Shares of Reddit surged 13% on Friday, fueled by an exciting partnership with artificial intelligence firm OpenAI. This collaboration is poised to boost advertising income for the popular social media platform significantly.
The Partnership Details
Announced Thursday, the partnership allows Reddit to leverage OpenAI’s cutting-edge technology to build innovative tools and features. Specifically, OpenAI’s ChatGPT platform will integrate Reddit’s content in a “real-time, structured” manner. Additionally, OpenAI will become an advertising partner for Reddit, opening up new revenue streams.
Market Impact
The stock price soared to $63.64, within striking distance of the record closing price of $65.11 in late March. If this trend continues, Reddit’s market capitalization could increase by $1.2 billion.
Financial Prospects
Piper Sandler lead analyst Thomas Champion estimates that the deal could yield between $50 million to $60 million annually for Reddit. This capital injection will undoubtedly strengthen the company’s position in the company landscape.
Beyond Advertising Revenue
Reddit’s “ambitions extend beyond adveReddit’s In a February filing, the company expressed its intention to explore new monetization channels. These include offering creator tools and licensing its data to third parties. Already, Reddit has data licensing agreements with undisclosed firms, which are projected to contribute at least $66.4 million in revenue this year. These licenses allow third parties to access, search, and analyze data on the platform.
OpenAI’s Growing Influence
While this OpenAI partnership is a win for Reddit, OpenAI has been making waves in the tech world. The company has secured content licensing deals with several publishers, including the Associated Press and the Financial Times. However, it also faces legal challenges, with some firms alleging unauthorized use of their content for training large language models.
