Reddit to go public, inks AI deal with Google

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On February 22, Reddit (NASDAQ: RDDT) and Google (NASDAQ: GOOGL) announced they would deepen their partnership.

“We’re pleased to announce a new Cloud partnership that enables Reddit to integrate new AI-powered capabilities using Vertex AI. Reddit intends to use Vertex AI to enhance search and other capabilities on the Reddit platform,” said Google in its announcement.

“This enhanced collaboration provides Google with an efficient and structured way to access the vast corpus of existing content on Reddit and enables Google to use the Reddit Data API to improve its products and services – including supporting new ways to display Reddit content and providing more efficient ways to train models,” said Reddit.

The benefits of the AI partnership

Google plans on using the content on Reddit to train its AI models, and Reddit plans on leveraging Google so that Reddit-based content appears higher on Google’s search engine.

The partnership should be of mutual benefit to both parties. When it comes to Google, training AI models requires a lot of data, and the quality of the model, or rather, what a model outputs, will only be as good as the quality of the data it is trained on.

Reddit has 70 million daily active users and approximately 850 million users who use it once a month; each of these users generates rich data points from the posts they create and comment on to the communities they join. Google finds these human-generated data points extremely valuable when training its models and experiences a significant benefit because the data it can feed to a model is data that others don’t easily access.

When it comes to Reddit, the platform does not use the same algorithms that most social media websites use to show users content that they may be interested in. Instead, Reddit users need to naturally discover or come across content they will be interested in. Therefore, having enhanced visibility via Google’s products should be beneficial to Reddit when it comes to growing its platform and users in terms of finding new communities and content they may be interested in.

That being said, both Reddit and Google’s announcements seem to be downplaying the purpose of why they are expanding their partnership. If I had to guess, it’s because neither company wants the world to become apprehensive that the data they generate via their Reddit account is going directly to Google. This parallels how many social media users fear giving their data to any platform owned and operated by Mark Zuckerberg.

To put users at ease, Reddit and Google have explicitly stated that this new partnership does not change Reddit’s Data API Terms or Developer Terms, stating that content accessed through Reddit’s Data API cannot be used for commercial purposes without Reddit’s approval.

Why tech giants and content platforms form strategic partnerships

This isn’t the first time that we have seen a company that creates AI models enter a partnership with a content platform to gain access to a better, more abundant set of data to train its AI models. Earlier this year, we saw OpenAI partner with the media company Axel Springer so that the AI company could access their vast work archives to train language models.

This most likely won’t be the last time we see a partnership of this nature, either. Tech giants, especially those that create AI models, are going to want to continue refining their AI capabilities by gaining access to data they can train their models with. On the other side of this equation, platforms that generate significant amounts of content can benefit from the preference and increased visibility these AI models and search engines give their content.

Reddit’s IPO ambitions

Although the Reddit-Google partnership is bound to benefit users of both platforms, Reddit’s plans to take the company public could be a bigger driver of such a large-scale public partnership.

Shortly after Reddit announced its partnership with Google, the company announced it had filed for an IPO under the “RDDT.” According to PitchBook, Reddit has a valuation of roughly $10 billion and has raised approximately $1.3 billion in funding. This new partnership with Google will likely enhance Reddit’s appeal to potential investors as Reddit prepares to enter the public market. The improved content discovery could also drive user growth, another key metrics that investors closely monitor.

Over the next few months, we will likely see the partnership’s impact materialize. In addition, we are likely to see companies mirror Reddit’s strategy, partnering with the producers of AI models to infuse or benefit from AI capabilities being integrated into or adjacent to their products and services. Because developing AI models in-house is a rather costly and resource-intensive endeavor, companies will opt to form alliances with the players that dominate the AI field so that they can quickly, efficiently, and cost-effectively get on the path of AI innovation.

While specific details about Reddit’s upcoming IPO remain sparse, there are rumors that the company could go public as early as March 2024.

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