Shares of Reddit (NYSE:RDDT) experienced a nearly 14% increase on Friday following an announcement of a partnership with artificial intelligence company OpenAI. The collaboration aims to enhance the social media platform’s user experience through AI technologies and boost advertising revenue.
Trading at $63.75 shortly after market opening, Reddit’s stock approached its highest closing price of $65.11 recorded in late March. The partnership entails Reddit utilizing OpenAI’s technology to develop new tools and features, as well as integrating its ChatGPT platform for real-time, structured content delivery. Additionally, OpenAI will serve as an advertising partner for Reddit.
This partnership aligns with Reddit’s post-IPO strategy to leverage AI technologies for platform enhancement and revenue diversification. With its primary revenue source being advertising, Reddit aims to explore new monetization channels, including offering creator tools and data licensing.
Already having data licensing agreements in place, Reddit expects these partnerships to contribute significantly to its revenue, projected to reach at least $66.4 million this year. Despite being a smaller player in the social media landscape with over 80 million daily active users, Reddit’s shares have surged 66% since its IPO on the New York Stock Exchange in March.
However, the partnership announcement coincides with OpenAI facing legal challenges regarding content usage for training language models. Despite this, OpenAI has secured content licensing agreements with various publishers, including the Associated Press and the Financial Times, in recent months.
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