Reddit said Friday that the Federal Trade Commission sent a letter to the company regarding its data licensing business related to training artificial intelligence systems.
“On March 14, 2024, we received a letter from the FTC informing FTC staff that a We have received notice that we are conducting a public investigation,” Reddit said in its latest initial public offering prospectus. Reddit filed for an IPO in February and will trade on the New York Stock Exchange under the ticker symbol “RDDT.”
Although Reddit’s core business relies on online advertising, the company is looking to generate revenue in other ways and is currently in the “early stages” of “data licensing efforts,” the filing states. There is.
“This opportunity is consistent with our values and the rights of Reddit users,” Reddit said, referring to users and forum moderators.
The 19-year-old company has filed to sell its shares for $31 to $34 per share in an IPO that would value the business at nearly $6.5 billion. Reddit is entering the public market at a time when technology company IPOs are at a historic low. Since then, there have been no notable venture-backed technology debuts. instacart and Claviyo During September. Before that, the market had been mostly closed since the end of 2021.
Reddit’s revenue increased 20% last year to $804 million. Approximately 98% of sales came from advertising. His remaining 2% includes data licenses.
“These programs may expose us to evolving approaches to the regulation of this data and imply complex and evolving data privacy and data protection, misappropriation, and intellectual property laws, rules, and regulations. ,” Reddit said in its latest filing.
An FTC spokesperson declined to comment.
According to Reddit, the company entered into a partial data licensing agreement in January that is valued at $203 million over two to three years. We expect to recognize at least $66.4 million from these agreements in 2024.
In the same week that Reddit filed for IPO, Google announced The expanded partnership gives the search giant access to data that can be used to train AI models and more.
“We believe our growing platform data will become a key element in training leading large-scale language models (“LLMs”) and serve as an additional monetization channel for Reddit,” the company said in its prospectus. Says.
Reddit said that given the “novelty of these technologies and commercial agreements,” it is “not surprising that the FTC has expressed interest in this issue.”
“We do not believe we have engaged in any unfair or deceptive trade practices,” Reddit said in a statement. “The letter indicated that FTC staff was interested in meeting with us to learn more about our plans and intended to request information and documents from us as the FTC continues its investigation. .”
Reddit said that dealings with regulators could be “long and unpredictable,” could result in “significant costs” and other investigations and product changes, and could result in “changes in policies and practices.” “We may need to make changes or divert management or other resources from our operations.” Otherwise, our business, results of operations, financial condition and prospects could be adversely affected. ”
Reddit’s data licensing business was at the center of widespread protests by Reddit moderators. Over the summer, there was outrage over the company’s announcement of pricing changes that would affect some third-party developers who use its application programming interfaces (APIs) to build apps.
At the time, the company said that the API price increase was Google OpenAI sucks up tons of Reddit data to help train and improve the capabilities of its AI models. However, several developers have complained that some of his Reddit apps have been used to moderate discussions, and that API updates have proven too costly to keep the Reddit apps running. Ta.
