The latest deal from Reddit which offered for sale its user data for AI training has caught the attention of the US Federal Trade Commission (FTC) but is unfazed and believes that it did not violate any laws. This development came amidst the company's initial public offering (IPO) coming next week, with the FTC now questioning the company's decision towards growing more of its revenue with these licensing deals.
In its first AI model training licensing deal, Google was its first partner where Reddit offered its user data for $60 million for the Big Tech company to obtain.
Reddit's AI Training User Data Sale Now Under FTC Investigation
Reddit revealed in a filing that it is now under an FTC investigation for its monumental deal in licensing its human-generated user content for AI training, particularly, with its $60 million deal with Google.
On March 14, 2024, we received a letter from the Federal Trade Commission (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. Given the novel nature of these technologies and commercial arrangements, we are not surprised that the FTC has expressed interest in this area.
The company believes that this process would be lengthy, and it may cause them to "incur substantial costs," one that could result in fines or "regulatory fines."
It came a week before the company's IPO which is taking place next week, with Reddit expressing their concerns about how it will affect its business.
Reddit Remains Unfazed, Believes It Did Nothing Wrong
However, despite this FTC inquiry, Reddit remains unfazed and believes it did nothing wrong.
"We do not believe that we have engaged in any unfair or deceptive trade practice," Reddit said.
The letter, as relayed by Reddit, claimed that the FTC was interested in meeting with the company to learn more about this venture, particularly with its sharing of user data for $60 million to Google, and would request documents and files from the company moving forward.
Reddit's AI Training Data Deal with Google and IPO
Initially, amidst the company's plans to go public and bring its first-ever IPO, it was reported that Reddit sold its user data, particularly, human-generated content, to companies interested in using it for AI model training. In this way, Reddit is selling its user data and earns money in the process, but several questions have been raised regarding privacy and security on the platform.
It was later revealed that it struck a deal with Google for this specific licensing of its content for AI training, with Reddit making $60 million off the partnership between the two.
Additionally, this also came at the time when the company filed its IPO, the first indication that Reddit was going public, with many believing that this AI training deal was to boost more of its valuation and revenue.
While many celebrated the IPO filing of Reddit, some questioned its deal with Google and this specific venture toward selling human-generated user data to license AI training. The FTC's probe will look into this offer by Reddit, with the company remaining unfazed and standing by their decision, facing this inquiry a week before its IPO.
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