Mar 18, 2024 - Technology

Reddit's IPO drops it into growing battle between AI companies and users

Animated illustration of the Reddit logo shooting lasers with dollar signs in them out of its eyes.

Illustration: Brendan Lynch/Axios

Reddit's plan to start selling shares to the public later this week is dropping the popular discussion site into the center of a sprawling struggle between AI companies and content creators over rights and compensation.

Why it matters: Every post and photo that humans have added to the internet over the last 30 years is now potentially fodder for training AI, but the conflict over who should pay for what has only just started.

Driving the news: The Federal Trade Commission is investigating Reddit's effort to boost revenue by selling the rights to its content to an unnamed large AI company, Axios' Dan Primack reported Friday.

  • Bloomberg reported Reddit's deal last month and pegged it at roughly $60 million in annual revenue.

Reddit's AI deal resembles those more traditional media publishers, like Axel Springer, are making with AI providers in an effort to participate in the AI boom.

  • Many media companies believe they got rolled by Google 20 years ago and have decided that, as AI takes off, they're going to insist on their share of the pie.

Yes, but: Reddit isn't a traditional media company — it's more like a bulletin board or a coffee shop than a newspaper or a TV station — and its attempt to put a price tag on its users' words could backfire.

Friction point: Reddit is one of the last flourishing remnants of the early web ideal of online community, in which users freely offer their content and moderation labor.

  • Most contributors are motivated not by a potential payday but by the desire to share enthusiasms and give back to the community.
  • Reddit's volunteer moderators have already staged protests and walkouts, most notably last summer, when they succeeded in shutting down most of the site.
  • But their protest failed to derail the plan that sparked it— Reddit's effort to start charging third-party developers and apps for access to Reddit's API.

Reddit wants to let some of its most dedicated volunteers buy into its IPO. But efforts to sell IPO shares to wide bases of users have had mixed results in the past.

  • Other community-based sites, from Etsy to Airbnb, have tried to let their users participate in their IPOs — but that has proven easier to manage for e-commerce and service-focused sites than for information and social media providers.
  • Google's 2004 attempt to use a "Dutch auction" to distribute IPO shares to its users, like a similar previous effort in 1999 by news site, was generally viewed as a flop.

Our thought bubble: In theory, letting key Redditors participate in its IPO should align their interests and the company's.

  • But in practice it's more likely to speed the transformation of what once was labor-of-love participation into pure transactional behavior.

Once Reddit is publicly traded, it will face overwhelming pressure to speedily monetize everything in sight.

The bottom line: The concept of "user-generated content" has fostered confusion and conflict all the way back to the 1980s, when the pioneering online community The Well started telling participants, "You own your own words" — but AI is bringing that conflict new urgency.

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