I liked to skip class in college. I was one of those “busy” kids that did way too many extracurriculars. I had three separate on-campus jobs, wrote for the student magazine, and competed in some business competitions that the school held. This wasn’t to build the resume, although it did help, it was because I just got bored. If a class consisted of just course lectures from the book, then why go to class when I can read the book. If I could use the underlying data to pass the exams and ultimately pass the class, why not do it? This is not academic advice.
Content is King
One of the best corners of the internet is Reddit. Where else can you find top-tier tech discussions alongside absurd stories on relationship advice with some philosophy on the side? There’s a community subreddit for almost any topic, and if you can’t find one, just build it yourself. Does the anonymity make way for unusual, sometimes borderline illegal content? Yes. But it also breeds discussions on all sorts of topics from experts happy to share their knowledge in the shadows. Bad, good, weird, funny — it’s all content. And in this new world of AI, content is king.
Reddit knows this and they’re finally going public:
Reddit is going public, seeking a $6.5 billion valuation after a year of upheaval that gave it more control over what CEO Steve Huffman has called a “vast corpus” of valuable data that can be used to train AI. As an example, Google recently cut a deal with Reddit worth a reported $60 million per year for real-time access to that data. - The Verge
Transactions solidify value. Just because you list your closet wardrobe for $100 on DePop, doesn’t necessarily mean it’s worth that — unless it actually sells. Private markets are a place of endless speculation. The startup world is filled with ticket prices for companies that haven’t even earned a dollar of revenue. Reddit has been around for nearly 20 years, and in that time it has accumulated troves of unique data from users. The $6.5 billion valuation, at first glance, feels quite high. But through the rose-colored lenses of AI, the number looks just right to investors:
Given that Reddit is an unprofitable, long-established social media company, and one that depends on advertising, that feels a tad expensive. Unprofitable Snap, for example, is currently worth 4.34x its revenues while highly profitable Meta is worth 9.86x its own trailing revenues, according to Yahoo Finance.
Reddit’s game plan for AI is one good reason why it’s pricing its shares closer to Meta than Snap.
Reddit sold $203 million worth of contracts to AI companies for access to its data earlier this year. - Reddit’s planned IPO share price seems high, unless you look at its AI revenue, TechCrunch
The market is forward-looking, and the future is AI. We know this.
Data is Oil
The first thing Reddit did when considering going public was closing their APIs. Last April, CEO Steve Huffman told users that they would be “updating access to the API, including premium access for third parties who require additional capabilities and higher usage limits.” For most of its life, Reddit gave away access to its data for free, but Huffman quickly realized that while the original intent was to ease the viewing, lending data to apps like Apollo, LLMs like OpenAI and Google Gemini were just training their models for free. Were a lot of people angry at this decision? Yes, but it was the best decision out there. This is a business, and businesses need to make money.
The value was quickly realized as they started cutting deals with OpenAI and most recently, Google. In the same way oil is turned into different fuels, data is cleaned up and sorted to be useful for AI, helping it learn and make decisions. The worth of data, like oil, depends on how good it is and how much people want it. So what’s so special about Reddit’s data?
Unlike other platforms, Reddit has communities, called subreddits, that cover pretty much every topic you can think of. They get really deep and dive into specific topics that can show what's trending or what issues people are passionate about. The upvote and downvote system also shows you what's catching people's attention. So, for companies or researchers, Reddit's data is super valuable because it gives a real-time snapshot of public opinion and trends, making it a go-to source for understanding what's on people's minds.
What other site do we know filled with data from user posts, that recently went private and also started charging for API access?
Thank you
The more I navigate this world of content creation, the more I realize that it’s becoming more and more important to own your stuff. Is that tweet mine or Twitter’s? Does this blog post belong to me or Substack? But it’s tough. If I can’t share my work for free, how can I grow? People won’t pay for new things unless they know something about the brand. You have to market it, you have to give free samples and you have to cut deals. It’s still an evolving market and I fear the days of the freemium model are coming to an end. As always, if you have any questions, want more explanations, or strongly disagree, comment below, follow me on Twitter (X), follow me on Threads, follow me on TikTok, or shoot me an email.
Disclaimer: These views are my own, and do not necessarily reflect the views of any organization with which I am affiliated with.