Reddit's betting on AI to supercharge its IPO potential.

Reddit is getting serious about AI and its upcoming IPO. And looks like they've signed a deal to let an AI company (name’s hush-hush) use their content for model training.

What's going on here?

Reddit is licensing its content for training AI models, to get a cash boost before a potential IPO.

What does this mean?

Bloomberg reports that it's a $60 million annual contract with a big (but unnamed) AI player. Reddit's basically saying, "Hey AI folks, wanna train your models on the wild conversations and random stuff our users post? It'll cost you."

Last year Reddit tightened up how people could access its data (strict rate limits, pricy API plans, etc.). One key reason was Reddit wasn’t getting much in return for its data that supposedly powered these AI models. And now bang on, Reddit got that bag.

Big question is: did Reddit hand over ALL their training rights to one player?

I keep hearing: data is the new oil. $60M looks like gas station money, not oil well money. It’s better than nothing, but last year, Reddit raked in over $800M. That’s less than a 10% annual bump. It could make sense if the deals are not exclusive, and Reddit partners with a dozen more foundational model providers.

Why should I care?

Parent companies of Youtube, Facebook and Twitter all are creating their own models. But for other social media companies who aren’t, the future’s clear: Restrict training on the content mine you have, then license that content for a payday. Fair for business, but I wonder how users will react to this.

On the other hand, conversational chat data would impact how AI chatbots interact. No one wants them to keep blabbering, most of us want that snappy, chat-with-a-friend feeling. So, the POV depends on how often you are using Reddit and AI tools.