Reddit’s $60 Million Gamble on AI: A Strategic Move Before IPO

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Reddit's $60 Million Gamble on AI: A Strategic Move Before IPO

Reddit is stepping up its game by teaming up with an undisclosed AI company, as reported by Bloomberg. The deal involves using AI to train on the vast amount of content found on Reddit, including the 70 million daily user-generated posts. This strategic move, valued at $60 million annually, comes just in time for Reddit’s planned IPO.

Why the sudden interest in AI? Firstly, AI has become a major player in the tech world, and Reddit doesn’t want to be left behind. With giants like Google and Meta incorporating AI into their platforms, Reddit aims to create its own AI to enhance user interaction and predict how users engage with different subreddits.

Secondly, despite Reddit claiming a $5 billion valuation, its 2023 revenue was only $800 million. The real treasure lies in the data it holds, especially within its user-generated subreddits. Reddit’s CEO, Steve Huffman, emphasized the value of their data, stating, “The Reddit corpus of data is valuable, but we don’t need to give all of that value to some of the largest companies in the world for free.”

This move follows Reddit’s controversial decision to charge for its API, causing protests from moderators of major subreddits who staged blackouts. These bold decisions, including the embrace of AI, are part of Reddit’s strategy to confidently go public and prove that its $5 billion valuation is justified.

Andrew Tropeano, a technology expert with NWT Media, commented on Reddit’s embrace of AI, stating, “Reddit is at a watershed moment where they need to make confident strides forward to show they can hang with the big social media dogs. This is their time to prove they aren’t just another tech sinkhole.”