Reddit thinks it’s more valuable to use its data internally than license it to Google or OpenAI

Reddit’s licensing deals with Google and OpenAI are great, but using that data for itself is even better, Reddit CEO Steve Huffman said at Deutsche Bank’s Media, Internet & Telecom Conference this week.

Here’s Huffman during a fireside chat:

“We did a couple of deals last year — one with Google, one with OpenAI — licensing our corpus for training for their LLMs. And then we also started investing in our own work to kind of reveal the value of that corpus. And that’s where our head is at right now. So this is search. This is Reddit Answers. This is training our own models.”

These deals, where tech companies like Google pay Reddit tens of millions of dollars a year to license its trove of conversations in order to train their large language models, made up less than 9% of the company’s total revenue last year. (The AI business is buried in “other” revenue.) The vast majority of its revenue comes from advertising.

Huffman said Reddit of course is still “open and open for business” when it comes to these licensing deals — it’s basically free money, after all — and will “see where this goes.” But using that data itself is really the main event:

“What I know for sure is that there is an incredible amount of value there. And I think we’re actually in the best position to kind of capture it.”

Huffman also seemed to be playing down the idea that Reddit and Google have become frenemies after Reddit blamed a tweak to Google’s search algorithm for its disappointing growth in daily active users last quarter, and after Reddit has launched its own Google-like services. Huffman says he thinks the company can reach a billion daily active users irrespective of Google’s algorithm.

“Big picture, our relationship with Google is great. We collaborate with them. On the search side, obviously, we have a ton of content in their index that makes their search product better.

It’s an amazing channel for us. Particularly, those logged out users coming from Google, though it’s volatile, it’s a great opportunity for us to teach internet consumers broadly that Reddit has the answer to their questions. It also happens to be our least valuable cohort of users from a monetization point of view, so it doesn’t really affect revenue. That’s why you didn’t see any revenue movement related to anything that Google does.

And then we collaborate with Google on the AI side. They’re a customer for our data. We’re a big cloud customer. We’re mutual advertisers. We collaborate on safety. It’s a really deep and healthy partnership.”

“Google” was mentioned 35 times in the conversation, mostly by the Reddit CEO.