Federal Trade Commission investigates Reddit’s AI licensing deals

The FTC’s inquiry into Reddit’s AI licensing deals raises questions about its data-sharing practices, Reddit denies all allegations

The Federal Trade Commission (FTC) has initiated an inquiry into Reddit’s AI licensing agreements, as disclosed by the company in paperwork submitted to the Securities and Exchange Commission (SEC).

“We received a letter from the FTC advising us that the FTC’s staff is conducting a non-public inquiry focused on our sale, licensing, or sharing of user-generated content with third parties to train AI models,” stated Reddit.

The FTC’s scrutiny extends beyond Reddit, with ongoing investigations into tech giants Microsoft, Alphabet, and Amazon regarding their investments in prominent AI startups.

Amidst its Initial Public Offering (IPO) preparations, Reddit informed that the regulatory body had notified its officials of its intent to request information and documents concerning the company’s AI transactions.

While Reddit’s primary revenue stream hinges on online advertising, the company is actively exploring alternative monetization avenues, particularly through its “data licensing efforts,” as outlined in the filing.

The licensing agreements for Reddit’s repository of user-generated content are pivotal to its revenue expansion strategy as it braces for its public debut.

Notably, on the day of its IPO filing, Reddit unveiled a significant deal with Google, reportedly valued at around $60 million, enabling Google to leverage Reddit data for AI model training.

In response to concerns raised, Reddit said, “The opportunity does not conflict with our values and the rights of our Redditors,” referring to its users and forum moderators.

Reddit said it’s “not surprised that the FTC has expressed interest” in the matter, considering “the novel nature of these technologies and commercial arrangements.”

Reddit denies allegations regarding its data-sharing practices

“We do not believe that we have engaged in any unfair or deceptive trade practice,” Reddit asserted. “The letter indicated that the FTC staff was interested in meeting with us to learn more about our plans and that the FTC intended to request information and documents from us as its inquiry continues.”

Despite a 20% revenue surge last year, amounting to $804 million, Reddit remains heavily reliant on advertising, constituting about 98% of its sales. The remaining 2% encompasses revenue generated through data licensing.

Source: Newsroom

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