The Real Value of Reddit
Image: Eric Milllette for Forbes
hen old mainstream companies buy hot young digital properties, it’s often a story of faux hipsters walking into trouble. Witness the New York Times Co’s stumbles with About.com, Microsoft’s $6.2 billion writedown after snapping up the aQuantive digital ad business and the biggest horror show of them all, Time Warner’s ill-fated hookup with AOL in 2000.
Not so for Advance Publications, the Newhouse-family enterprise famous for publishing the New Yorker, Vanity Fair and Vogue. Advance spent little more than loose change in 2006 to acquire Reddit, one of the internet’s edgiest news and comment sites. Now, Advance could be looking at a 30-to-1 jackpot on a fast-growing property that’s arguably worth $240 million or more.
“We did almost nothing to integrate Reddit into the rest of the company, and we probably should have done even less,” says Bob Sauerberg, the New York-based president of Advance’s Condé Nast magazine division. “We left Reddit in San Francisco and let it find its own way. Mostly, we wanted to make sure we didn’t screw it up.”
Reddit is a giant bulletin board made up of 185,000 active forums with their own obsessions: Science trivia, political arguments, videogame critiques, jokes and photos—lots of photos, of which more than a sprinkling are of cats or naked women.
Staffers hardly touch a thing. Instead, the site’s easy-to-post format turns scads of its young, mostly male, college-educated visitors into unpaid contributors, or Redditors. Despite a clunky user interface that has barely been updated since 2005, Reddit attracts 3.4 billion page views a month, putting it among the 70 most visited sites in the US and bigger by far than any of Advance’s other digital properties.
Reddit is way too bohemian to attract the elegant perfume and sports car advertisers that flock to Condé Nast’s upscale magazines, but it may not need big-spending sponsors to become a decent business.
By Forbes’ estimate, Reddit is a paragon of thrift, spending just $7 million a year to support a 22-person payroll and 75 servers rented from Amazon’s cloud. Those expenses are largely covered by a smattering of ads from movie studios, gaming companies, web domain registrars and the occasional big brand such as Autodesk.
“Reddit provides a super-engaged base and a ginormous audience,” says Aaron Magness, vice president for marketing at Coastal Contacts, which sells eyeglasses online.
Magness shrugs off the uproar over Reddit’s seediest posts, noting that Coastal advertises only on the site’s front page, which has filters that keep racy content away. “As long as we don’t participate in categories of Reddit that raise questions,” he says, “we’re safe.”
Big questions got raised last month over some of the site’s more offensive subreddits, and there are plenty of them, with names like upskirt, carcrash, rapejokes and PicsOfDeadKids. Most of that content is posted pseudonymously and lives on the outer edges of what’s tolerable under the First Amendment.
Last month, the website Gawker outed a 49-year-old computer programmer named Michael Brutsch for his role in “creepshots”, a subreddit specialising in voyeuristic photos of women. Brutsch closed his main Reddit account as his pseudonym Violentacrez was being exposed. Some Redditors avenged Brutsch by blocking Gawker links from appearing on Reddit, until Reddit’s 34-year-old CEO, Yishan Wong, called for peace.
“Look, I find this sort of content deplorable,” says Wong in an interview. “But when you support free speech, you very rarely end up protecting someone who is nobly in the minority. Most of the time you end up protecting—or appearing to protect—someone that everyone hates.”
Reddit’s notoriety today is a far cry from its early struggles to win attention on any basis.
The site was started in 2005 by two fresh University of Virginia graduates, Alexis Ohanian and Steve Huffman, after they couldn’t finance a previous brainstorm: An online food-ordering site. Reddit’s visitor traffic was so feeble at first that the founders spent hours posting content under a variety of fake names. Within months, a tech-savvy user base began to build. Ohanian created a zany aura, doodling up a goofy red-eyed alien named Snoo that became Reddit’s logo. Huffman, the engineer, cooked up clever algorithms that allowed users to vote intriguing submissions into prominence on the site’s home page, while dull material faded into oblivion. That made the site come across as being skillfully edited, even though software made the decisions.