Reddit’s reported $60 million data deal with Google may be the answer to its profit prayers and IPO dreams 

Reddit’s IPO is a long time coming, and burying the lede (the biggest news, for you non-journalists) is right, since the unveiling of the S-1 yesterday hardly scratches the surface of Reddit’s significant developments. On the same day as the IPO filing, reports emerged about Google paying a whopping $60 million annually for access to Reddit’s API, a detail buried beneath the headlines, but central to Reddit’s trajectory.

Think of it like this: Google needs to compete with OpenAI, Meta, and others to create ultra-intelligent AI systems. To train these systems, it needs loads of data, almost exactly like Audrey II from Little Shop of Horrors (a carnivorous plant with an insatiable appetite for humans). “Feed me, Seymour,” but with troves of articles, scientific journals, tweets, Reddit threads—you name it. Reddit closed its API last year (which caused a lot of blowback) because it knew that it held something important and that Big Tech firms would pay up for the access.

So, it seems to have worked. Google is coughing up big money to presumably feed its AI all the weird user posts Reddit has to offer. Have you ever Googled a question with “Reddit” at the end because that’s the only way to elicit a useful answer? Seems like the tech giant caught on.

As reported by 9to5Google, Google’s use of Reddit data extends beyond enhancing the efficiency of training large language models (LLMs). The tech giant is actively exploring ways to streamline access to Reddit content across its products, and for its part, Reddit will use Google’s Vertex AI “to enhance search and other capabilities on the Reddit platform,” according to Google. Anticipate future Google interfaces that offer more immersive showcases of Reddit content, underscoring Google’s commitment to facilitating engagement with Reddit communities and conversations.

So Reddit seems poised to make quite the splash as a public company. Except, of course, it’s not that simple. As my colleague Jessica Mathews writes, the timing of Reddit’s IPO is risky. Recent tech IPOs (like Instacart, which went public in September and whose share price has dropped 11% since) have struggled to maintain their initial momentum.

What’s more, Reddit remains entirely unprofitable. According to its IPO filing, Reddit had a net loss of $90.8 million in 2023. Despite revenue growth, reaching $804 million in 2023, up from $666.7 million the previous year, the ongoing losses pose a challenging proposition for potential public investors in today’s market climate.

Yes, it won’t be easy for Reddit on Wall Street, but maybe the API gambit will be the boost it needs to reach profitability. There are tons of companies working on AI that have untold billions of dollars to throw around, and even more companies happy to accept the largesse like my alma mater Business Insider, which reportedly secured $10 million annually from OpenAI for using its reporters’ articles as training data. 

Worth mentioning is OpenAI CEO Sam Altman’s significant 8.7% stake in Reddit, potentially valued at around $435 million. Perhaps OpenAI can parlay that into an API deal with Reddit, too? What’s a tech success story without Altman, anyway? We all know he could use a win.

Kylie Robison

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NEWSWORTHY

Apple attacks Spotify. Apple, accused by Spotify of breaking EU antitrust law with its 30% cut of purchases made through the iOS ecosystem, claims the music streamer is “trying to get limitless access to all of Apple’s tools without paying anything for the value Apple provides.” The case is nearly five years old now, and the European Commission is reportedly close to making a decision. Per the Guardian, Apple said yesterday that Spotify doesn’t pay it any fees for music subscription sales in the EU, because it doesn’t offer those subscriptions through its App Store.  

Booking fine. The online travel agency Booking says it’s likely to be hit with a $526 million antitrust fine in Spain. The Financial Times reports the company has seen a draft decision in the case, finding that Booking prevented Spanish hotel groups from undercutting their Booking.com prices on their own websites. It says it will appeal if that’s the Spanish competition regulator’s final decision.

Humane pin delay. The much-ballyhooed Humane AI Pin won’t be shipping next month as planned. As The Verge reports, Humane now says the $699 device will head to customers in mid-April at the earliest. It will now come with three free months of the Humane subscription, which otherwise costs $24 a month.

SIGNIFICANT FIGURES

52%

—The proportion of adult U.S. TikTok users who have never posted a video to the platform themselves, according to new Pew research. Interestingly, the researchers found “no significant differences in the share of users who have posted on the site based on gender, political affiliation, or educational attainment.”

IN CASE YOU MISSED IT

Reddit tests the IPO market during a treacherous time for unprofitable startups: ‘Sophisticated investors won’t be excited about buying,’ by Jessica Mathews

Sam Altman is set to be one of biggest winners in Reddit’s IPO, with a stake that could be worth $435 million, by Kylie Robison

Global trade is at a critical juncture–and we can’t take it for granted, WTO meeting chair warns, by Thani Al Zeyoudi (Commentary)

Lenovo, the world’s largest maker of personal computers, is going all in on AI. Investors aren’t wowed, by Lionel Lim

Law firm nearly got away with overbilling New York City double the hourly fee by asking ChatGPT to calculate the bill, by Christiaan Hetzner

OpenAI’s Sora has left AI experts either enthused or skeptical. It’s left most everyone else terrified, by Sage Lazzaro

BEFORE YOU GO

Sora stymies Perry plans. Tyler Perry has halted plans for an $800 million expansion of his Atlanta studios, ostensibly because of the advent of OpenAI’s Sora text-to-video AI model. Perry told the Hollywood Reporter that seeing Sora’s demonstration made him realize such facilities would become superfluous. “I can sit in an office and do this with a computer, which is shocking to me,” he said. “It makes me worry so much about all of the people in the business. Because as I was looking at it, I immediately started thinking of everyone in the industry who would be affected by this, including actors and grip and electric and transportation and sound and editors, and looking at this, I’m thinking this will touch every corner of our industry.”