Reddit is poised to solidify its place in the AI gold rush by signing a content licensing agreement with an unnamed artificial intelligence company, according to a report by Bloomberg. The deal, valued at around $60 million per year, will grant the AI firm access to Reddit’s vast trove of user-generated content as training data for its models.

The agreement comes as Reddit prepares for an initial public offering, expected as early as next month. While going public has been on Reddit’s roadmap for years, the company had previously struggled to meet its lofty revenue goals. As of the end of last year, Reddit brought in $520 million in revenue – an impressive 20% year-over-year growth, but still short of a $1 billion target set two years prior.

Reddit had initially filed IPO paperwork in 2021 but postponed plans for a public debut as tech valuations declined. Now, with the AI deal providing a fresh revenue stream, Reddit is ready to test the public markets again. Advisers have reportedly recommended the company seek a $5 billion valuation for the offering. While substantial, that target is far below the $10 to $15 billion valuation Reddit could have achieved in early 2021 at the height of the pandemic tech boom.

The identity of Reddit’s AI partner remains undisclosed. However, the size of the licensing deal places it in the ballpark of agreements major news publishers have signed with AI leaders like OpenAI and Anthropic. Last year, OpenAI reportedly agreed to pay some publishers up to $5 million annually for access to articles and other content. Apple has also been seeking multi-year deals with major news companies worth at least $50 million each.

Reddit finds itself in an enviable position as AI companies scour the internet for training data. The site’s troves of images, conversations, and niche interest groups offer an unfiltered look at how people communicate online. Tech giants are eager to license such data to improve their AI systems after the questionable legality of simply scraping the open web without permission came under scrutiny.

Reddit has shown a willingness to leverage its valuable data aggressively. Last year, the company faced a massive user revolt when changes to its API pricing caused leading third-party Reddit apps to shut down. But Reddit refused to back down, ultimately waiting out the protests. The company has also threatened to cut off search engine crawlers from Google and Bing unless it could make training data deals with AI firms.

The AI licensing revenue comes at an opportune time for Reddit. It provides a new income stream to dazzle potential investors ahead of the IPO. Some recent tech IPOs like Snap and Meta Platforms (formerly Facebook) have struggled after going public. With slowing user growth and ads comprising the bulk of revenue, Reddit hopes its prized data assets provide a buffer against similar post-IPO turbulence. As AI permeates more of the economy, Reddit’s user-generated content could prove even more valuable.