Reddit, a popular social media platform, has recently come under scrutiny from the Federal Trade Commission regarding its data-licensing business. The company received a letter from the FTC informing them of a non-public inquiry focused on their sale, licensing, or sharing of user-generated content with third parties for AI training purposes. This has sparked discussions about the implications of such practices on data privacy and protection laws.
In response to the FTC inquiry, Reddit updated its IPO prospectus to provide more details about its data licensing efforts. The company, which primarily generates revenue through online advertising, has been exploring other sources of income, such as data licensing. Last year, Reddit’s revenue grew by 20% to $804 million, with 98% of its sales coming from advertising. The remaining 2% was attributed to data licensing deals.
Reddit acknowledges that their data licensing programs may subject them to evolving regulations related to data privacy, protection, misappropriation, and intellectual property laws. The company emphasized that it does not believe it has engaged in any unfair or deceptive trade practices, despite the FTC’s interest in the matter. However, Reddit is aware of the complex nature of these technologies and commercial arrangements, which could pose challenges in the future.
In January, Reddit entered into data licensing deals with a total contract value of $203 million over two to three years. The company expects to recognize at least $66.4 million from these agreements in 2024. Additionally, Reddit announced an expanded partnership with Google, providing the search giant access to data for training its AI models. Reddit sees its growing platform data as a key element in the training of large language models and an additional monetization channel.
The implications of Reddit’s data licensing business on AI training raise important questions about data privacy, protection, and regulatory compliance. As Reddit prepares for its IPO and seeks to diversify its sources of revenue, it must navigate the evolving landscape of data laws and regulations. The company’s response to the FTC inquiry and its commitments to user privacy will be closely monitored as it moves forward with its data licensing efforts.