The front page of the internet
Reddit profile
Adsider explains the company's advertising model, creative monetization and the path from $100K to $3 billion

January 27, 2021

Julia Danylenko

Slogan
the front page of the internet
internet, media
Area
Founded
2005
Market cap
$3 billion
Founders
Steve Huffman, Alexis Ohanyan
Users
Website
Head office
San Francisco
Description
Reddit is a news aggregator, entertainment site and social network or discussion forum, divided into thematic sections — subreddits. Reddit users add content to the platform that other redditors can comment on and upvote or downvote.

The algorithm displays the posts that received the most upvotes on the Reddit home page. Upvotes also add to the karma of the author: the level of karma determines whether the user has the opportunity to post or leave comments in certain subreddits.
Leadership
Steve Huffman
Co-founder and CEO
Jen Wong
COO
Christopher Slow
CTO
Reddit: founded and lost
Reddit emerged in 2005 when two university friends, Steve Huffman and Alexis Ohanyan, raised $100,000 from Y Combinator. In the same year, they gave editors the opportunity to leave comments on the website, a feature that will later become the defining aspect of Reddit. The next year, media company Conde Nast Publications bought Reddit for $10 million. Both Hoffman and Ohanyan later admitted that the decision to sell the company at the time was a mistake, and they underestimated the prospects of their startup. The mistake is the right word: in 2020, during the next round of funding, Reddit was estimated at $3 billion.

The name Reddit is deciphered as a derivative of read and edit, as well as a play on words "I read it".

Reddit emerged in 2005 when two university friends, Steve Huffman and Alexis Ohanyan, raised $100,000 from Y Combinator. In the same year, they gave editors the opportunity to leave comments on the website, a feature that will later become the defining aspect of Reddit. The next year, media company Conde Nast Publications bought Reddit for $10 million. Both Hoffman and Ohanyan later admitted that the decision to sell the company at the time was a mistake, and they underestimated the prospects of their startup. The mistake is the right word: in 2020, during the next round of funding, Reddit was estimated at $3 billion.


The name Reddit is deciphered as a derivative of read and edit, as well as a play on words "I read it".

Key events
1
2005
University of Virginia graduates Steve Huffman and Alexis Ohanyan created the first version of Reddit. In June, they received $100,000 in funding from Y Combinator, and at the end of the year merged with Aaron Schwartz's Infogami. Schwartz became a co-founder of Reddit.

2
2006
Condé Nast bought Reddit for $10 million and moved the company's headquarters to San Francisco. A month later, Aaron Schwartz began complaining in his blog about the new "corporate" atmosphere.

3
2007
Aaron Schwartz left the company.

4
2008
Reddit gave users the ability to create their own sections of the website, or subreddits, and switched to open source.

5
2009
Both founders, Huffman and Ohanyan, left Reddit. In the same year, the company completely transferred its data to Amazon Web Services.

6
2010
Reddit has released a new mobile version and a paid subscription — Reddit Gold. The company tried to find a new way to monetize.

A Reddit Gold subscription cost $3.99 per month

7
2011
The company gained operational independence from Condé Nast. It gave Reddit the opportunity to appoint a CEO, look for new ways to monetize and hire a marketing team.

8
2012
Yishan Wong, who previously worked at Facebook and PayPal, becomes the new CEO of Reddit.

9
2014

The year turned out to be quite eventful:

  • Reddit has raised $ 50 million in investment. The main investor in Round B was Sam Altman of Y Combinator.

Peter Tiel, Jared Leto, Snoop Dogg and Yishan Wong also took part in the funding round.

At this stage, Reddit planned to create its own cryptocurrency

  • Reddit has purchased the Alien Blue mobile app.
  • Yishan Wong resigned as CEO, Ellen Pao became acting CEO.
  • Reddit co-founder Alexis Ohanyan has returned to the company.
10
2015
In May, Reddit introduced new anti-bullying rules and announced the creation of Reddit Video. In July, Steve Huffman returned to Reddit and became the company's new CEO.

11
2017
The company decided to abandon the open source policy and closed its code again.

12
2018
Reddit changed its design and logo.

13
2019
The company received $300 million in financing in the next round of investments, of which $150 million from Tencent Holding Ltd.

14
2020
Alexis Ohanyan has resigned from the board of directors.
Following the #blacklivesmatter protests in the United States, Reddit announced plans to change the site's content policy to prevent racism.
In December, Reddit acquired the Dubsmash video platform.
Reddit in numbers
>2,5 million
subreddits were on the site as of December 2020.
303.4 million
posts on Reddit in 2020 — 52.4% more than in 2019.
2 billion
comments under the posts — 18.6% more than last year.
435 thousand
votes were received by the most popular post of the year.
Monetization and marketing
Reddit's revenue in 2020 was $164 million against $120 million in 2019. The company is monetized through advertising, paid subscriptions and rewards.

Advertising


In 2019, Reddit earned more than $100 million in advertising. In 2020, according to WSJ, the website's revenue from advertising was to grow by 70%.

Like most businesses, Reddit suffered from a coronavirus pandemic in the second quarter of 2020 — direct advertising revenue fell to 27% year on year from 40% in the first quarter. But in the third quarter, Reddit gained momentum again — up to 83% growth in advertising revenue compared to the same period in 2019.

Reddit offers advertisers three levels of inventory — advanced, standard and limited. Customers have the option to disable comments on their ads and block their ads from appearing next to individual keywords or in certain subreddits.

Reddit Premium


Reddit Premium costs $5.99 per month or $49.99 per year. For this amount, the user gets the opportunity to browse the website without advertising, get 1000 coins during the registration and 700 coins per month. The company does not disclose the number of paid subscribers.

Reddit also has its own reward system, which can be given to the author of an interesting publication or apt comment. You can buy rewards for Reddit coins that cost real money: 500 coins will cost the user $1.99.

Rewards

The cheapest reward

Silver — 100 coins (~40 cents).

The most expensive reward

Ternion All-Powerful — 50,000 coins (about $125).
Plans to invade new markets
In a December interview with the Wall Street Journal , Reddit chief operating officer Jen Wong said the company plans to increase revenue by expanding its advertising business into new international markets.

Reddit will open 3-5 foreign offices each year, including Europe, the Middle East and Africa.

Reddit plans active hiring in the next 12 months — the company's management wants to increase the number of employees by 75% by the end of 2021.

At this time, large advertisers do not see Reddit as a "solid" choice for allocating their advertising budgets. According to GroupM, the website is now more in the experimental category — and this imposes restrictions on the size of allocated budgets. More than 10 GroupM customers are currently advertising on Reddit, and the number is growing. Jen Wong wants to prove to big companies that advertising their products on Reddit is not scary.
Top 10 subreddits
Subreddit ............................. Number of subscribers

/r/announcements .................. 80,972,327
/r/funny ................................. 34,942,903
/r/AskReddit .......................... 30,987,366
/r/gaming .............................. 29,099,784
/r/aww .................................. 27,792,097
/r/Music ................................ 26,758,361
/r/pics ................................... 26,482,511
/r/science .............................. 25,820,102
/r/worldnews ......................... 25,609,819
/r/videos ................................ 24,642,802
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