Reddit, Inc. (NYSE:RDDT) may be willing to walk away from roughly $60 million a year to stop Google from turning its discussions into answers that users never leave Google to read. The companies are negotiating a renewal of their 2024 data-licensing agreement, and Reddit has discussed ending Google's access to its content for AI use, the Wall Street Journal reported on July 22. Reddit, Inc. (NYSE:RDDT) fell 8.7% after the report, its worst session since March, according to Barron's.
Google can find generic product descriptions and technical explanations all over the web. Reddit is useful because its users argue about whether a product is actually good, describe unusual problems and update old advice. Those conversations answer queries for which polished corporate pages are nearly useless. Reddit can reasonably demand more money or limits on how that material appears in Google's AI products.
brett-jordan-0FytazjHhxs-unsplash
Walking away would carry a cost beyond the licensing check. Alphabet Inc. (NASDAQ:GOOGL), through Google Search, also sends people to Reddit, where their visits can be turned into advertising revenue. If an AI answer already quotes the useful part of a discussion, however, that referral relationship becomes less valuable. Reddit is effectively being asked to keep supplying an input that may reduce the traffic Alphabet Inc. (NASDAQ:GOOGL) sends back.
The $60 million payment is not large enough to make the decision on its own. Reddit generated $663 million of revenue in the first quarter, of which $625 million came from advertising and $39 million from other sources, including data licensing. Google would lose a frequently updated source of human answers. Reddit would find out how many users seek it out and how many arrive only because Google placed a link in front of them.
#reddit #licensing #NASDAQ #googl
Google can find generic product descriptions and technical explanations all over the web. Reddit is useful because its users argue about whether a product is actually good, describe unusual problems and update old advice. Those conversations answer queries for which polished corporate pages are nearly useless. Reddit can reasonably demand more money or limits on how that material appears in Google's AI products.
brett-jordan-0FytazjHhxs-unsplash
Walking away would carry a cost beyond the licensing check. Alphabet Inc. (NASDAQ:GOOGL), through Google Search, also sends people to Reddit, where their visits can be turned into advertising revenue. If an AI answer already quotes the useful part of a discussion, however, that referral relationship becomes less valuable. Reddit is effectively being asked to keep supplying an input that may reduce the traffic Alphabet Inc. (NASDAQ:GOOGL) sends back.
The $60 million payment is not large enough to make the decision on its own. Reddit generated $663 million of revenue in the first quarter, of which $625 million came from advertising and $39 million from other sources, including data licensing. Google would lose a frequently updated source of human answers. Reddit would find out how many users seek it out and how many arrive only because Google placed a link in front of them.
#reddit #licensing #NASDAQ #googl
2 days ago
