Reddit's AI strategy

Hi, it’s Ed in San Francisco. Reddit’s AI-themed IPO adds up for investors. But first...Three things you need to know today:• Amazon deliver [View in browser]( [Bloomberg]( Hi, it’s Ed in San Francisco. Reddit’s AI-themed IPO adds up for investors. But first... Three things you need to know today: • Amazon delivery rival secured [$41.5 million in fresh funds]( • Accenture tumbled the most in four years [on a disappointing outlook]( • Microsoft will pay Inflection AI [$650 million to license its software]( Early returns Reddit Inc. getting its artificial intelligence story right was a big part of a [successful listing day]( on Thursday. Shares gained 48% on the social platform's trading debut from its $34 initial public offering price. Now the communities, forum-based platform has to go out and prove that selling user data to AI companies is a viable business. The basic pitch is that Reddit's going to grow 20% a year, in part by licensing its users’ data to builders of large language models. Those LLMs are the very [large neural networks]( that are trained using massive amounts of text and data, including e-books, news articles and websites like Wikipedia. That plan could work because Reddit has exactly that — lots of text. And investors like the idea of selling that data because it will supplement a longer-standing, but still young advertising business that helped Reddit post $800 million in sales last year, although the company reported a net loss of $91 million. “There's the new emerging market of AI, where large language models need data to train on,” Reddit's Chief Operating Officer [Jen Wong](bbg://people/profile/17407576) told me on Bloomberg Technology. “And when you look at Reddit's corpus, 19 years of human experience organized by topic with moderation and relevance, that's incredibly important to building both the chat capability and the freshness of information.” Reddit's argument is that its data is more valuable than others’ because, ironically, it reflects actual human input at different layers. The posters are human, a post's spot in a forum's timeline is voted on by humans and the volunteers that moderate the content and uphold content policies are also — human. That's particularly valuable in a world where more and more AI-generated content is shared on social media platforms, argues Wong. Read More: [Seven Things to Know About Reddit’s Unusual IPO]( The 19-year-old San Francisco-based company has historically had its own content problems, but the platform these days shows forums and posts more strictly organized by topic and the dialogue is moderated by independent, vetted, volunteer moderators. The funny thing is that Reddit's kinda seized on the AI hype just like every other company that has publicly listed in the last six months. Reddit's not an AI company itself and licensing its data to real AI companies is just an extension of a more established, existing business Wong frames as data for the purpose of “social listening.” In simple terms, Reddit already sells data to agencies and financial service companies so they can look at what people are talking about and build custom marketing campaigns around that information. It’s a check on what the communities you want to sell to are really saying. The plan has its risks. Even before listing day, Reddit had disclosed that the US Federal Trade Commission is [probing its deals licensing user data to AI companies](bbg://news/stories/SAEPE5T0G1KW). Some analysts think that could slow down new AI deals. Reddit is also having to confront its loudest critic and combative audience: its own users. Redditors have clashed with the company's management over everything from the idea of the IPO itself, to how much Reddit's chief executive officer gets paid and they’re now [debating](, or in some cases protesting, the licensing model on the platform. Wong has been a big part of Reddit's evolution from a community-led platform, in which revolts from Redditors led to the ousting of previous executives, to more of a business. It's also worth noting that she's going to hold 1.6 million shares. The company only started building its AI-focused business last year and a lot of people I've spoken to credit Wong with putting Reddit on a path to becoming a real business. The challenge will be to sustain that business now that the company must answer to investors as well as its sometimes noisy users. —[Ed Ludlow](mailto:eludlow2@bloomberg.net) The big story Apple was sued by the US Justice Department and 16 attorneys general. The suit [accused the iPhone maker of violating antitrust laws]( and thwarting innovation by blocking rivals from accessing software and hardware features on its popular devices. And Apple and Google are facing scrutiny from European Union regulators [over the companies’ compliance with the new Digital Markets Act](. One to watch [Watch Reddit Chief Operating Officer Jen Wong interviewed on Bloomberg Television about the company’s IPO.]( Get fully charged Alibaba raised $357.8 million by selling securities in Chinese [streaming platform Bilibili.]( Online betting firm Rush Street is exploring strategic options [including a potential sale.]( The United Nations General Assembly approved a resolution to promote [“safe, secure and trustworthy” AI systems.]( Somalia gets its first 5G to help [boost trade with the region](. More from Bloomberg Bloomberg Technology Summit: Led by Bloomberg Businessweek Editor Brad Stone and Bloomberg TV Host and Executive Producer Emily Chang, this full-day experience in downtown San Francisco on May 9 will bring together leading CEOs, tech visionaries and industry icons to focus on what's next in artificial intelligence, the chip wars, antitrust outcomes and life after the smartphone. [Learn more](. 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