From what I’ve seen they’ve been clear that ads is their primary business. One direct quote from the earnings report was, “the future of Reddit, it’s really our ads business”.
What I like about their ads business is they have not really optimized that much yet, and are now doing so. For example, they said that ads that take place between the comments section are new and in test. They’ve been talking a lot about making the ads platform better, scaling it, making the ROI more apparent to customers.
It appears that a lot rides on the licensing deals. Do you have any more you can add about how these contracts work? Are the volume based? Do they work more or less like a subscription?
I see the licensing deals as a nice unexpected bonus but I doubt this will become their primary business. The licensing is in the category of “Other Revenue” for them and makes up about 10% of total revenue. In the quarters since they have been public it has gone from 20.3M → 28.1M → 33.2M
Sounds like each deal is custom depending on the use case. The user data is anonymized and protected so that individual users cannot be targeted. There are some uses like Google and OpenAI which need data from humans to train their AI models on. Reddit is one of the few places where there is a lot of genuine discussion that is not AI generated.
In the intro thread there are some details of what I was able to gather on the Google and OpenAI deals. Some of their newer deals for the information are doing more analysis like fashion and industry trends.
For sure, a valuable contribution, but is it sustainable?
I believe it is sustainable as new content and discussion is being generated by users every day. I’ll give one example of how I use Reddit which may make it more clear how the platform works. I’m following the Russian/Ukraine war and Reddit is an excellent way to track developments.
There’s a live thread in the r/worldnews (49M members) for every day of the war with a lot of comments and links, it also have a feed of Twitter related posts.
There’s a few more specific subreddits like r/ukraine (915k members), r/UkrainianConflict (470k members), r/UkraineWarVideoReport (824k members), r/ukraina (130k) Ukrainian language forum. There’s also pro Russian subreddits like r/UkraineRussiaReport (92k members).
Each subreddit has its own rules and moderators. When you consider this platform has the entire full information of links for every single day of the war from multiple perspectives, then it may be easier to see why OpenAI wants to train on this type of data that is based on real people discussing as opposed to click bait articles put out by other places.