NEW YORK, April 21 (Reuters Breakingviews) – More than 50 million people gather and interact with each other on social media platform Reddit every day. Their conversations are becoming an increasingly valuable source of training data for artificial intelligence chatbots such as Microsoft’s (MSFT.O)’s Bing and Alphabet’s (GOOGL.O)’s Bard. Reddit has also been considering a public offering since late 2021, but volatile market conditions and a crash in public technology stocks may have pushed the company back. Reddit data may be just the catalyst we need, as it helps our AI models.
Reddit plans to introduce new revenue streams to supplement what it already earns from advertising. Twitter has already tried. On Thursday, Elon Musk tweeted that he would sue Microsoft over its use of Twitter data. The company is also offering to sell companies access to less than 1% of his tweets on its platform for $42,000 a month, Wired reported last month. If Reddit charged the same fee, selling his 1% of the 8.3 billion comments, posts, and messages per year could bring in $6,000 per customer each month.
It doesn’t seem like much, but Reddit could improve its business model. Meta Platforms (META.O) and Alphabet also have access to user habits, but the specific, consistent and highly personal nature of Reddit chat boards is what makes machines learn how to behave like humans. is what you need. Additionally, Reddit has reasons to publish its data more widely. For example, Alphabet doesn’t want to sell data to Microsoft, while Reddit is willing to create a competitive marketplace.
Various adjustments have been made to the model. For example, selling large amounts of data to a few customers at a very high price, or charging based on usage. But to put it simply, let’s say Reddit sells all of your data, and you can charge his 20% premium to Twitter prices based on that expertise. Potential to earn $8.3 million per customer per year. On that basis, he would need to acquire just 40 customers to nearly double his $350 million in revenue in 2021. With 29x the same sales Microsoft invested in ChatGPT, Reddit is worth his $10 billion. Final funding – based solely on data sales.
And that calculation doesn’t include revenue from advertising. This would add an additional 15% value in the same multiples of 4 as the meta. When Reddit tries to sell stocks to the general public, it can get a bit daunting. Again, so is AI in general.
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(Author is a Breakingviews columnist for Reuters. Opinions expressed are her own.)
contextual news
Reddit CEO Steve Huffman said the social media platform would allow companies using its APIs or application programming interfaces to access large amounts of data derived from person-to-person conversations on the company’s website. The New York Times reported on April 18 that it plans to start charging. The company has not announced pricing details for the offer.
According to The Information, Reddit plans to go public later this year, possibly in the second half of the year.
Twitter put API behind a paywall after CEO Elon Musk announced plans to do so in February, Wired reported March 10. According to Wired, the cheapest package available gives a customer access to 50 million tweets for $42,000 a month.
Edited by Lauren Silva Laughlin and Sharon Lam
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