FTC investigating Reddit over AI facts-licensing practices in advance of IPO

FTC investigating Reddit over AI facts-licensing practices in advance of IPO


Mateusz Slodkowsk | Lightrocket | Getty Visuals


Reddit explained Friday that the Federal Trade Commission despatched a letter to the corporation about its information-licensing company associated to the coaching of artificial intelligence devices.

“On March 14, 2024, we acquired a letter from the FTC advising us that the FTC’s staff members is conducting a non-general public inquiry centered on our sale, licensing, or sharing of person-generated written content with third get-togethers to train AI types,” Reddit reported in an current IPO prospectus. Reddit filed for an IPO in February, and strategies to trade on the New York Inventory Trade below the ticker symbol “RDDT.”

Despite the fact that Reddit’s core business relies on on line marketing, the organization is looking for to make funds in other means, and is in the “early levels” of its “information licensing efforts,” the filing stated.

Reddit explained “the prospect does not conflict with our values and the legal rights of our Redditors,” referring to its buyers and discussion board moderators.

The 19-yr-outdated business has filed to provide shares in its IPO at $31 to $34 in an featuring that would worth the small business at shut to $6.5 billion. Reddit is seeking to hit the general public market place throughout a traditionally slow period of time for tech IPOs. There has not been a noteworthy venture-backed tech debut due to the fact Instacart and Klaviyo in September. And prior to that the marketplace experienced been largely shuttered given that late 2021.

Reddit’s income rose 20% past yr to $804 million. About 98% of its gross sales arrived from advertising and marketing. The remaining 2% features details licensing.

“These courses may possibly subject us to evolving ways to the regulation of this facts and implicates sophisticated and producing details privacy and facts defense, misappropriation, and mental house laws, rules, and regulations,” Reddit claimed in the current filing.

An FTC spokesperson declined to remark.

Reddit explained it entered into some info licensing bargains in January with a overall deal price of $203 million more than two to three many years. It expects to realize at minimum $66.4 million from these agreements in 2024.

The same 7 days that Reddit submitted for its IPO, Google announced an expanded partnership with the organization, giving the lookup huge entry to details to educate its AI types, amongst other makes use of.

“We feel our rising platform facts will be a important element in the coaching of primary large language designs (“LLMs”) and serve as an more monetization channel for Reddit,” the business mentioned in its prospectus.

Reddit explained it truly is “not stunned that the FTC has expressed interest” in the matter, thinking about “the novel character of these technologies and business preparations.”

“We do not consider that we have engaged in any unfair or deceptive trade exercise,” Reddit said. “The letter indicated that the FTC personnel was fascinated in assembly with us to understand more about our strategies and that the FTC meant to ask for information and paperwork from us as its inquiry continues.”

Reddit mentioned that any dealings with regulators could be “lengthy and unpredictable” and could result in “sizeable costs” and other probes and product modifications that could “require us to change our procedures or procedures, divert administration and other assets from our business, or otherwise adversely influence our small business, effects of functions, fiscal condition, and prospective buyers.”

Watch: What a Reddit IO would signify for funds markets

Reddit readies for IPO: Heres what it means for capital markets



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