If IPOs begin flowing again, one of the companies expected to go public is Reddit. While waiting for that possibility, the company seems to be duking it out on so many fronts, it's hard to keep track.
For starters, Fidelity, which led Reddit's $700 million funding round in 2021 at a valuation of $10 billion, has marked down the value of its Reddit stock again, reports Techcrunch. Fidelity released updated information on its private stock holdings for its Fidelity Blue Chip Growth Fund, showing the value of its Reddit stock down by over 40% as of the end of April. Insider previously reported that Fidelity's Growth Company Fund had already marked down its Reddit stock in January disclosures.
At the start of 2022, Reddit filed confidential IPO paperwork with hopes of listing at around a $15 billion valuation, Bloomberg reported. It hired its first CFO in 2021. But the 2022 economy didn't go well and the economic clouds continue to cover 2023's skies. Harold Klaje, Reddit's chief revenue officer, told Insider in March that he quintupled the advertising sales team over the past two years.
Along came ChatGPT
Then along came OpenAI and its famous chatbot ChatGPT. OpenAI disclosed in research that Reddit was among its massive number of sources used to train the underlying AI models.
Reddit was not amused. It announced that, starting in June, it would be charging fees to developers who hoovered up more than a little bit of its data. Whether it will be able to enforce that for OpenAI, should it still use Reddit, hasn't been disclosed.
"The Reddit corpus of data is really valuable. But we don't need to give all of that value to some of the largest companies in the world for free," said Steve Huffman, CEO of Reddit.
I asked ChatGPT if it is going to pay for Reddit data
I asked ChatGPT if it is going to pay for Reddit data. It told me its training data cut-off was September 2021 so it didn't know what was happening after that date.
What we do know is this: Apollo, a popular third-party app for using Reddit, said earlier this week that Reddit's new fees are so high, Apollo would have to pay $20 million a year to "keep running as is," according to developer Christian Selig. He's mulling how to proceed, but the fees outlined in that post suggest Reddit's pricing is punitive and aimed particularly at AI companies that need large volumes of training data.
A Reddit spokesman said the new fees will help the company foster a responsible developer ecosystem that keeps users and data safe. "We've had a long-standing policy in our past terms that outlined commercial and non-commercial use, but unfortunately some of those agreements were not adhered to so we clarified our terms and reached out to select organizations to work with them on compliance and a paid premium access tier," the spokesman wrote in an email to Insider.
I am an avid Reddit user
Full disclosure: I am an avid Reddit user myself; someone who spends at least an hour a day reading and chatting there. And, as a journalist, I know a popular post on Reddit can help drive readers to the original media source.
Many other times, though, journalists like myself have watched as Reddit users have posted copies of our work on the platform, in violation of copyright laws, with moderators looking the other way. The user experience is obviously better that way: You'd rather read something right there for free, instead of subscribing or going to the original website or app to see the story. But good journalism costs money. It takes time to check facts and write articles carefully and fairly.
With its new battle against OpenAI, it's clear that Reddit feels similarly about misuse of online content. It wants to be paid, too.
While I have no insight into what is causing Reddit's shrinking valuation, investors must be pretty concerned about the value of its content being sucked away by giant AI models.
In the words of Taylor Swift, "Karma's gonna track you down."
