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. Managed-ads campaigns that provide direct access to Reddit's sales team start at a minimum $50,000. The auction-based Reddit Ads platform requires a minimum bid of $3.50 CPM, but depends on the result of the auction.

Key Takeaways

  • Reddit is a social media website known for its discussion forums on politics, sports, entertainment and other topics.
  • The company generates revenue through advertising and an ad-free premium membership plan.
  • Reddit operates in the application-software segment of the technology industry, providing software allowing users to share media content.
  • The firm has signed a content and advertising deal with the NFL.

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. Reddit faces a long list of competitors, including Facebook Inc. (FB), Twitter Inc. (TWTR), 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 $3 billion in its latest round of funding that took place in February 2019. The company raised $300 million, led by a $150 million investment from Tencent Holding Ltd. (TCEHY). Other investors included Sequoia Capital, Fidelity, Tacit Capital, and Snoop Dogg. Reddit has raised $550.1 million in total funding to date.

The company boasts 430 million plus average monthly active users and 21 billion average screen views per month on its website. As of the end of March 2019 the company was on pace to post $119 million in U.S. ad revenues for the year and double revenues by 2021, according to a forecast by eMarketer. Following Reddit's latest round of funding, CNBC estimated that the company was pulling in an average revenue per user (ARPU) of approximately $0.30, far less than Twitter's ARPU of $9.48 and Facebook's $7.37 at the time.

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 both he and Ohanian are board members.

Recent Developments

Reddit signed a content and advertising deal with the National Football League (NFL) in September 2019. The league's players, executives, team personnel, and others associated with the NFL will take questions from Reddit's users via its "Ask Me Anything" format. The NFL will also produce a video series featuring the various guests. While Reddit is not charging the NFL a fee, both the company and the league will share in any revenue resulting from sponsorships associated with the videos.