Reddit: The New Fee On API Access

Several recent innovations introduced at Reddit, in the crypto and AI sphere, are hinting that the company may want to go public. 

The latest is the idea of charging for access via API for those who want to access data on the platform specifically to train artificial intelligence (AI) algorithms.

This was revealed a few days ago by the New York Times, specifying that access to Reddit’s API will remain free for developers who use the tool to create useful applications, and for researchers who use the platform for non-commercial purposes, but will be charged for companies involved in artificial intelligence. 

Reddit, crypto, and AI 

AI requires huge amounts of data to be trained, and they often fetch it on social networks, where they find lots of text and images to feed their algorithms as resources they can tap into to answer questions. 

It is no coincidence that something similar is being done by, for example, Twitter, as Elon Musk is continually looking for new sources of profit to put the company’s finances in order. 

What’s more, Reddit CEO Steve Huffman hopes that the work they are doing on the authenticity of data on the platform will prompt more AI companies to use the social network as a source of data for their databases. 

Indeed, for nearly a decade now, the social network has changed policy, as revealed in a recent interview Huffman gave to Wired, preferring the trade-off between freedom and security instead of pure anarchy. 

The platform has adopted stricter policies, and has begun to take tough action against those who violate them. This in theory should have improved the average quality of its content, and this is what Huffman is counting on to be able to convince AI companies to subscribe to their APIs for a fee. 

It is worth noting that OpenAI, i.e., the company that developed ChatGPT, pre-trained its Transformer 4 generative language model using precisely data extracted from Reddit. 

Listing on the stock market

While there is some speculation circulating that the decision to make API access paid for by AI companies is merely an attempt to cover the costs of maintaining the service, there is also a possibility that Reddit wants to become profitable and attractive enough for investors to list on the stock exchange. 

Steve Huffman started Reddit in 2005 along with Alexis Ohanian, which is the year before Twitter was born. 

The following year the company merged with Aaron Swartz’s Infogami, and Swartz himself became the third equal owner of the resulting parent company. 

Later that year, Huffman and Ohanian decided to sell Reddit to Condé Nast Publications, i.e., the publishing company that owns, for example, Wired, for between $10 million and $20 million. In 2007 Swartz was fired. 

In 2009 Huffman and Ohanian also left Reddit, but Ohanian returned in 2014 as executive chairman, while Huffman returned the following year as CEO. Ohanian then resigned from the board in 2020. 

A first major funding round for the company was held in 2017, with a $200 million round raising the company’s valuation to $1.8 billion. 

Another large funding round worth a total of $410 million was held in 2021, raising the company’s theoretical value to $10 billion. That same year Reddit announced that it had filed a draft registration statement with the SEC for a potential IPO, but to date there has not been one. 

Right now the majority of its stock is owned by Advance Publications, i.e., Condé Nast’s parent company, so it would be up to them to decide whether or not to go public. Right now, the hypothesis of an imminent IPO is just an unconfirmed hypothesis that is nevertheless circulating persistently. 

NFTs and cryptocurrencies

Earlier this month Reddit announced the launch of the third round of NFT avatars. 

This is the third release of its “Collectible Avatars,” i.e. blockchain-based NFT GEN 3. The initial NFT collection Reddit Avatars were a huge success, although this market has cooled off a lot in the meantime. 

While in October 2022 the sales volume was about $9 million, by April 2023 it was less than $4 million, or less than half. Given that the second release also generated a total sales volume of about $9 million, the contraction seems obvious and not coincidental. 

Reddit, on the other hand, does not itself have a presence in the crypto market with its own token, even though there are Reddit Coins. These, however, are not a cryptocurrency token, but only a non-exchangeable internal currency. 

Nevertheless, it remains a social network where cryptocurrencies are much discussed, so much so that, for example, the subreddit dedicated to Bitcoin has nearly 5 million members, and the one on Ethereum more than 1.7 million. 

However, given that the goal seems to be to be listed on traditional exchanges, it seems rather unlikely that they will launch their own token on the crypto markets.