Why Google and OpenAI suddenly paid Reddit $160 million
Social platform Reddit was busy building an advertising business to compete with the likes of Google and Meta when it found another way to add $US100 million to its bottom line: generative artificial intelligence.
The rise of large language models that ingest huge databases of content and respond with human-like answers – OpenAI’s ChatGPT and Google’s Gemini, for example – has been a huge boon for Reddit.
Jen Wongsays Reddit is “right at the centre of the biggest and most important technology arc that will happen in the next five to 10 years”. Dominic Lorrimer
It listed on the New York Stock Exchange last year at a valuation of $US6.4 billion. It is now worth $US20 billion ($32.4 billion).
Reddit was once the wild west of the internet, a dark online corner that described itself as “the front page of the internet”. It hosted trolls, extremists and was known for having very few rules. Now that 20-year archive of conversations is a serious asset worth serious money.
In the 2024 calendar year, Reddit banked an extra $US100 million in “other revenue” than it did in 2023, which the company’s global chief operating officer, Jen Wong, says came mostly from deals with OpenAI and Google.
“The way the internet is changing with AI and large language models, Reddit is right at the centre of the biggest and most important technology arc that will happen in the next five to 10 years,” Wong told The Australian Financial Review while visiting Sydney this week.
“What it’s illuminated for us, certainly for me, is that our data is incredibly valuable, and I think going up in value because human perspective is how LLMs [learning language models] get perspective, and it’s not going anywhere. Everybody wants to access this trove of human opinion.”
Sam Altman is a significant shareholder in Reddit. AP
This is all personal for Wong, who, behind Reddit’s co-founder and chief executive Steve Huffman and OpenAI CEO Sam Altman, is one of the biggest individual shareholders in the company.
On Wednesday, when US President Donald Trump paused wide-ranging tariffs, Reddit’s stock jumped 25 per cent. Wong’s personal wealth jumped at least $US40 million.
Reddit’s revenue has been steadily rising. In 2022, it made $US667 million in revenue. In 2024, it made $US1.3 billion. It is preparing to launch a version of shopping advertising which will allow retailers to promote individual items.
Australia is one of Reddit’s top five countries for active user base, Wong said. This growth has happened organically – it did not have an office here until 2021.
The r/australia subreddit, in which people ask questions or discuss Australian news, has 2.6 million members. The r/ausfinance subreddit, a forum about the local finance sector, has more than 700,000. The forum r/AskAnAustralian, which is exactly as it sounds, has 550,000 “mates”.
“It’s a very mature market for us, audience-wise,” Wong said. “The commercial side is more nascent.”
Wong said there were 17 million Reddit users active each month in Australia, which is an estimate from research firm Ipsos. This is at odds with other third-party data – a 2023 report by the Australian Competition and Consumer Commission estimated there were 1.9 million monthly users.
Reddit does not break out its revenue by country, but it says it makes $US7.04 per user in the US each quarter and just $US1.67 a user in the combined rest of the world. This is the opportunity, says Wong, who has been in town this week meeting with major advertising agencies and individual clients such as NAB’s UBank.
Reddit has become a de facto search engine. Wong says the word “Reddit” being added to a query makes it the seventh-biggest search term in Australia because people can find useful opinions on there faster than a Google search result.
This makes the platform heavily reliant on Google for a substantial portion of its traffic, but it would not be “existential” if it disappeared, she said.
“The first 10, almost 15 years, our corpus wasn’t big enough to even matter in search. People just heard of Reddit through word of mouth, and they came for the communities,” she said. “Even when we got indexed, search traffic always goes up and down because it’s not something we control.”
Reddit has always prided itself on being open and public. There’s no need to log in, and it has provided access to its data to researchers for years. Even though it has signed commercial deals with OpenAI and Google, Wong says it is “most likely” any LLM around today was trained, in part, using Reddit data.
“For years we were open. We believe in the open internet. We don’t want to not give people access to it,” she said. “Our view is, if you’re going to use our data for commercial purposes, you have to have a relationship with us.”
Reddit now has quarterly targets and shareholders, but Wong says it still takes a long-term view.
“We’re in a really exciting moment. We are profitable as of last quarter, so it gives us a lot of financial success and control over our business,” she said. “When you’ve been around for 20 years, you have a lot of conviction you’ll be around for another 20.”
