Reddit has disclosed in a filing that it is the subject of an investigation by the US Federal Trade Commission (FTC). The inquiry, as detailed in a recent filing with the US Securities and Exchange Commission, focuses on the company's practices around the sale, licensing, or sharing of user-generated content with third parties for the purpose of training artificial intelligence (AI) models. The social media platform, which is on the verge of becoming a publicly traded entity, expressed its anticipation of such scrutiny and asserted its belief in the legality of its practices, stating, “We do not believe that we have engaged in any unfair or deceptive trade practice.”
IPO Preparations Amidst Regulatory Scrutiny
As Reddit advances towards its Initial Public Offering (IPO), this investigation emerges as a significant development. The company, known for its vibrant and diverse online communities, has announced its intention to diversify its revenue streams beyond advertising, which has historically been its primary source of income. With plans to monetize its extensive data, speculation arises around potential partnerships, notably with OpenAI, given the involvement of OpenAI co-founder and CEO Sam Altman as one of Reddit's major investors. This strategy aligns with the growing interest in leveraging user-generated content to enhance AI models, such as ChatGPT.
Reddit aims to set its share price between $31 and $34, targeting a valuation of up to $6.5 billion as it prepares to list on the New York Stock Exchange under the ticker symbol “RDDT.” In an unconventional move, the company is extending offers to its top moderators and users with high karma scores to purchase shares at the IPO, underscoring the platform's community-centric ethos.
User Engagement and Financial Performance
In its IPO filings, Reddit has confirmed significant user engagement, boasting 267.5 million active weekly users and 73 million daily users. The year 2023 saw the company generating $804 million in revenue, despite incurring a loss of $90.8 million. This financial snapshot provides a glimpse into the platform's operational scale and its ambitions for growth amidst the challenges of navigating regulatory landscapes and the complexities of monetizing user-generated content.
As the FTC investigation unfolds, the outcome could have implications not only for Reddit's IPO but also for broader practices related to data sharing and AI development within the tech industry.
