Reddit Inks $60 Million-a-Year Deal To Train Google AI Ahead of Expected IPO | Report

It’s the first deal the social media platform has made with one of the major artificial intelligence companies

Reddit is expected to hold its long-awaited IPO in March.

Reddit Inc. struck a deal with Google that will enable the tech giant to use the social media platform’s content to train its artificial intelligence models, Reuters reported Thursday.

The report said the contract, which will allow Google to use the content posted on the platform, is worth $60 million per year for the San Francisco-based company.

That positions the deal as an important new source of revenue for Reddit ahead of an expected initial public offering amid a still uncertain advertising market, which saw steep declines last year.

Reddit at midday posted that it had expanded its “partnership” with Google but did not put a pricetag on the pact.

“This enhanced collaboration provides Google with an efficient and structured way to access the vast corpus of existing content on Reddit and enables Google to use the Reddit Data API to improve its products and services – including supporting new ways to display Reddit content and providing more efficient ways to train models,” the post said. “Our work with Google will make it easier for people to find, discover, and engage in content and communities on Reddit that are most relevant to them.”

“All of this builds on our existing partnership with Google Cloud to integrate new AI-powered capabilities to improve Reddit,” the post continued.

Google in a blog post said, “Reddit plays a unique role on the open internet as a large platform with an incredible breadth of authentic, human conversations and experiences, and we’re excited to partner to make it even easier for people to benefit from that useful information.”

“This partnership will facilitate more content-forward displays of Reddit information that will make our products more helpful for our users and make it easier to participate in Reddit communities and conversations,” the post said.

Google said being able to access Reddit data will enable it to “better understand Reddit content and display, train on, and otherwise use it in the most accurate and relevant ways.”

However, the tech giant added, “This expanded partnership does not change Google’s use of publicly available, crawlable content for indexing, training, or display in Google products.”

Earlier this month, Bloomberg reported that Reddit had signed a deal with an AI company but did not name which firm was behind the pact. Reddit executives reportedly told potential investors that it had inked the contract with Google, which could telegraph an ability to profit from Wall Street’s growing enthusiasm for AI — the S&P 500 was up 1.5% in morning trading Thursday on the strength of AI chipmaker Nvidia’s fourth quarter report — and gather some momentum for the IPO.

Shares of Google parent Alphabet rose a fraction at midday, to $144.90. The stock closed Monday up about 3% since the start of the year.

Reddit’s revenue rose about 20% in 2023 to top $800 million last year, Bloomberg reported, citing people familiar with the matter.

While Reuters noted that a 2021 funding round valued the company at $10 billion, Reddit has been advised to shoot for a $5 billion valuation as it debuts on the stock market, Bloomberg said.

The IPO is expected to launch next month, though Reddit so far has not filed any new materials with the Securities and Exchange Commission, a necessary step before it can sell any stock. Reuters reported a filing could land as early as Thursday.

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