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Full Version: Reddit Is Raising Funds Valuing Startup at $1.7 Billion
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Reddit is one of the few relics of the mid-2000s internet that has not only survived but thrived in recent years. Now venture capitalists are giving a major boost to the link-sharing website, with funding that will give the company a valuation of about $1.7 billion, two people familiar with the matter said.

In recent weeks, Reddit Inc. was looking for investments totaling about $150 million, said one of the people, who asked not to be identified because the terms are private. A spokeswoman for Reddit said no funding had been finalized, declining to comment further.

Steve Huffman and Alexis Ohanian founded Reddit in 2005 as students at the University of Virgina. They joined Silicon Valley business incubator Y Combinator and sold the startup to magazine publisher Conde Nast the next year. It attracted a devoted audience posting links to news, images and video, which fellow users vote on to rank their importance. It’s been the birthplace of countless online memes but has also drawn criticism for hosting racist, sexist and anonymous rants.

Huffman and Ohanian quit when their Condé Nast contracts expired in late 2009. At the time, Reddit wasn’t really making much money. Condé Nast used it as a conversation starter with advertisers, but primarily as a gateway into conventional contracts for its established magazine brands like Wired. Not only did advertisers view some Reddit content as unsavory, but the site itself wasn’t terribly accommodating to advertisers in terms of available real estate. A premium membership called Reddit Gold was launched in 2010, and one year later Condé Nast spun out the company into an independent entity that could hire its own ad sales team.

For the next several years, Reddit’s user growth continued to skyrocket—but its ad sales merely meandered. The site still didn’t offer much in the way of visibility for advertisers, and fewer brands wanted to be associated with the site after one of its subreddits played a central role in distributing hacked photos of nude celebrities in August 2014. Not too long after, Alexis Ohanian returned as executive chairman at the same time that then-CEO Yishan Wong resigned over an apparent dispute over office space (yes, that seems to really be what happened).

Ellen Pao, an existing Reddit executive who also was waging a high-profile gender discrimination case against her former employer (venture capital firm Kleiner Perkins Caufield & Byers) was installed as interim CEO. Her tenure wouldn’t last too long, but she did make a major hire: Zubair Jandali, a former Google advertising executive, as vice president of sales.

Jandali was given a fairly simple mandate: Figure out how to translate Reddit’s massive user base into dollars.

A new plan

Jandali immediately recognized that Reddit had made very little effort to help advertisers understand the site, resulting in poor experiences and high client churn rates.

“The reason brands spend money on advertising is because they want to affect word of mouth, and Reddit is basically the world’s largest water cooler,” Alexis Ohanian says, adding that one-third of all Americans will visit the site this month. “The brands are already being talked about on there, so it’s a question of if they want to be part of those conversations in an authentic and meaningful way.”

Jandali’s plan was to maintain traditional display advertising, but focus most of his efforts on creating what amounts to an in-house creative consultancy for native content. Reddit not only would provide space for brands, but would help develop their message for the right audience within (after first mining Reddit for information on how and where the brand is being discussed).