Reddit, the popular social media platform, has inked a lucrative deal with Google to supply its content for training the tech giant’s artificial intelligence (AI) models. The deal, which is worth about $60 million per year, is the first of its kind for Reddit and a major boost for its upcoming initial public offering (IPO).

Reddit content deal diversifies its revenue stream

The Reddit content deal with Google is a strategic move by the San Francisco-based company, which is facing stiff competition for advertising revenue from other social media platforms such as TikTok and Meta’s Facebook. By charging Google for access to its application programming interface (API), which is the means by which it distributes its content, Reddit is diversifying its revenue stream and creating a new value proposition for its platform.

Reddit, which was founded in 2005 by web developer Steve Huffman and entrepreneur Alexis Ohanian, is known for its diverse and niche discussion groups, called subreddits, that cover a wide range of topics and interests. Some of these subreddits have tens of millions of members who generate a vast amount of user-generated content every day.

Google, which is owned by Alphabet, is one of the leading players in the field of AI, which involves creating machines and software that can perform tasks that normally require human intelligence. Google uses AI for various purposes, such as improving its search engine, developing self-driving cars, and creating smart assistants. To train its AI models, Google needs large and varied datasets that can help the models learn from different scenarios and contexts.

The Reddit content deal will provide Google with access to a rich and diverse source of data that can help it improve its AI capabilities and products. The deal is also beneficial for Reddit, as it will allow it to monetize its content without compromising its user experience or privacy.

Reddit content deal paves the way for its IPO

The Reddit content deal comes at a crucial time for the company, which is gearing up for its highly anticipated IPO. Reddit, which was valued at about $10 billion in a funding round in 2021, is expected to file its IPO prospectus this week, which will reveal its financial details for the first time to potential investors. The company is planning to sell about 10% of its shares in the offering, according to Reuters.

The Reddit content deal will likely boost the company’s valuation and attractiveness to investors, as it demonstrates its ability to generate new revenue and leverage its unique content. The deal will also set Reddit apart from other social media companies that have gone public in recent years, such as Pinterest, which floated its shares in 2019.

The Reddit content deal is also a sign of the growing demand for content owners in the AI industry, as makers of AI models seek to diversify their training data beyond large scrapes of the internet. However, this practice also raises ethical and legal concerns, as many content creators have claimed that their content was used without their consent or compensation.

Reddit and Google declined to comment on the deal, which was first reported by Bloomberg without naming the buyer. The sources who revealed the deal to Reuters were not authorized to speak to the media and requested anonymity.