Shares of Reddit Inc. rose about 12% in extended trading Thursday after the social-media platform announced a partnership with OpenAI. The deal will bring Reddit content to OpenAI's ChatGPT and give OpenAI access to Reddit's Data API. "This will enable OpenAI's AI tools to better understand and showcase Reddit content, especially on recent topics," Reddit said in a blog post.
Key Takeaways:
Strategic Partnership: Reddit and OpenAI have formed a new content partnership, allowing OpenAI access to Reddit's data and introducing AI-powered features on Reddit.
Market Impact: Reddit’s shares surged over 13% in premarket trading following the announcement, indicating strong investor confidence.
Revenue Potential: Analysts estimate the deal could generate $40 million to $50 million in high-margin annual revenue for Reddit.
High-Profile Collaborations: This partnership follows Reddit’s previous agreements with tech giants like Google, showcasing the platform’s value in the AI and data licensing sectors.
As part of the partnership, Reddit will also introduce new AI-powered features for its users and moderators. Additionally, OpenAI will become a Reddit advertising partner.
Reddit counts OpenAI Chief Executive Sam Altman among its investors.
The social-media platform recently announced its first quarterly results as a public company, reporting a revenue beat and a narrower-than-expected loss.
The company is no stranger to high-profile partnerships. Speaking during the first-quarter conference call last week, Reddit CEO Steve Huffman said that the company's "still nascent" data-licensing business continued to grow and evolve. The CEO also pointed to Reddit's deal with Alphabet Inc.'s Google.
The two companies have a longstanding relationship, and the Google deal, which is said to be worth $60 million a year, was deepened in February with a new cloud partnership.
Reddit shares, which ended Thursday's session down 5.5%, are up 11.8% since the company's IPO in March.
Earlier this week, OpenAI unveiled GPT-4o, the privately-held company's latest flagship artificial-intelligence model, which it said offers improvements in speed and performance.
Conclusion
The new partnership between Reddit and OpenAI signifies a strategic move for both companies, enhancing their capabilities and expanding their reach. With Reddit's content now contributing to the training of OpenAI's advanced AI models, and OpenAI providing AI-powered features and advertising opportunities for Reddit, both companies stand to benefit significantly. This collaboration underscores the growing importance of data and AI in today's digital landscape and highlights the potential for future innovations and revenue growth.
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