FTC Launches Probe Into Reddit's AI Data-Licensing Practices Ahead of IPO

By Jace Dela Cruz

Mar 16, 2024 02:09 AM EDT

The Federal Trade Commission (FTC) has initiated a probe into Reddit's data-licensing practices related to the training of artificial intelligence (AI) systems, as disclosed by the company in its updated initial public offering (IPO) prospectus. 

LOS ANGELES, CALIFORNIA - FEBRUARY 13: In this photo illustration, the Reddit logo is displayed on a cell phone and computer monitor on February 13, 2024 in Los Angeles, California.
(Photo : Mario Tama/Getty Images)

FTC's Inquiry Into Reddit's AI Data-Licensing Practices

According to CNBC, the FTC sent a letter to Reddit on March 14, indicating a non-public investigation into Reddit's sale, licensing, or sharing of user-generated content with third parties for AI model training purposes. 

While Reddit primarily relies on online advertising for revenue, it is exploring additional avenues, such as data licensing, which it considers to align with its values and users' rights.

Reddit filed for an IPO in February. The social media company wanted to trade on the New York Stock Exchange under the ticker symbol "RDDT." 

Reddit intends to diversify its revenue streams beyond advertising, with data licensing being in the "early stages" of implementation.

"The opportunity does not conflict with our values and the rights of our Redditors," Reddit said in the filing, referring to its users and forum moderators. 

READ NEXT: Google Inks Content Licensing Agreement With Reddit to Train AI Models: Report

IPO Filing of Reddit

Reddit's IPO filing revealed plans to sell shares at $31 to $34 each in an offering that would value the the company at nearly $6.5 billion.

The filing also showed that Reddit recorded $804 million in annual sales for 2023, a 20% increase from the previous year's $666.7 million. Around 98% of its sales came from advertising, while the remaining 2% includes data licensing.

In response to the FTC's inquiry, Reddit expressed willingness to cooperate while asserting confidence that it has not engaged "in any unfair or deceptive trade practice."

The company acknowledged the complexity of data privacy and intellectual property laws governing its activities but emphasized its commitment to transparency and compliance with regulatory requirements. 

READ MORE: Reddit to Go Public After Submitting Its IPO Filing to Trade on NYSE Under the Ticker 'RDDT' 

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