AI Licensing Deals With Google and OpenAI Make Up 10% of Reddit's Revenue

Reddit's recent earnings report revealed that AI licensing deals with Google and OpenAI account for about 10% of its $1.3 billion revenue, totaling approximately $130 million. With Google paying $60 million, OpenAI is estimated to be paying Reddit around $70 million annually for content licensing. Adweek reports: 'It's a small part of our revenue -- I'll call it 10%. For a business of our size, that's material, because it's valuable revenue,' [said the company's COO Jen Wong]. The social platform -- which on Wednesday reported a 71% year-over-year lift in fourth-quarter revenue -- has been 'very thoughtful' about the AI developers it chooses to work with, Wong said. To date, the company has inked two content licensing deals: one with Google for a reported $60 million, and one with ChatGPT parent OpenAI.

Reddit has elected to work only with partners who can agree to 'specific terms... that are really important to us.' These terms include user privacy protections and conditions regarding 'how [Reddit is] represented,' Wong said. While licensing agreements with AI firms offer a valuable business opportunity for Reddit, advertising remains the company's core revenue driver. Much of Reddit's $427.7 million Q4 revenues were generated by the ongoing expansion of its advertising business. And its ad revenue as a whole grew 60% YoY, underscoring the platform's growing appeal to brands.

Helping to accelerate ad revenue growth is Reddit's rising traffic. While Reddit's Q4 user growth came in under Wall Street projections, causing shares to dip, its weekly active uniques grew 42% YoY to over 379 million visitors. Average revenue per unique visitor was $4.21 during the quarter, up 23% from the prior year. While Google is 'nicely reinforcing' Reddit's growth in traffic, Wong said, she added that the site's logged-in users, which have grown 27% year-over-year, are 'the bedrock of our business.'

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