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Behind the dicey IPO comeback, the meme stock infatuation, and the users-are-investors-are-owners story, the Reddit debut is about something else: a Faustian bargain in which it sells itself to AI.
Reddit leaders see the company's next phase in turning its deep stockpile of user conversations into training material for AI tools. But by fortifying large language models (LLMs), Reddit could also sabotage its advertising potential and its relationships with users, who are so integral to the company's worth.
If investors are to take AI's transformative power seriously, as Reddit does, they should assume that the world of search and advertising will fracture. As chatbots like ChatGPT become more sophisticated, the tools will remove the need to go hunting for information beyond their dialog box or to click through to a website after a search on a soon-to-be archaic non-AI-powered browser.
As Reddit acknowledges in its IPO filing, “Changes in internet search engine algorithms and dynamics could have a negative impact on traffic for our website and, ultimately, our business."
Since advertising accounts for nearly all of Reddit's revenue, advancing its goals in the AI realm may conflict with its ad ambitions. (In 2024, eMarketer projects Reddit's digital ads business will grow more than any other company, aside from Walmart and TikTok, rising nearly 30%.)
The AI pivot also undermines one of Reddit's greatest strengths.
As search results became littered with ads and SEO-optimized chum, Reddit emerged as a refuge from automated dreck. That you can find real answers from real people instead of useless results is a significant advantage. It's what makes Reddit so unique. And why people spend time there.
That value will only increase as synthetic content gobbles more of the web, displacing discussion forums, artistic works, and research with weaker semblances. Reddit's executives know this. They've touted the company's "vast and unmatched archive of real, timely, and relevant human conversation on literally any topic."
In an interview with Yahoo Finance’s Brian Sozzi ahead of the market debut, Reddit co-founder and CEO Steve Huffman said, "In an AI world, where everything is increasingly written by AIs, the human-generated content actually becomes more valuable over time.” For Huffman, the best response to AI is actual intelligence.
If that's true, why undermine the value of human content by fueling the early stages of industrial-scaled generative machinery? And would a synthesized and flattened AI chatbot answer to a query, devoid of the context and dialectical back-and-forths users are known for, even conserve any of Reddit's credibility?
Reddit isn’t an outlier. Other major media companies are striking deals with AI developers, trading their digitized bodies of language for guaranteed revenue. That may seem like a better deal than publishers suffered through when the tech giants swallowed the web. But Reddit and the others are probably making the same mistake.
Companies selling their distinctive repositories of human speech risk jeopardizing their traffic and ad potential. It also leaves yet another part of their business vulnerable to the whims of a whole other mutated and remixed ecosystem of tech companies.
Reddit's pitch is that its two decades of discourse — its towering heap of threads spanning a universe of posting — is worth something.
But if the community's authenticity is what gives the company value, why feed it to the machines?
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