HomePolicyFTC questions Reddit about data licensing ahead of IPO

FTC questions Reddit about data licensing ahead of IPO

Reddit is currently within the crosshairs of the Federal Trade Commission (FTC) over its AI data licensing practices, which were uncovered ahead of a planned initial public offering.

The FTC's investigation focuses on Reddit's “sale, licensing, or distribution of user-generated content to 3rd parties for the aim of coaching AI models.”

Reddit is preparing to go public and plans to sell shares at a price between $31 and $34, which might potentially value the corporate at about $6.5 billion.

Reddit is sitting on considered one of the most important gold mines within the history of web content. Its intention to sell posts and comments has sparked heated debate amongst its 850 million average monthly users.

One Reddit post is titled “Are your stories secure now that Reddit is officially selling user data?” Respondents agreed to “upload useless junk data to Reddit each day for the following sixty days.”

That's an interesting point – Reddit's data may be very sensitive to user input, and with such strong communities, the corporate shouldn't be too complacent about its claim to user-generated content.

Despite it, Reddit argues that selling data stays consistent with its principles and states: “The opportunity shouldn’t be inconsistent with our values ​​and the rights of our Redditors.”

Reddit's financial prospects appear robust, with revenue rising 20% ​​last 12 months to $804 million, largely driven by promoting.

So far, Reddit's disclosure includes stepping into data licensing agreements price $203 million. The company expects to generate at the least $66.4 million from these agreements in 2024. That represents a modest portion of its total revenue stream, but could grow exponentially.

Reddit has already entered right into a partnership with Google, which goals, amongst other things, at training AI models. This underscores the importance of its data in a world where tech corporations are increasingly willing to pay for his or her data reasonably than simply scraping dubious “public use” sources.

Regarding the FTC's comments, Reddit stated, “We aren’t surprised that the FTC has expressed interest” in its data licensing practices, attributing the scrutiny to “the novelty of those technologies and business arrangements.”

Additionally, Reddit reiterates its belief within the legality of its practices, emphasizing: “We don’t consider that we’ve got engaged in unfair or deceptive trade practices.”

The company also shared insights into its ongoing dialogue with the FTC, noting: “The letter indicated that FTC staff was eager about meeting with us to learn more about our plans and that the FTC intended to to request information and documents from us as a part of their investigation.” continues.”

The FTC has recently taken a tougher stance on technology deals after the agency approved latest investigative powers for AI corporations last November.

The latest paid data gold rush

Data is inexpensively available to generative AI corporations, with databases created by web corporations corresponding to Common Crawl and LAION forming the mainstay of coaching data.

However, that is changing as copyright lawsuits increase and the EU AI law seeks to mandate stricter data practices for the industry.

Additionally, many web sites actively block AI web crawlers. The Wild West era of free training data could also be coming to an end.

Reddit isn't the one company that knows the worth of its content. Automattic, the parent company of WordPress and Tumblr, is Reportedly in talks with MidJourney and OpenAI for a content and data agreement.

As Reddit prepares to go public, the corporate's performance is being closely watched by each regulators and Reddit users.


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