A $500 Million Valuation for Reddit, the Home of the Web’s Most Popular Conversations

As Reddit raises funding at a valuation of $500 million, the home of the web’s most popular conversations is the internet’s surprise success in a world of higher-tech. 

Creating Conversations

A bulletin board, a news-sharing aggregator, a power house of justice, or the “Front Page of the Internet”: whatever you call it Redditis now a dominant force on the net.

The ever-growing site, which currently has 135 million unique monthly users and 7,398 independent communities (or subreddits), allows users to post, discuss, and share anything they want from cat GIFs and science trivia to mainstream politics and specialist niche news. An up-voting system then lets the users push the hottest stories to the top, and inevitably, into the viral zone.

Indeed, despite having a basic user interface that has seen little change since launch in 2005, Reddit now claims a position as the real-time interpreter of what’s on the move. It is the place where the most important conversations happen, and the first port of call to spot the buzz. A large part of the blogging world – from The Huffington Post to BuzzFeed – should probably extend their thanks. Reddit has become our mainstream media.

Ask Me Anything” sessions – AMAs to those in-the-know – with academics and CEOs, or celebrities and politicians (Bill Gates, Arnold Schwarzenegger, Madonna and Barack Obama have all logged on) offer Reddit some extra buzz.

And so, with a cache like that, it’s no surprise to hear that Reddit is apparently raising funding at a valuation of $500 million. Andreessen Horowitz and Sequoia Capital, two tech-hot venture capital firms, are rumoured to be involved.

Jump Starting Success

But Reddit’s current notoriety is a long way from its early days. In 2005, two young graduates of the University of Virginia, Steve Huffman and Alexis Ohanian, were trying to raise funding for their preferred idea, an online food-ordering site. But when the pitch bombed they rushed together a new idea, what they called a “top 40 for interesting content”. They secured themselves $100,000 in Y Combinator seed funding, and Reddit was born. But it was only after the duo spent the first months posting their own content submitted under the guise of fake users that Reddit was up and running.

In 2006 Reddit was acquired by Condé Nast for an undisclosed amount, and in 2011 changed status, becoming an independent subsidiary of Condé’s parent company, Advance Publications. And whether the founders sold out too early or not, they certainly chose the right buyer. Reddit, a small-fry website amongst Advance Publication’s portfolio of world leading print titles, has been left alone to thrive. Whilst the founders have moved on, their ethos is still at the centre of Reddit.

Predicting Profits

But the Reddit story has not made it this far without a blot, and the company’s commitment to freedom of speech has brought controversy. The recent stolen nude celebrity photo scandal, and Reddit’s involvement in wrongly identifying a number of “suspects” following the Boston Marathon bombing, are just some of the examples.

And Reddit has also remained unable to turn a significant profit. By valuing the community who make it a success, Reddit has so far rejected the traditional money-making methods of advertising and sponsored promotions. Instead the company has made efforts to drive revenue through its online store, a premium subscription serviceReddit Gold, a standalone Reddit AMA app, and reddit.livewhich offers users real-time updates. But if the new valuation at $500 million turns out to be true, it’s likely that Reddit has identified another, more powerful, source of future revenue.

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