Reddit's shares saw an 11% increase in after-hours trading following the announcement of a data-sharing deal with OpenAI, the pioneering artificial intelligence firm known for its development of the ChatGPT chatbot. This significant uptick came after a drop of 5.45% earlier in the day, but the news of the partnership rejuvenated investor confidence, boosting the stock to $62.61.
Reddit and OpenAI today announced a partnership to benefit both the Reddit and OpenAI user communities in a number of ways. Learn more on our corporate blog. https://t.co/qah9TaRjVU
— Reddit (@Reddit) May 16, 2024
Source: Reddit
Details of the Partnership
Under the agreement, Reddit will grant OpenAI access to its data application programming interface (API), allowing real-time content from Reddit posts to be utilized in enhancing ChatGPT's responses and potentially developing new products. This collaboration is not only expected to enrich the quality of interactions within ChatGPT but also to introduce advanced AI-powered features to Reddit, aiming to increase user engagement on the platform.
Mutual Benefits from the Deal
In return for data access, OpenAI will provide Reddit's users and moderators with innovative AI tools designed to bolster community interaction and moderation. This move is part of Reddit's ongoing strategy to diversify its revenue streams and enhance community engagement beyond traditional advertising methods.
OpenAI as an Advertising Partner
Alongside the data-sharing arrangement, Reddit has also appointed OpenAI as one of its advertising partners, setting the stage for integrated marketing solutions that leverage AI technology to target and engage users more effectively.
Legal Challenges Facing AI Firms
The announcement comes at a time when OpenAI and other AI entities are navigating through legal challenges regarding their data collection methods used to train AI models. Notably, Sony, the world's largest music publisher, has recently questioned the legality of these practices, particularly concerning the use of copyrighted music to train AI models.
Previous Initiatives and Crypto Involvement
Reddit has experimented with various methods to enhance user interaction and monetization, including a blockchain-based rewards service called Community Points. However, this service was discontinued due to scalability issues. Additionally, Reddit has shown a progressive stance towards cryptocurrencies, having previously disclosed investments in Bitcoin and Ether and supporting transactions in Ether and Polygon for certain virtual items.
Implications for the Future
This partnership with OpenAI could mark a significant turning point for Reddit as it embraces AI technology to drive user engagement and potentially revolutionize the way content is consumed and moderated on the platform. As AI integration becomes more prevalent across social media platforms, the collaboration between Reddit and OpenAI may set a precedent for future interactions between technology developers and content platforms.
