Reddit said ahead of its IPO next week that licensing user posts to Google and others for AI projects could bring in $203 million of revenue over the next few years. The community-driven platform was forced to disclose Friday that US regulators already have questions about that new line of business.

In a regulatory filing, Reddit said that it received a letter from the US Federal Trade Commision on Thursday asking about “our sale, licensing, or sharing of user-generated content with third parties to train AI models.”

The FTC, the US government’s primary antitrust regulator, has the power to sanction companies found to engage in unfair or deceptive trade practices. The idea of licensing user-generated content for AI projects has drawn questions from lawmakers and rights groups about privacy risks, fairness, and copyright.

Reddit isn’t alone in trying to make a buck off licensing data, including that generated by users, for AI. Programming Q&A site Stack Overflow has signed a deal with Google, the Associated Press has signed one with OpenAI, and Tumblr owner Automattic has said it is working “with select AI companies” but will allow users to opt out of having their data passed along. None of the licensors immediately responded to requests for comment. Reddit also isn’t the only company receiving an FTC letter about data licensing, Axios reported on Friday, citing an unnamed former agency official.

It’s unclear whether the letter to Reddit is directly related to review into any other companies.

Reddit said in Friday’s disclosure that it does not believe that it engaged in any unfair or deceptive practices but warned that dealing with any government inquiry can be costly and time-consuming. “The letter indicated that the FTC staff was interested in meeting with us to learn more about our plans and that the FTC intended to request information and documents from us as its inquiry continues,” the filing says. Reddit said the FTC letter described the scrutiny as related to “a non-public inquiry.”

Reddit, whose 17 billion posts and comments are seen by AI experts as valuable for training chatbots in the art of conversation, announced a deal last month to license the content to Google. Reddit and Google did not immediately respond to requests for comment. The FTC declined to comment. (Advance Magazine Publishers, parent of WIRED’s publisher Condé Nast, owns a stake in Reddit.)

AI chatbots like OpenAI’s ChatGPT and Google’s Gemini are seen as a competitive threat to Reddit, publishers, and other ad-supported, content-driven businesses. In the past year the prospect of licensing data to AI developers emerged as a potential upside of generative AI for some companies.

But the use of data harvested online to train AI models has raised a number of questions winding through boardrooms, courtrooms, and Congress. For Reddit and others whose data is generated by users, those questions include who truly owns the content and whether it’s fair to license it out without giving the creator a cut. Security researchers have found that AI models can leak personal data included in the material used to create them. And some critics have suggested the deals could make powerful companies even more dominant.

The Google deal was one of a “small number” of data licensing wins that Reddit has been pitching to investors as it seeks to drum up interest for shares being sold in its IPO. Reddit CEO Steve Huffman in the investor pitch described the company’s data as invaluable. “We expect our data advantage and intellectual property to continue to be a key element in the training of future” AI systems, he wrote.

In a blog post last month about the Reddit AI deal, Google vice president Rajan Patel said tapping the service’s data would provide valuable new information, without being specific about its uses. “Google will now have efficient and structured access to fresher information, as well as enhanced signals that will help us better understand Reddit content and display, train on, and otherwise use it in the most accurate and relevant ways,” Patel wrote.

The FTC had previously shown concern about how data gets passed around in the AI market. In January, the agency announced it was requesting information from Microsoft and its partner and ChatGPT developer OpenAI about their multibillion-dollar relationship. Amazon, Google, and AI chatbot maker Anthropic were also questioned about their own partnerships, the FTC said. The agency’s chair, Lina Khan, described its concern as being whether the partnerships between big companies and upstarts would lead to unfair competition.

Reddit has been licensing data to other companies for a number of years, mostly to help them understand what people are saying about them online. Researchers and software developers have used Reddit data to study online behavior and build add-ons for the platform. More recently, Reddit has contemplated selling data to help algorithmic traders looking for an edge on Wall Street.

Licensing for AI-related purposes is a newer line of business, one Reddit launched after it became clear that the conversations it hosts helped train up the AI models behind chatbots including ChatGPT and Gemini. Reddit last July introduced fees for large-scale access to user posts and comments, saying its content should not be plundered for free.

That move had the consequence of shutting down an ecosystem of free apps and add ons for reading or enhancing Reddit. Some users staged a rebellion, shutting down parts of Reddit for days. The potential for further user protests had been one of the main risks the company disclosed to potential investors ahead of its trading debut expected next Thursday—until the FTC letter arrived.

Updated March 15, 2024, 8 pm EDT: This article was updated to disclose that Advance, owner of WIRED’s publisher Condé Nast, has a stake in Reddit.

The Federal Trade Commission (FTC) has recently launched an investigation into Reddit’s artificial intelligence (AI) training program, which reportedly involves the sale of user data. This development has raised concerns about privacy and data protection among Reddit’s vast user base.

Reddit, a popular social media platform known for its diverse communities and discussions, has been utilizing AI technology to improve its recommendation system and content moderation. The platform’s AI algorithms analyze user behavior and preferences to provide personalized content suggestions and identify potentially harmful or rule-breaking posts.

To train these AI models effectively, Reddit has been collecting and utilizing vast amounts of user data. This includes information such as users’ browsing history, interactions with posts and comments, and even personal preferences expressed through voting patterns. While this data collection is not uncommon in the tech industry, the sale of such data has sparked controversy.

The FTC’s investigation aims to determine whether Reddit has violated any privacy laws or regulations by selling user data without proper consent or disclosure. The agency is also examining how this data is being used by third-party entities and whether it poses any risks to users’ privacy or security.

Privacy advocates argue that the sale of user data without explicit consent undermines individuals’ control over their personal information. They argue that Reddit should have been more transparent about its data collection practices and given users the option to opt out of having their data used for AI training or sold to third parties.

On the other hand, Reddit defends its AI training program, stating that it is crucial for improving the platform’s user experience and content moderation. The company claims that the collected data is anonymized and stripped of personally identifiable information before being used for training purposes. Reddit also emphasizes that it adheres to industry-standard security measures to protect user data.

However, concerns remain regarding the potential risks associated with the sale of user data. Even if the data is anonymized, there is always a possibility of re-identification through cross-referencing with other available information. Moreover, the involvement of third-party entities in purchasing and analyzing this data raises questions about their intentions and the potential misuse of the information.

The outcome of the FTC investigation will likely have significant implications for Reddit and other social media platforms that rely on AI training involving user data. It could lead to stricter regulations and guidelines regarding data collection, usage, and disclosure, ultimately aiming to protect users’ privacy rights.

In the meantime, users are advised to review and understand the privacy policies of platforms they engage with, including Reddit. They should be aware of how their data is being collected, used, and potentially sold. Additionally, individuals can take steps to protect their privacy online by using tools such as VPNs (Virtual Private Networks) and being cautious about sharing personal information.

As the FTC investigation unfolds, it is essential for both Reddit and other social media platforms to prioritize user privacy and ensure that their data practices align with legal requirements and user expectations. Transparency, consent, and robust security measures should be at the forefront of any AI training programs involving user data to build trust among users and maintain a healthy online ecosystem.

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