The long-awaited Reddit IPO is finally official, as the company formally notified the Securities and Exchange Commission (SEC) of its plans to take the company public on the New York Stock Exchange with the ticker symbol RDDT.
Reddit has also revealed that the controversial $60M/year deal to provide access to user-generated content to an AI company was with Google …
Reddit IPO official
Reddit yesterday filed an S-1 form with the SEC, advising that the company would be going public, offering shares through an initial public offering (IPO).
The company has been preparing for this move for a considerable time now, with two of its most controversial decisions clearly intended to maximize revenue in order to attract investors.
Most notoriously, Reddit started charging large fees for use of its API, which led to the demise of the hugely popular third-party app Apollo. That led to wide-scale protests, which the company had to forcibly shut down.
More recently, Reddit announced a controversial deal to sell access to user-generated content to what was then an unnamed AI company to help it train a large language model. That company has now been revealed to be Google – more details below.
What we know so far
The SEC filing reveals information about the company’s finances, as summarized by CNBC.
Reddit said it had $804 million in annual sales for 2023, up 20% from the $666.7 million it brought in the previous year, according to the filing. The social networking company’s core business is reliant on online advertising sales stemming from its website and mobile app.
The company, founded in 2005 by technology entrepreneurs Alexis Ohanian and Steve Huffman, said it has incurred net losses since its inception. It reported a net loss of $90.8 million for the year ended Dec. 31, 2023, compared with a net loss of $158.6 million the year prior […]
Reddit has more than 100,000 communities, 73 million average daily active uniques, or DAUq, and 267 million average weekly active uniques, according to the filing. As of the fourth quarter of 2023, Reddit’s U.S. average revenue per user, or ARPU, was $5.51, down from $5.92 from the previous year. The company’s global ARPU was $3.42, which was a 2% year-over-year decline from $3.49.
Reddit also partly-confirmed a WSJ report that some Redditors will be offered preferential access to the IPO.
Non-employed moderators, known as Redditors, can participate in the company’s IPO offering through its “directed share program.”
The WSJ reported that access would also be extended to the most prolific users, with some suggesting that Reddit karma – effectively post upvotes given by other users – would be the criteria for this.
We don’t yet know exactly when the IPO will go live, though it will reportedly be sometime in March.
AI data harvesting deal was with Google
We learned earlier this week that access to Reddit user content was being sold to an unnamed AI company, to help it train large language models. This company has now been identified as Google.
The company presented it as a way to further surface Reddit posts in Google results, with the AI training mentioned almost in passing at the end (our emphasis):
With this partnership, and via our Data API, we’re ushering in new ways for Reddit content to be displayed across Google products by providing programmatic access to new, constantly evolving, and dynamic public posts, comments, etc., on Reddit. This enhanced collaboration provides Google with an efficient and structured way to access the vast corpus of existing content on Reddit and enables Google to use the Reddit Data API to improve its products and services – including supporting new ways to display Reddit content and providing more efficient ways to train models.
But the IPO filing reveals the financials.
In January 2024, we entered into certain data licensing arrangements with an aggregate contract value of $203.0 million and terms ranging from two to three years. We expect a minimum of $66.4 million of revenue to be recognized during the year ending December 31, 2024 and the remaining thereafter.
Photo by Anne Nygård on Unsplash
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