Reddit has entered a partnership with OpenAI to integrate its content into the widely used chatbot, ChatGPT.
The corporation made the announcement on Thursday in a joint statement. According to Reuters, the revelation resulted in a 12% increase in Reddit shares during extended trading.
This partnership signifies Reddit’s ongoing efforts to diversify its revenue streams beyond its core advertising business.
It also follows Reddit‘s previous agreement with Alphabet, which intended to provide content to train Google’s AI models.
Under the terms of the agreement, ChatGPT and other OpenAI products will access Reddit’s data via its application programming interface (API). This API will serve as the conduit for distributing Reddit’s content to OpenAI’s systems.
Additionally, OpenAI will become a Reddit advertising partner, further enriching the collaborative relationship between the two companies.
Reddit’s strategic move is viewed by investors as a pivotal step toward capitalising on its data assets. The arrangement with Alphabet, reported to be valued at approximately $60 million annually, exemplifies this strategy. The agreement with OpenAI represents another significant revenue opportunity for Reddit as it looks to leverage its vast repository of user-generated content.
The partnership comes at a time when Reddit is showing robust financial performance. The social media company recently reported strong revenue growth and improving profitability in its first earnings release since its initial public offering (IPO) in March.
This positive financial trajectory is attributed to the success of its partnership with Google and its concerted efforts to expand its advertising business.
Following the announcement, Reddit’s shares increased by 10.5%, closing at $62.31. The stock has risen nearly 12% since its market debut, reflecting investor confidence in the company’s strategic direction and financial health.
Reddit’s IPO in March marked a significant milestone for the company, and its subsequent financial disclosures have reinforced a strong position in the market.
By forging alliances with major players like Alphabet and OpenAI, Reddit is not only diversifying its revenue streams but also positioning itself as a critical data provider in the burgeoning AI sector.