Published On: Tue, Feb 12th, 2019

Reddit is raising up to $300 million with an epic $3 billion valuation

Reddit is raising a Series D round led by Tencent Holdings, the Chinese tech giant that the Wall Street Journal once called China’s “most valuable company” after it purchased 5% stake in Tesla (the company is also the largest gaming conglomerate in the world). Through the round, Reddit is raising anywhere between $150 to $300 million in an effort to keep the website—dubbed the “front page of the Internet”—running. According to TechCrunch, the round could lead to a $3 billion valuation, depending on how much money the company scores from investors.

photo supplied Austin Gaines

Reddit currently has 330 million active users, and 150,000 subreddits (forums dedicated to specific topics on Reddit). In July 2017, the company raised a whopping $200 million, bringing their valuation to $1.8 billion.

Over the last month, Reddit has repeatedly voiced its progress to the press and potential advertisers. In December, the company announced that it had reached a milestone moment with 1.4 billion video views per month, which was up by 40% compared to two months prior. Other factors also contribute to its higher valuation.  

Last year, the company made aggressive moves to attract advertisers towards leveraging their massive audience. Several ad agencies told CNBC that Reddit had pitched their plans to make it easier for brands to target their customers. Their 28-page presentation detailed different types of ad units offered by Reddit, including an option called “top post takeover,” which pushes brands to the coveted front page of Reddit.

The presentation reads, “own Reddit’s most valuable advertising real estate for 24 hours. When users visit Reddit, your brand will be seen in the top ad slot in their feed and throughout the sidebar.” So far, case studies for their new advertising programs have been conducted with Coca-Cola, JetBlue, Toyota, and several others.

Over the past few years, Reddit has grown internally to match demand, which is something many startup tech companies struggle with. Small teams growing into large teams require third-party solutions like Reed Group software to help them scale, higher cloud storage capabilities, and stronger management policies in place. In 2015, the brand partnerships team grew from just a department of 8 to a department of 90.

In 2018, the company brought in $100 million in revenue. Compared to other social networks, this isn’t much. Twitter gained $655 million in ad sales during just the first quarter, and Google brought in $95 billion during 2018. However, Reddit is only just beginning to focus on the business side of their platform, and this ultimately rules in their favor.

Since Reddit was launched, its focus has been solely on improving the user experience and changing the way people consume content and news. For instance, although Reddit is far behind in terms of advertising revenue, it’s way ahead in terms of user engagement. While the average Twitter user spends six minutes per day on its platform, the average Reddit user spends 16 minutes per day.

Part of the high valuation lies in advertising potential. Reddit users are active and engaged, and everyone from celebrities to influencers to your average, everyday user posts and participates in online discussions. After all, the forums are designed to be social, allowing users to decide what’s most important to them.

The renowned subreddit “Ask Me Anything” allows users to ask any participating person any question. The types of people participating in AMA are wide and varied: from important political figures like Barack Obama to people who have had incredible life experiences, AMA has become an integral part of the Reddit community. And there aren’t many other social news sites where big names (Bill Gates has participated several times) are willing to volunteer with no costs to the publisher.

There are other things going for Reddit’s Series D round, too—like their ability to maneuver tough social situations that other platforms are facing heat for. The company removed more than 1,000 fake Russian-based accounts after they repeatedly trolled the subreddits and pushed propaganda.

As they start to raise money, more about the company culture and their policies will come under the microscope, but given the serious advertisers interest (more advertisers are coming to Reddit for ad space than the opposite), we can expect the social news site to fare well in their fundraising efforts.

Author: Ravi Kumarr Gumpta

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