Exclusive: AI startup raises $25M, inks deals with major media companies
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A handful of major news and music companies have agreed to license their content to ProRata.ai, a generative AI startup that claims it can accurately attribute and share revenues with content owners from AI chatbot subscriptions.
Why it matters: Media partners hope ProRata.ai's business model will pave the way for a new AI economy that honors the value of premium content.
- Financial Times, Axel Springer, The Atlantic, Fortune and Universal Music Group have signed on to share subscription revenue on a per-user basis.
Follow the money: ProRata.ai has raised a $25 million Series A fundraising round from Mayfield, Revolution Ventures, Prime Movers Lab and Idealab Studio, a tech incubator run by longtime tech entrepreneur Bill Gross.
- Gross, who is credited with inventing the pay-per-click keyword advertising business model that today floats Google and other search engine businesses, will serve as CEO, he told Axios in an interview.
- Mike Lang, a longtime media executive, is helping the 20-person startup' to strike deals with media companies as a board member and strategic advisor to the company.
What they're saying: "We hope to see this approach to permissions, content controls, clear attribution, and fair value become the industry norm," The Atlantic CEO Nicholas Thompson said in a statement.
- ProRata.ai's objectives "align with our own vision of how this revolutionary technology can be used ethically and positively while rewarding human creativity," Universal Music Group Chair and CEO Sir Lucian Grainge said.
How it works: ProRata.ai is building its own, yet-to-be-named subscription AI chatbot that it plans to debut this fall.
- It plans to evenly split revenues from subscriptions to the forthcoming chatbot search engine with its content licensing partners.
- It aims to strike deals with a wide array of premium content owners, including publishers, authors, music labels, poets, artists and more, to feed the large language model that will power its chatbot.
- In addition to the publishing partners announced Tuesday, Gross said the firm has also struck deals with individual authors such as Adam Grant, Seth Godin and Tony Robbins.
Zoom in: Half of ProRata.ai's monthly subscription revenue from its search chatbot app upon launch will be divided among all of its media partners, Gross said.
- ProRata.ai will use an already-patented algorithm to attribute every individual output from its chatbot to a content owner's work.
- The attribution algorithm considers a unique set of qualifications, such as the novelty of a claim or fact made in a report.
- Content partners are compensated based on the percentage of outputs attributed to their work.
The big picture: Gross believes this type of attribution system can pave the way for publishers to demand fair value for their work from any generative AI company.
- He plans to eventually license ProRata.ai's large language model to bigger AI firms, such as OpenAI or Anthropic, that don't currently have a system to attribute the contribution of a particular content owner to its bottom line.
- The Atlantic, Fortune, Financial Times, Time and Axel Springer have already inked deals with AI companies like OpenAI and Perplexity. Those arrangements aren't exclusive. Publishers can strike deals with other AI companies, like ProRata.ai, if they wish.
- ProRata could also license the technology to third-party marketplaces, such as Tollbit, that can use its attribution algorithm to help broker deals between AI companies and content publishers.
- ProRata.ai has no connection with Dan Primack's Pro Rata newsletter for Axios.
Yes, but: Gross is betting the company's success on the accuracy and reliability of its large language model, which has yet to be proven out at scale via a consumer app.
What to watch: ProRata's early media partners are willing to broker upfront deals with ProRata and promote its future chatbot because the revenue-sharing structure incentivizes them to do so.
- Gross is bullish that bigger AI companies will want to license ProRata's model, instead of building a competitive model, because it will be cheaper and easier to offload the responsibility of attribution to a smaller third party that publishers trust.
The bottom line: "We're building a movement that says generative AI is incredible, but it's flawed. It's powerful, but it's unfair, and we're working to make it fair."
