FTC Probes Reddit Data Licensing Practices Ahead of Major IPO
The Federal Trade Commission investigates Reddit over its sale of user-generated content to third parties for artificial intelligence training. The inquiry emerges just as the social media company prepares for its highly anticipated public debut.
The Federal Trade Commission investigates Reddit over its data-licensing practices related to artificial intelligence training. Reddit discloses in an updated IPO prospectus that the FTC sent a letter focusing on the sale, licensing, or sharing of user-generated content with third parties to train AI models. This regulatory scrutiny comes at a critical time as the 19-year-old social media company prepares to go public on the New York Stock Exchange under the ticker symbol "RDDT."
Reddit views data licensing as a significant new revenue stream beyond its core advertising business, which currently accounts for 98% of its $804 million in annual sales. The company reveals that it entered into data-licensing deals in January with a total contract value of $203 million over two to three years, expecting to recognize at least $66.4 million this year. Notably, Google announces an expanded partnership with Reddit during the same week as the IPO filing, granting the search giant access to Reddit's data to train its AI models.
The company acknowledges that these data-licensing programs subject it to evolving data privacy, misappropriation, and intellectual property regulations. Reddit insists that this monetization opportunity does not conflict with its values or the rights of its users and forum moderators. The company aims to sell shares at $31 to $34 each in an offering that values the business at close to $6.5 billion, attempting a notable tech debut during a historically slow period for public offerings.