Start-up ProRata.ai valued at $130mn after signing up UK publishers

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ProRata.ai, a US artificial intelligence start-up aiming to bring greater fairness in how media groups are paid for content, has agreed licensing deals with publishers including Daily Mail-owner DMG Media, the Guardian and Sky News.

As part of the deal, which is set to be announced on Wednesday, DMG Media will acquire a stake in ProRata in a funding round that people familiar with the situation said would value the group, which was founded in January, at about $130mn.

Nicholas Thompson, chief executive of The Atlantic magazine, another partner to ProRata, will also join the board of directors of the LA-based start-up.

ProRata, which is launching its AI-powered search engine next month, is offering a unique model to media companies in publishing, music and video that aims to pay fairly for the usage of their content. It has developed technology that pays publishers per use of their content in generating AI answers and searches.

The group will share half the revenue from subscriptions to its platform with its licensing partners, which already include Universal Music, Axel Springer, Financial Times, The Atlantic and Fortune.

The model aims to address the concerns in the media industry over AI start-ups stealing their content to train and provide up-to-date responses to users.

This has led to deep divisions between the media and tech industries: Rupert Murdoch’s Dow Jones and the New York Post are suing Perplexity AI over an alleged “brazen scheme” to rip off their journalism, while the New York Times has filed a similar lawsuit against OpenAI.

Some AI start-ups have sought to sign commercial partnerships and licensing agreements with publishers, including News Corp and the FT, which typically include an upfront amount and a licence fee every year. 

Bill Gross, founder of ProRata and chair of tech start-up incubator Idealab Studio, said there were revenue sharing agreements with creators across platforms such as Spotify, YouTube and Apple News. 

But for “generative AI”, he said, “there is no revenue share right now because it’s not as easy of a thing to measure. We think that’s unfair. That’s not sustainable for publishing, for creativity, to be able to just shoplift content and use it.”

Gross has been credited as the inventor of pay-per-click keyword internet advertising, which has been the foundation of the multibillion dollar digital advertising industry. 

He compares the behaviour of rival AI companies to how Napster was ripping off music two decades ago. “What the AI companies are doing today is crawling the web, using it and not sharing any revenue. We feel this is the future, and we’re trying to both invent it, protect it, and scale it.”

ProRata wants to license the technology behind its search engine to other generative AI companies. “If you adopt this business model, this will end your lawsuits, because now you’ll be sharing revenue properly.”

Rich Caccappolo, vice-chair of DMG Media, said that it was the first UK news publisher to take an equity stake in ProRata, which he described as “a vital first step towards advancing accurate and fair attribution and promoting transparency”.

Sky News executive chair David Rhodes said: “ProRata’s solution helps advance high-quality, impartial journalism across AI platforms and publishers.”

ProRata’s technology analyses AI output, measures the value of contributing content and calculates proportional compensation. ProRata has submitted patents for its tech that are awaiting approval.

Other investors include Mayfield Fund, Revolution Ventures, Prime Movers Lab and Idealab Studio.