Reddit gets paid for AI training

Reddit, the long-established and popular social bookmarking and discussions site, has found a new way of monetising all that sweet, sweet free user content:

Reddit made a $60 million deal with an “unnamed large AI company” to train its artificial intelligence models on the platform’s content, reported Bloomberg on Friday. Reddit, which is rumored to be valued at around $5 billion, could use the announcement to help bolster its looming initial public offering, Bloomberg speculated.

Turns out that it’s Google.

This at least partially explains something that happened last year. In a Twitter-like move, Reddit made access to its API very expensive, essentially killing off third party Reddit apps.

How mighty Apollo was felled

Amongst the casualties was my preferred Reddit app, Apollo:

Reddit's most popular third-party app, Apollo, will shut down due to new API fees. Reddit's recent decision to charge third-party developers exorbitant fees for API access just killed off its biggest, most popular app.

The developer was making money on the app with subscriptions, but suddenly his costs to keep it running would have jumped astronomically:

“It went from $0 to effectively $20 million a year if I kept the app as it is currently,” Christian Selig, the developer of Apollo, told me.

While this change did lead to protests, and some subreddits going dark for weeks, in the end, it stuck, and people went back to using the site. But we have to use the official app, like animals.

(OK, it's not that bad, but it's not great, either.)

Making the AI companies pay

It seems pretty clear that this move was about maximising revenue prior to an IPO — and making sure the door was shut on AI companies using the once free API to scrape data to train their models on.

An extra $60m line of revenue, with the promise of more to come if it can do similar deals with other AI companies, ain't bad for a company that just has to provide the structure, while other people provide all the content and the moderation for free…

At least some of those users might see their efforts rewarded, though:

The company plans to reserve an as-yet-undetermined number of shares for 75,000 of its most prolific so-called redditors when it goes public next month, according to people familiar with the matter. The users will have the opportunity to buy Reddit shares at its initial public offering price before the stock starts trading, a privilege normally reserved only for big investors. 

Well, rewarded as long as they have the spare cash to buy shares, that is… (The other big winner, incidentally, is likely to be Condé Nast, which still owns a chunk of Reddit.)

The creativity pyramid scheme

It's like a pyramid of companies making money on the free labour of others… Reddit profits from their content through ads and API deals, and then the AI companies profit by selling access to their tools trained on this free labour.

No wonder the economics of creative businesses are so screwed right now.