Meet the Latest AI Darling: Reddit
12:41 Share

You want a straightforward path to your goals, but at Merrill, we know things may get in the way.

Or new opportunities can put you at a crossroads. With the bull at your back, you get a personalized plan and a clear path forward. Go to ml.com slash bullish to learn more. Merrill, a Bank of America company. What would you like the power to do? Investing involves risk. Merrill Lynch Pierce Fenner & Smith Incorporated. Registered broker dealer. Registered investment advisor. Member SIPC. A wholly owned subsidiary of Bank of America Corp.

Welcome to Tech News Briefing. It's Thursday, December 12th. I'm Belle Lin for The Wall Street Journal. Amazon just opened its most automated warehouse yet. But underneath all the robotics and artificial intelligence, the facility will still rely on thousands of people. We'll find out why the e-commerce behemoth can't do without humans yet.

And then AI companies were one of Reddit's biggest frustrations last year. Now they're a key source of growth for the social media platform. Our reporter Sarah Needleman tells us why OpenAI and Google are hankering for Reddit's data.

But first, Amazon said its new warehouse in Shreveport, Louisiana is its first to use automation and AI at every step of the fulfillment process. Yet it still needs thousands of people to keep it running smoothly, especially in the midst of the frantic holiday retail season that pushes millions of added shipments through fulfillment networks. So what can't Amazon's robots do?

WSJ reporter Liz Young has been following the story, and she joins us now with more.

Liz, why does Amazon need humans at an automated factory that's filled with robots? Basically, Amazon has been able to incorporate more automation throughout their warehouse. So they're able to do that to help speed up fulfillment, get packages to you at your house faster. But in the process, there's still a lot of things that robots can't do. It's difficult for robots, for example, to do what a human hand does, to reach into a bin full of items and

both identify what it's looking for and then correctly pick up that item. Same with loading and unloading trucks. These are tasks that just haven't been able to be fully automated yet. When you think about it, Amazon sells, they say, more than 400 million products worldwide.

And those range in size, weight, and fragility. So, you know, you have everything from like a soft dog toy to a toaster oven that's really big, heavy, but also easily breakable. So it's really challenging to then teach that robot, here's how you pick up a dog toy and here's how you pick up a toaster oven. And the amount of time and training data required to teach it on those things.

400 million items. That's got to be huge. Yeah, absolutely. They're working on training the AI so that the AI can identify damage, for example, is another part of this, that they want to be able to look at it and say, okay, is this broken in a way that a human can quickly look at something and say, oh, that dog toy is falling apart. A robot is still learning how to do that reliably every single time to say, we can't send that to a customer.

All right, Liz, give us a sense of this new Amazon warehouse in Louisiana. How big is this facility? Yeah, absolutely. It's more than 3 million square feet. And the building is going to employ eventually 2,500 people picking orders, loading and unloading trucks, managing the robotics, all that good stuff. So far, they've been open a little over two months. They've hired about 1,400 people. So they're still ramping up operations there.

And the idea here is that they want to incorporate more automation to help save on labor costs, speed up operations, and to make warehouses safer.

So for doing things like lifting heavy objects repetitively, are those what robots are being used for now? Yeah. So there's some automation at every different point that serves different kinds of functions. But one of the things they have, these robots that are able to roll across the ground kind of like a Roomba. And what they carry is they carry a stack of totes.

directly over to workers. And Amazon says that the robot is able to provide a tote to a worker at an ergonomic height so that people don't have to bend over, for example. Liz, do we have any idea how much of a bottom line impact these robots can have? And especially during the upcoming holiday season, can they simply pack millions more of these boxes? Amazon has not disclosed the

what a difference this makes, but they do say that it helps speed things up. Amazon said that this building has cut fulfillment costs 25% and is fulfilling orders 25% faster than some of its less automated sites. That was our reporter, Liz Young. Coming up, it turns out years upon years of Reddit posts are excellent fodder for training AI models. We'll find out why and what that means for Reddit's revenue after the break.

You want a straightforward path to your goals, but at Merrill, we know things may get in the way.

Or if new opportunities can put you at a crossroads, with the bull at your back, you get a personalized plan and a clear path forward. Go to ml.com slash bullish to learn more. Merrill, a Bank of America company. What would you like the power to do? Investing involves risk. Merrill Lynch Pierce Fenner & Smith Incorporated. Registered broker-dealer. Registered investment advisor. Member SIPC. A wholly owned subsidiary of Bank of America Corp.

AI companies need data so their apps can respond to users' questions and prompts with accurate results and in a conversational tone. Enter Reddit, whose text-heavy platform and growing collection of online human interactions fit the bill.

Plus, Reddit's willingness to sell its data to AI companies makes it stand out because there's only so much data out there to gobble up for free or purchase. Reddit recently reported its first quarterly profit as a publicly traded company, thanks partly to data licensing deals it made in the past year with OpenAI and Google.

For more on Reddit's newfound wealth and the limits of its data, we're joined by WSJ reporter Sarah Needleman. Sarah, we know there's a lot of text on Reddit, but why is that data so interesting and valuable to AI companies? Well, there are a number of reasons. The platform has been around for about 19 years. And during that time, people posted a lot of content.

comments. And what's interesting about Reddit, or at least what makes it a little bit different than some of its peers, is that users can respond to those comments with an upvote or downvote. They can also accumulate what's called karma, which are essentially like points that show you've been a good contributor to the platform.

And that's, you know, with the up and down vote, that's different than what you might see on other platforms where the content is organized by an algorithm. But when posts on Reddit get a lot of upvotes, those are the ones that you're more likely to see than the ones that are voted down because they are considered higher in quality. And that's the sort of thing that AI companies look for. They want high quality information and quality.

They're looking for a wide variety of information, too. So Reddit is divided into more than 100,000 so-called subreddits. And these are dedicated to all sorts of topics, just about everything you can possibly think of. And they can be very specific or they can be general. And that's really helpful for AI because it really covers a lot of ground, whereas other social platforms may cater to a specific group of people. So, for example, Discord is known for being popular among video game enthusiasts.

Strava is popular for fitness fans. But Reddit is for just about everybody on Earth and its demographics are really spread out. There is one other thing about Reddit that makes it attractive for the AI companies. And that is that because

Users are mostly pseudonymous. They just go by like a fake username. They tend to be more candid in what they post. And that's, again, something that's helpful for an AI tool that wants to be able to take users' queries and respond with accurate information and in a conversational tone, the way that we talk, not a robot.

For Reddit's business, this seems to be pretty great. How much money has Reddit made from some of these deals? Reddit has made a good chunk of change from these deals. It's still the amount of money that comes in from the data licensing is still much smaller than their main bread and butter, which is advertising sales. But that being said, with the first nine months of this year, Reddit's revenue category that includes the licensing deals we're talking about

grew to 81.6 million, and that's up from 12.3 million a year earlier. So this is like a category that's blown up. And so even though collectively, it's still small compared to the broader picture of Reddit's revenue pie, the fast growth is really interesting. And it's really exciting for investors, because this could be a long term opportunity. We don't know exactly how long these deals are for. But the companies are looking for more than just

what people have written in those past 19 years. They also want what's coming in right now, day after day. It's an ongoing, their thirst can never be quenched. They're constantly drinking from this fountain that is Reddit. And we're talking about a relatively high margin business. So they didn't have to put out a lot of costs to make this happen. Yeah.

Yeah, absolutely. Can we quantify how much data Reddit really has? Reddit did say that in the first half of this year, people posted more than 5.3 billion pieces of content to Reddit. And that's a 20.5% increase from the second half of 2023. And that seems like a pretty beefy amount. I will say, however, that private messaging chats, that content is not shared with the AI companies. So we wouldn't be counting that. And it does account for a large part of

The 5.3 billion pieces of content I just mentioned. Also, keep in mind, Reddit is not as big as some of its other social media peers. So while that number does seem big, and it is big, keep in mind, Reddit has something like 97 million daily users. Snapchat, for example, had 443 million daily users. In both cases, we're talking about as of the end of September.

Are there any downsides for OpenAI to be training on Reddit's data or for any AI company to be training on Reddit's data?

Reddit's data is based on what regular people are posting day in and day out. And these aren't necessarily experts. They have opinions that are wide ranging. And just because something is voted up as being very popular doesn't necessarily mean it's high in quality. Oftentimes that is the case. It is a logical conclusion, but that isn't always a guarantee. And so it's possible that some of the data that's being trained on is just flawed or biased and

And that is true of a lot of content on the internet. And so there's some judgment calls or some editing they may have to make along the way to correct that. But again, we have the signals, the upvotes and downvotes, the karma. These are all signals that help AI companies get a sense of what is high quality. And a lot of the AI companies, when they spit out results, they have some sort of language that warns readers to necessarily take this verbatim. But anyone with common sense should not take it.

anything verbatim from the internet and assume it to be true. That was our reporter, Sarah Needleman. And that's it for Tech News Briefing. Today's show was produced by Julie Chang with supervising producer, Catherine Milsop. Logging off, I'm Belle Lin for The Wall Street Journal. We'll sign back in this afternoon with TNB Tech Minute. Thanks for listening. You want a straightforward path to your goals, but at Merrill, we know things may get in the way.

Or new opportunities can put you at a crossroads. With the bull at your back, you get a personalized plan and a clear path forward. Go to ml.com slash bullish to learn more. Merrill, a Bank of America company. What would you like the power to do? Investing involves risk. Merrill Lynch Pierce Fenner & Smith Incorporated. Registered broker-dealer. Registered investment advisor. Member SIPC. A wholly owned subsidiary of Bank of America Corp.