slow period for tech IPOs, with Reddit attempting to seize the opportunity to enter the public market.

In terms of financials, Reddit reported a 20% increase in revenue last year, reaching $804 million, with advertising contributing to 98% of its sales. Data licensing accounted for the remaining 2% of revenue. However, Reddit acknowledges the complexities surrounding data privacy and intellectual property laws, stating that its data licensing initiatives may subject the company to evolving regulatory frameworks.

Despite these regulatory challenges, Reddit revealed that it had secured data-licensing deals in January, with a combined contract value of $203 million over two to three years. The company anticipates recognizing at least $66.4 million from these agreements in 2024.

Source: CNBC