Reddit becomes reddit Inc.

http://blog.reddit.com/2011/09/independence.html

by markgx • 15 years ago

334 115 15 years ago

blog.reddit.com

thurn• 15 years ago

Can someone with more business know-how tell me how a company like Condé Nast benefits from making Reddit an incorporated subsidiary? It doesn't sound like all that much is changing, honestly.

mibbit3• 15 years ago

From the other posted article it looks like it will make it easier for them to start selling it off...

"The move comes after Conde talked to several investors about selling off a chunk of the company as part of the spinout;"

jacoblyles• 15 years ago

Selling a minority stake to outside investors is a good way to capitalize the company and give it the resources it needs to grow. Reddit has been notoriously resource-starved. A few hundred million dollars in a partial equity sale fixes that without draining Conde Nast.

gyardley• 15 years ago

I suspect Condé Nast's advertising operations didn't mesh well with Reddit's audience. Within Condé Nast, they were likely just an irritating drain on resources.

If Reddit's going to monetize effectively (and that's a big 'if'), it needs to be operationally independent so it can get creative.

dkokelley• 15 years ago

Instead of Reddit being a division on the Org. chart of C.N., Reddit Inc. shares are held by C.N. This means that Reddit can take on equity investors to finance operations and operate externally of any organizational influence Conde Nast had (which may not have been much anyways).

guan• 15 years ago

Reddit, Inc., will be owned by Advance Publications, which also owns Condé Nast, so it will be a corporate sibling of CN and more independent of it. Advance Publications owns other divisions in addition to CN, including a newspaper division that presumably does not is not influenced very much by the magazine folks:

http://en.wikipedia.org/wiki/Advance_Publications

kn0thing4• 15 years ago

Condé Nast seems to have every intention of 'funding' this new company itself (that is, without raising outside investment), so it's really just removing the "Condé Nast" from the process but maintaining ownership.

Granted, they were rather autonomous (one reason why I know I stayed until the end of my contract) but with money in the bank, the new CEO can simply do things as easily as any of the other startups in the top 50. Before, that money would be going through some other big company approval process -- e.g., if reddit wants to hire away a fabulous programmer, it simply gets done.

If things go well, reddit continues to grow and increase its value, at which point, it could potentially be acquired, IPO [RDIT?], or just become a cash cow for Condé Nast.

0x12• 15 years ago

If they keep Reddit as part of the mothership they can't sell it whole or in part. This is the first step in a process of divestment. The valuation that they are tossing around should be seen as the asking price if and when they do. It would highly surprise me if that asking price was met or even approached by an outside party.

Note that a deal at that valuation did not go through, and that likely that valuation was an important reason why it didn't.

SoftwareMaven• 15 years ago

One issue not mentioned here is that Condé Nast has particular rules about staffing that are good for magazines but bad for web sites. These kinds of issues need to be worked through politically every single time they come up.

As a stand-alone entity, they won't be subject to those rules, and Condé Nast doesn't have to worry about the rest of its companies saying, "but reddit did it".

xsmasher• 15 years ago

I'm interested in learning more about these rules. (This is not snark - I don't know anything about the magazine biz.)

nohat2• 15 years ago

Sounds like they may be making it more attractive as an aquisition target.

citadrianne• 15 years ago

You underestimate the ability of a large media company to squash innovation and morale. They might get outside investment so they can iterate harder/better/faster but Advance wants to hold onto this goldmine.

From http://www.betabeat.com/2011/09/06/a-startup-is-reborn-reddi...:

Greater independence will mean reddit can go to a new board, which includes reddit OG Alexix Ohanian, who had been serving as an “advisor,” as well as representatives from Conde and Advance, with proposals instead of jockeying within Conde’s budget. Reddit doesn’t plan to seek outside funding at this time, Mr. Martin said, but it’s not out of the question. “It’s a lot more more of a startup,” he said. “It’s able to happen faster with less overhead.”

nohat2• 15 years ago

Hmm, in that case they seem to be making a reasonable move: remove to some extent the overhead of Conde Nast. If that's the primary motivation, then I am impressed that Conde Nast can recognize it's limitations, and give reddit a chance to grow outside of their oversight. That being said, my impression was that Conde Nast was remarkably hands off.

pointyhat2• 15 years ago

Perhaps it's dying and they are trying to cut it loose first.

cryptoz2• 15 years ago

I can't tell if you're serious or not. In case you are...what makes you think reddit is dying? All indications point to continued explosive growth. I've been on reddit for about 5 or 6 years and it's pretty clear the site goes through growing pains but consistently gets over them. Overall it is better and better every day, with more lively intelligent discussion than even in the beginning days.

philwelch6• 15 years ago

There might be a really cool cafe on my block, and I might go in there and have lively discussions with intelligent people, and there might be more and more people in that cafe every day, but if the cafe doesn't sell any coffee it goes out of business.

gigantor• 15 years ago

They're currently experiencing explosive growth: http://soshable.com/reddit-traffic-has-exploded-in-12-months...

They have also, in my opinion, implemented mainstream and niche news so well (via subreddits) that they're not in immediate danger of being replaced by another aggregate news and/or niche site.

evan_2• 15 years ago

>They're currently experiencing explosive growth

so was Digg, and Fark before it, and Slashdot before that.

Am I wrong? History shows that these sites are basically popular for a certain amount of time, and then they lose huge market share when they inevitably do something to sour the community-at-large (like trying to monetize).

philwelch6• 15 years ago

Traffic growth is a cost, not a revenue. Usually there's some revenue associated with that traffic growth, but there's no indication Reddit's infamously anti-commercial user base is very easy to monetize.

pbhjpbhj• 15 years ago

>they're not in immediate danger of being replaced by another aggregate news and/or niche site //

I'd say they're not in immediate danger because they're not making a profit and most businesses that have the sort of money needed to support such an effort (ie the large traffic) don't want to waste money on something that's not going to make a profit. Indeed Conde Nast appear to have only recently and quite reluctantly allowed reddit some more resources.

Explosive growth in traffic, yes, what's the balance sheet look like.

dchuk• 15 years ago

In terms of traffic and user base, they're killing it. In terms of revenue (and most importantly, profit), I'm sure they've been a massive let down for Conde Nast.

Now they spun them out so other people can finance it without it being their sole burden.

pointyhat2• 15 years ago

That summarises my point perfectly.

cowkingdeluxe• 15 years ago

Seems like what happened to digg. Didn't Digg balloon to 75+ employees at one point? I wonder if Reddit is going to head down that same route.

kn0thing4• 15 years ago

As long as I'm on the board, I'll do everything I can to stop any nonsense like that.

specto• 15 years ago

Good luck, it looks daunting.

staunch2• 15 years ago

My first thought when they said you were on the board was "Well at least we'll have an honest witness to the train wreck that's likely to ensue."

I really hope they actually listen to you. Would you consider taking the CEO job there? Best possible outcome.

markkat• 15 years ago

Usually, I wouldn't put much stake in a statement like that. But for you sir, I make an exception.

Best of luck, and congratulations.

barredo2• 15 years ago

So. Who will end up buying this new reddit with high traffic and lots of user affection?

How much? I'd say 50M$ would be adequate.

jkaljundi2• 15 years ago

Would be really amazed if Reddit would sell so low, considering their fast-growing visitor numbers. http://blog.reddit.com/2011/09/how-reddit-works.html

klbarry• 15 years ago

However, Reddit users are notoriously cheap and anti-commercial.

barredo2• 15 years ago

Remember Reddit Only has one ad per pageview

dotBen• 15 years ago

This change is all about setting up reddit so that it can better handle future growth and opportunities.

FTFY: This change is all about setting up reddit so that it can be be sold.

argus• 15 years ago

My thoughts exactly... Reddit is a misfit in the overall organization and with the current exponential growth it's experiencing, it's the best and most leveraged time to sell it off. Would be a strategically good decision IMO.. I'm surprised this comment isn't voted higher..

emmett6• 15 years ago

Sad to see them hiring an outside CEO instead of promoting from within. I don't think hired CEOs work so well for products that are still at the stage Reddit is at.

They need someone with deep, intimate knowledge of the community and the product. The best source for that in my opinion would be internal.

lobster_johnson2• 15 years ago

Reddit is currently a small team of developers, so there's really no "within" to promote from. I don't know them personally, but I somehow doubt any of the developers wants to be CEO.

emmett6• 15 years ago

Who says developers can't be CEOs?

Zuckerberg, Gates, Page, ...

jedberg3• 15 years ago

I believe they only have one person from within still there that could do it.

emmett6• 15 years ago

Do they need more than one CEO?

Sounds like you should have said "they still have someone within who could do it!"

p0ss• 15 years ago

Like hueypriest hasn't become enough of an egotistical megalomaniac as it is, he has been banning entire reddits, creating an army of super mods and shadow banning anyone who questions his decisions. Great CEO material right there...

jillsy• 15 years ago

Says the guy who was promoted to CEO last week :-)

joshklein3• 15 years ago

The question for reddit isn't whether or not people enjoy it and want to spend time on it, but whether or not the owners can make money selling those people's attention. The traffic to reddit - while admirably large - is relatively unattractive to most advertisers.

"Reach" (impressions/eyeballs) are only important insofar as you're talking to someone who might buy what you're selling (see "relevancy"). The sub-reddit system could theoretically segment the audience in interesting ways, but other than r/gaming, there aren't many natural industry fits amongst popular sub-reddits.

Anecdotally, the audience would also seem to be advertisement-averse. An advertiser should be willing to pay network prices for the audience (i.e. pennies CPM), which makes it a nice living for a small group of folks living off their passion, but pretty useless to a Condé Nast trying to run a media empire.

I think the business model in a reddit-like site could be selling curated content in other media, e.g. a meme-series of coffee table books. Think Harry Potter, not Oprah.

If you're in the content game, your business's value is in having the attention of a group of people. Your first attempt to monetize that asset needn't be to sell your audience's attention to someone else, in this case undermining your ability to keep their attention. Instead, you should focus on bringing things your audience wants - and would pay for - to them. Sometimes that means you need to make the things they want to buy instead of shilling them for someone else, because no one sells what your people want.

Condé Nast isn't built to do this.

kn0thing4• 15 years ago

Nailed it, joshklein. In fact, publishing xkcd and SMBC (along with the other breadpig products) has taught me a few things about that world. I'm hoping reddit makes good use of them.

joshklein3• 15 years ago

The founder of reddit throwing a "nailed it" at me is kind of a swoon-worthy moment. Thanks.

smokinn• 15 years ago

Cheezburger Network seems to be scooping up the business model you're mentioning, bringing the 4chan and reddit memes that are likely to have a broad audience into the mainstream and monetizing them.

weinzierl• 15 years ago

"The sub-reddit system could theoretically segment the audience in interesting ways, but other than r/gaming, there aren't many natural industry fits amongst popular sub-reddits." In my opinion this is only true for a few (admittedly most popular) subreddits like r/funny and r/wtf and everything nsfw . Nearly every subreddit that I read has an industry that fits, r/photography -> photo gear, r/parenting -> baby stuff, r/science -> journals and books, r/somethingimade -> etsy, etc. I'm also sure that reddit knows a lot more about my interests than google and facebook together. But maybe that's just me...

eli• 15 years ago

Gaming isn't even an especially lucrative market in terms of ads.

Now, if they had a /r/PharmaExecutives...

rmc2• 15 years ago

Exactly, Some more examples: r/motorcycles r/programming r/$PROGRAMMING_LANGUAGE r/linux etc.

The NSFW ones are tricky. On one hand there's a lot of money in porn. But most of the content there is either stuff from porn companies (that would be paying for ads), or amateur stuff, and would an amateur audience like porn company ads?

joshklein3• 15 years ago

You're not wrong by any means, but it's also a question of scale and purchasing power. There's no doubt that r/parenting is filled with people worth talking to about, say, baby products. But then look at the advertising sales minisite for Babycenter.com[1]; a company like Johnson & Johnson isn't going to bother with r/parenting. Smaller companies might be interested, but small companies don't spend much money on ads. When they do, they mostly spend it on Adwords.

Of course the joke here is that J&J bought Babycenter. If I were a category-specific CPG company, I'd cut out the publisher middleman, too.

Ad networks & exchanges lead us to think there's a perfectly efficient & liquid market for ad space, but there's a real scaling problem for big advertisers that leads them to stick with big publishers. Quality control on r/parenting would be a concern.

[1] http://www.babycentersolutions.com/

fabiandesimone4• 15 years ago

Some time ago, the Reddit community expressed their interest to have an @reddit email account (they were willing to pay for POP access, etc.). I tried to contact the Reddit admins by Reddit messages, email, Facebook, etc, because we can provide them with @reddit mail accounts in no time and scalability is not an issue (we have installations in some of the biggest ISPs in the world) and it would cost them nothing as we were wanting to do a rev-share deal. Sadly I never heard back.

There's an opportunity to monetize Reddit users, even if they seem somewhat far from the core product.

rmc2• 15 years ago

How much have people said they'd pay? I doubt it'll be that much. How can you do it for free? The email market seems to free now, can you really make money by selling email?

trafficlight• 15 years ago

It's not really that far from their core product. To me, Reddit is this big clubhouse where you get all of the references and in-jokes. Having a Reddit email address is just one more thing that shows you belong.

bane2• 15 years ago

In my experience, I've gotten really poor responses from the Reddit admins almost every time. When I say poor I mean 'none'.

I don't think it's a function of them being bad or lazy, but being such a small team for such an enormous site. I can't imagine being the sole community manager for such a monster. You have to triage between "will answer tersely" and "will ignore". And unless it's a lawsuit or a fire about to burn down the server room, almost everybody seems to end up in "will ignore".

philwelch6• 15 years ago

Even something like coffee table books would be a nightmare to get all the rights lined up. Having users post content on an open website allows you to shrug off a lot of these problems compared to actually publishing it yourself. A lot of the content on Reddit consists in writing from people using throwaway accounts they'll never check again (i.e. /r/IAmA, /r/AskReddit, etc.) or in "borrowing" images from pop culture or random strangers where it may be impossible to ever track down or secure the rights for (i.e. /r/vertical and /r/adviceanimals).

And there's nothing stopping someone other than Reddit from monetizing all that content the same way. If I wanted to, I could send private messages to hundreds of Redditors and get permission to include their comments in a self-help book gleaned from AskReddit comments, and Reddit would have absolutely no advantage over me in doing this, nor any way to stop me. As far as any content on Reddit goes, the story is the same way. Just as Hacker Weekly operates independent of YC and the people who run HN.

I think if you want to monetize Reddit, monetizing the audience isn't the only way. There's no reason Reddit can't, aside from having subreddits, sell paid hosting for completely separate, possibly private reddits that don't connect to Reddit itself.

whatusername• 15 years ago

Wasn't that their original business model. I don't think it went very far (although it got them to a ramen level profitability).

They also have things like /r/dragonage taht was setup by EA (possibly with a fee?) to promote the game

zck• 15 years ago

The rights are already lined up. From Reddit's TOS (http://www.reddit.com/help/useragreement):

>...you agree that by posting messages...you grant us a royalty-free, perpetual, non-exclusive, unrestricted, worldwide license to use, reproduce, modify, adapt, translate, enhance, transmit, distribute, publicly perform, display, or sublicense any such communication in any medium (now in existence or hereinafter developed) and for any purpose, including commercial purposes, and to authorize others to do so.

In fact, reddit has already used user content to create products. They've done shirts (http://store.xkcd.com/reddit/#Jawsbackwardstshirt) and posters (http://store.xkcd.com/reddit/#Cuiltheoryposter) based off of comments or submissions.

bane2• 15 years ago

r/gaming, there aren't many natural industry fits

I wonder if then that speaks to interesting business opportunities? There appears then to be a misalignment between traditional industries and what people are actually interested in.

philwelch6• 15 years ago

Well, r/trees suggests an interesting business opportunity, but that's illegal. Lots of other subreddits (/r/mensrights, /r/politics, /r/worldnews, /r/atheism) are hotbeds of demagoguery and outrage, which may be good for political fundraising but little else. (It's possible to sell demagoguery and outrage--Rupert Murdoch and Arianna Huffington have taught us that much--but I don't know about selling it people who are already getting it for free.) And then of course, pictures of cats and formulaic jokes are another thing.

PostOnce• 15 years ago

/r/forhire could compete with craigslist if it was managed right, I think.

they could do a /r/forRent, etc. also. Reddit has a lot of opportunities. Let's hope the CEO can figure out how to captialize on some of them.

shoham3• 15 years ago

Buyer of Reddit self-serve ads here, and I think that their approach is interesting, even exciting, and in the long-term potentially very profitable. Some of the issues come down to the ad averse culture (as you pointed out), not just of the community at large but even of the staff on the back-end.

There are great little ideas that are not being managed effectively in my opinion. For instance, it costs more to target a particular subreddit than the whole website, which is not particularly good for the kinds of small businesses that could really benefit from the service (there's also a daily minimum -- $20/day for site-wide, and $30/day for subreddit buys -- compared to Google, and Facebook's $1/day minimum).

Secondly, the true genius of the Reddit ad system is that your ad looks a lot like a regular submission. Think about the power of Adwords -- your ad looks just like the content your potential buyers came to consume anyway.

Thirdly, and here is the double-edged sword -- in the comments, a conversation (actually, a long-term, multiparty conversation) can build around your company. The power of this is truly great; however the implementation has been spotty. Every post on Reddit is submitted via a community with rules, and moderators. The one exception to this is self serve ads. What you end up with is a lot of spam and trolling in your self-serve ad, which defeats the whole purpose of having the comments in the first place.

Unfortunately, in my experience, the admins aren't sure what to say and fallback on free speech adherence, etc. although many posts and comments are taken down in various subreddits due to a lack of observance on the part of the commentor or OP to that sub's rules.

TL;DR: Reddit's self-serve ad system is a billion dollar idea in the making, but only if the culture of the community and more importantly the admins allow it to be so.

twidlit• 15 years ago

Here are a bunch of monetization ideas that wont divert too much from their culture:

1. paid mobile apps 2. paid API access 3. build an internal Flattr like service 4. offline events 5. go compete with Disqus

epicviking• 15 years ago

I can't even begin to imagine what Reddit would be like if Karma had a monetary value. Karma whore-ier I'd presume.

krashidov• 15 years ago

I've mentioned this before in a different comment: http://news.ycombinator.com/item?id=2948396

I would like to see reddit release a product where I, can implement a forum system much like reddit but completely autonomous and hosted on their own service - basically a replacement to the dreaded phpBB. Hell, I'd pay for it.

mason55• 15 years ago

The reddit code is open source

scottmcf• 15 years ago

That's true, however it's not really in a highly usable state. I believe it's one of their aims (although, that's been the case for a while) to remedy that situation, but you'd have a tough time using it in this way at the moment.

jedberg3• 15 years ago

You can already do that. You can assign a domain name to a reddit and they style it, which basically gives you exactly what you want.

fecklessyouth• 15 years ago

Reddit could become an email replacement. My college campus has all-campus email that anyone can send to. Discussions in email simply don't turn out well, there's no good way to respond to just one person while letting everyone view it, there's no good way to voice agreement or disagreement, and it's mixed in with much more important information.

Reddit would be perfect for it, and for campuses with less generous email policies. It doesn't interfere with work communication and its better suited for the sort of discussions and arguments that email often plays host to.

As a student, I can't speak much for companies. And I'm aware of Reddit's recent College promotion and how easy it is to make, moderate, etc a new Reddit. But a dedicated Reddit integrated with college websites or email could be a profit stream.

ck2• 15 years ago

3M pageviews per hour? Whoa, that's staggering.

garydevenay• 15 years ago

I have to say, although Reddit is a large and possibly even influential service. I can't agree that they will be able to influence the news industry greatly (I use greatly loosely as the industry is so large).

I think an online service could revolutionise the way we all read and digest news, Reddit is the first stepping stone in this revolution but I expect it to be overtaken soon by a superior service (The same way Facebook has MySpace).

IAnsari• 15 years ago

Reddit is cool. Get a CEO who is cool.

Reddit becomes reddit Inc.

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