How Reddit Makes Money

Reddit Inc. is a social media website that enables users to form online communities, share ideas, photos and videos, post the latest trends and breaking news, and vote on content posted by other users. The website is known for its discussion forums, including its popular "Ask Me Anything" format.

Reddit makes money by selling advertising space and from an optional premium membership plan that allows users to turn off ads and enjoy other benefits. Reddit also earns revenue from data licensing and various products in the user economy.

Reddit's Industry

Reddit is a social media website that provides users with a network of communities whose users post news stories, images, videos, and links. A user's standing within these communities is determined by the content they share and its evaluation by other users. Reddit also is well known for its online discussion forums on politics, entertainment, and other topics such as r/Cryptocurrency. Reddit faces a long list of competitors, including Meta Platforms Inc. (META, formerly Facebook Inc.), X Corp. (formerly Twitter, Inc.), and Google parent Alphabet Inc. (GOOGL). Some lesser-known competitors include Digg, Tumblr, Quora, 9GAG, and Gizmodo Media Group.

Fundraising and Financials

Reddit was valued at $10 billion in its series F round of funding, which took place in August 2021. The company raised another $410 million in that round, which was led by Fidelity Investments. Reddit was valued at $6 billion after raising $250 million in its prior funding round in February 2021. Reddit previously received investments from Tencent Holding Ltd. (TCEHY), Sequoia Capital, Fidelity, Tacit Capital, and Snoop Dogg. Reddit has raised about $1.3 billion in total funding to date.

The company boasts over 82 million daily active users and more than 16 billion posts and comments on its website.

History and Leadership

The San Francisco, California-based company was founded in 2005 by Steve Huffman and Alexis Ohanian. The two were college roommates and founded the company soon after graduating from the University of Virginia. Reddit was acquired by Condé Nast Publications in 2006 and was subsequently spun off into an independent company in 2011.

Huffman is Reddit's current CEO and serves as one of the company's board members. Ohanian stepped down as a board member in June 2020, and asked that he be replaced by a Black candidate. Reddit subsequently named Y Combinator CEO Michael Seibel as Ohanian's replacement.

Recent Developments

in February 2023, James Rogozinski, who founded the WallStreetBets subreddit responsible for the meme stock craze of 2020, accused Reddit of trademark infringement and breach of contract for removing him as a moderator in April 2020, according to The Wall Street Journal. Reddit had accused Rogozinski of "attempting to monetize a community." Reddit issued a statement calling Jame Rogozinski's lawsuit "frivolous" saying it was "another transparent attempt to enrich himself."

On March 5, 2021, Reddit announced the appointment of Drew Vollero as the company's first chief financial officer (CFO). Vollero has more than 30 years of experience leading finance functions at different companies in order to position them for growth. He previously worked as CFO at Allied Universal and he also served as Snap Inc.'s (SNAP) first CFO.

The new appointment came as Reddit explored the possibility of going public. CEO Steve Huffman told the Wall Street Journal that the company was exploring an initial public offering (IPO). Reddit filed IPO paperwork in 2021, but postponed the event.

The Bottom Line

Since its founding in 2005, Reddit has grown to reach millions of active users, bringing in revenue from ad sales as well as premium memberships and other initiatives. As a social media company, it doesn't have the reach of competitors like Facebook or X, but it's still one of the top 10 most-visited websites in the world.