FTC conducting inquiry into Reddit's AI data-licensing practices ahead of IPO

Reddit said on Friday that the Federal Trade Commission sent a letter to the company about its data-licensing business related to the training of artificial intelligence systems.

"On March 14, 2024, 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," Reddit said in an updated initial public offering prospectus. Reddit filed for an IPO in February, and plans to trade on the New York Stock Exchange under the ticker symbol "RDDT."

Although Reddit's core business relies on online advertising, the company is seeking to make money in other ways, and is in the "early stages" of its "data licensing efforts," the filing said.

Reddit said, "the opportunity does not conflict with our values and the rights of our Redditors," referring to its users and forum moderators.

The 19-year-old company has filed to sell shares in its IPO at $31 to $34 each in an offering that would value the business at close to $6.5 billion. Reddit is trying to hit the public market during a historically slow period for tech IPOs. There hasn't been a notable venture-backed tech debut since Instacart and Klaviyo in September. Before that, the market had been largely shuttered since late 2021.

Reddit's revenue rose 20% last year to $804 million. About 98% of its sales came from advertising. The remaining 2% includes data licensing.

"These programs may subject us to evolving approaches to the regulation of this data and implicates complex and developing data privacy and data protection, misappropriation, and intellectual property laws, rules, and regulations," Reddit said in the updated filing.

An FTC