Reddit’s Hoped-For IPO and Pipe Dream of Cashing in on OpenAI’s Hype

Jason Snell, writing at Six Colors:

I gotta be honest, this Huffman guy sure looks like a lying creep, and all of Reddit’s public statements about honoring third-party apps seem like an attempt to lie to Redditors so they don’t look like the bad guys. But the bottom line is that Reddit repriced its API in order to bankrupt third-party apps. (Selig says he’ll lose $250,000 in the shutdown.)

It seems pretty clear that all of Huffman’s recent decisions are driven by Reddit’s hoped-for IPO. On one front is the ugly fact that Reddit’s valuation is sinking. TechCrunch reported last week:

Fidelity, the lead investor in Reddit’s most recent funding round in 2021, has slashed the estimated worth of its equity stake in the popular social media platform by 41% since the investment. [...]

This devaluation, part of a broader trend that has hit a variety of growth stage startups across the globe in the past year, raises uncertainties about whether Reddit will maintain its initial intent to reportedly go public at a valuation around $15 billion.

On the other front is OpenAI, currently buoyed by a sky-high valuation, and which used Reddit content as part of its massive training data. The whole point of going from free-of-charge to very-expensive with these APIs is to get OpenAI and similar companies to pay for them. It’s a pipe dream. Julie Bort at Insider:

“The Reddit corpus of data is really valuable. But we don’t need to give all of that value to some of the largest companies in the world for free,” said Steve Huffman, CEO of Reddit.

I asked ChatGPT if it is going to pay for Reddit data. It told me its training data cut-off was September 2021 so it didn’t know what was happening after that date.

Reddit already gave all its data to large companies for free. Huffman is trying to charge now for horses that were let out of the barn years ago. And he obviously doesn’t care about Apollo or other third-party Reddit clients, or what these moves do to Reddit’s reputation as a platform vendor. He’s just trapped in a fantasy where investors are going to somehow see Reddit as a player in the current moment of AI hype.

Friday, 9 June 2023