How to Monetize User Data Like Reddit (Without Being Sketchy)

We’re fresh on the heels of the Google and Reddit version of “Let’s Make a Deal.” To the tune of $60 million per year, tech behemoth Google has been granted real-time access to its catalog of user-generated content for the purpose of training Google’s AI models.

As Reddit moves toward going public, the $60 million presents itself as a viable new revenue stream, perhaps setting a precedent for other tech companies to follow in their footsteps by turning user data into a new revenue stream in a legal manner. Hey, if Reddit can do it, you can do it too!

Let’s first take a gander at how Reddit and Google are pulling this off, then explore an option that can make a business cash while also fostering loyalty from their users:

 As it pertains to Reddit users, the legality comes from the Reddit Terms of Service agreement. When creating or submitting content to Reddit, users agree to grant Reddit a “worldwide, royalty-free, perpetual, irrevocable, non-exclusive, transferable, and sublicensable license to use, copy, modify, adapt, prepare derivative works of, distribute, store, perform, and display [the user’s] Content and any name, username, voice or likeness provided in connection with [the user’s] content in all media formats and channels now known or later developed anywhere in the world…and you irrevocably waive any claims and assertions of moral rights or attribution with respect to [the user’s] content.”

This is, of course, legalese for “We, Reddit, can pretty much do whatever we want with your data.” So, this is a legal monetization of data via licensing, however is it an ethical means of monetization? That’s for you to decide. Reddit is a big enough website with few viable competitors that it can, for the most part, monetize user data without any form of compensation given to users and not have to worry about losing a meaningful chunk of its user base.

One Reddit user, u/Morrissey_99, asked in the r/technology thread on the deal, “[So] do I get a part of that $60M Reddit? It’s my data you were using, after all”. The answer, of course, is no Morrissey_99 you will not. You agreed to royalty-free, perpetual, etc., etc., licensing of your data prior to using the Reddit product.

\User data is a hot commodity. Whether it’s AI training, quantitative trading, marketing measurement, or improving internal products and systems, it’s clear that data has tremendous value. Reddit’s data is worth $60 million annually to Google. That’s a lot. If you’re reading this, you’re probably not Reddit- or Google-sized, but you probably are sitting on a lot of data that can be productized and, in turn, monetized.

But how do you do that in a way that works for everyone? How do you do it in a way that is very cool 😎?  It’s pretty basic: be transparent and give users something they actually want in return.

Welcome to the revolutionary world of generally-speaking-do-things-in-the-opposite-way-of-Reddit-and-Google method monetization, where legalese takes a long walk off a short pier,  the Morrissey_99s of the world get compensated for their clearly valuable asset, and businesses open up a brand recurring new revenue stream from an asset they already have or can acquire with (relative) ease.

I realize monetizing data is technically not doing the opposite of Reddit, but it is perfectly alright to borrow goals (turn data into revenue) from Reddit, but probably not advisable to borrow their systems (make it so users can’t use your product without forking over their data).

Anyway…

Explicit Consent is Key, Rewards Entice

Whether it is the content generated on a website, app usage details, transaction history, or demographic information, the impetus is on the user to decide how that data can be used. Data privacy regulations like GDPR and CCPA make it abundantly clear users need to know what the heck is going on with their data and give them the options to decide whether the data can be used at all. The Reddit solution, essentially creating a gigantic blanket statement that allows them to do essentially whatever they want with the data while giving the user nothing in return other than the ability to use their product, is one way of going about things.

I don’t know if there’s any actual term for this type of “consent,” but for the sake of the blog, let’s call it “consent by acquiescence.” The vibe is, “This seems kinda messed up, but whatever, dude, if that’s what it takes.” Leaves a different taste in the mouth than the proposed alternative: “Hey, we’d like to use data a, b, & c for use cases x, y, & z. We’d like to use this data indefinitely, but each month, we can pay you $10, or we can upgrade your subscription to the paid version at no other cost. Oh, and you can opt-out whenever you want.”

This is an informal encapsulation of the mytiki (here’s my biz plug) ethos: data is valuable. Businesses should be able to use data, but only if they get consent from the user. That is covered by most laws. But the kicker is, hey, instead of alienating your user base by monetizing an asset they created without giving them something in return, why not, say, give them something in return for legally licensing their data to you? This turns the data into zero-party data--data willingly given to a business with the expectation of something of value in return.

We built technology to make this very thing possible. You can check it out at mytiki.com if you’re so inclined, but let’s focus our attention more on the logic behind why this model is the most intuitive.

It’s Legal, but It’s About True Ownership, Not Fine Print

The concept of zero-party data licensing is straightforward but game-changing in its execution. Unlike the all-too-common, lengthy terms of service agreements that users scroll through and accept without a second thought, zero-party data licensing is about empowering the user. It recognizes that the data created by individuals is their property — and that any use of this data by businesses must be both legal and fair.

What distinguishes data licensing from the “we-own-your-content” clauses hidden in the small print is the principle of ownership. Here, the user is not a passive participant but an active owner of their data. This means the data is not just observed or collected without explicit consent (as with first-party data), but it is owned and controlled by the individual.

The mechanics of a zero-party data license also significantly bolster its legitimacy. Participation is entirely optional; users retain full access to the app or website regardless of their choice to license their data. They are not sneakily enrolled but must make an active decision to participate. Moreover, the compensation is not vague or promised in the form of intangible rewards; it is explicit and tangible. This could be in the form of a cash payout, discounts, loyalty points, or other concrete rewards.

Zero-party data licensing agreements are immutable and digitally signed by both the user and the business, ensuring that the terms are enforced and protected. The user's ownership is not only recognized but respected and rewarded, making the process of data monetization transparent and equitable.

When users are dealt with in the data economy, businesses can foster trust and loyalty. Why hide behind complex legal jargon when you can forge a partnership with users based on respect for their data rights and clear, mutual benefits?

There are all sorts of legal questions that arise when it comes to monetizing data. Many are solved with user consent, and user consent is much more likely when they’re getting something of real value in return. If you’re sitting on data you can’t sell or are looking to source monetizable data in a way that genuinely interests users, zero-party data licensing is the best way to do it.

In summary:

1. It’s legal. But not in a Reddit-hired-some-lawyers-to-write-something-to-ensure-they-can-use-everyone’s-data-for-whatever-they-want type of way.
2. It deals with users to monetization. It’s their data, after all.
3. It allows businesses to create trust and loyalty by rewarding users and sticking to the actual terms of the agreement.
4. It’s specific.
5. It allows data to be utilized to its full potential with value-adds for everyone involved.

Conclusion

The Reddit-Google $60 million handshake shines a light on data monetization as a viable means of opening new, recurring revenue streams. The user data market is growing quickly. The rise of privacy initiatives coupled with growing user awareness of the value of their data brings about an obvious fork in the road when it comes to the way we as businesses use and monetize data: we can make slight modifications to the ways of old by baking a data ultimatum into terms of service agreements, or we can move toward strategies that directly involve and compensate the users generating the data.

User data will continue to generate interest from buyers in many fields, including the obvious cash cow of training AI. Product-led businesses are missing out on opportunities to add to their revenue by neglecting the potential for data itself to become a viable product. Zero-party data licensing is a novel but logical strategy for turning user data into revenue while building a loyal user base.

Take the story of Morrissey_99s and folks like them; it really hits home that users want to be recognized for their contributions. This isn't just about finding some middle ground; it's about coming up with totally new ways that respect what users bring to the table while also making business sense.