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Reddit: The ‘front page of the internet’ wants to be a billion-dollar business

In July 2015, Reddit was in a crisis. Volunteer moderators, the heartbeat of the site that look after pages known as "Subreddits", were revolting over the firing of a key member of the online community .

Nearly one year on, the site which bills itself as the "front page of the internet", is trying to put the controversy behind it and grow up.

"We're in a much better place than we were a year ago, and I think a year from now we'll be in an even better place," Steve Huffman, chief executive and one of the co-founders of Reddit, told CNBC in an interview at The Next Web Conference in Amsterdam last month.

Reddit boasts 234 million unique users and hosts links posted by people which are grouped around Subreddits - categories for just about anything.

But the site hasn't had the best reputation for reasonable debate and Reddit often being seen as a Wild West with often-offensive comments.


‘Reddit Revolt’

Reddit allows users to access its Subreddits to upload interesting links, clips and comment..

The dispute centered on the firing last July of Victoria Taylor, a senior manager at Reddit who organized the Ask Me Anything series (AMAs) on the site, where celebrities and high-profile public figures answered questions submitted by users. The site has managed to draw in people from Barack Obama to Bill Gates, highlighting its reach and importance.

Taylor was seen as the link between moderators of Subreddits and upper management. Reddit never commented on why Taylor was dismissed but at the time, the volunteer moderators blamed the then CEO Ellen Pao, who eventually resigned later in July. At the time, Reddit issued a statement saying the resignation was done under "mutual agreement".


But following Pao's resignation, Yishan Wong, Reddit's former CEO and Pao's predecessor, accused one of Reddit's co-founders Alexis Ohanian, of firing Taylor.

The site was in turmoil and Subreddits were shut down.

At this point, Huffman took over the reigns to steer the site back on course.


‘Healthier relationship’

Reddit founders Alexis Ohanian (L) and Steve Huffman (R)
Reddit
Reddit founders Alexis Ohanian (L) and Steve Huffman (R)

Since 2010, Huffman had started and worked at a travel site called Hipmunk. He is one of the co-founders and was brought in to put out the flames at Reddit So far, things appear to be going well.

"Our relationship is much healthier. Our community team is much larger and they're talking to moderators every day and I'm in those very often," Huffman told CNBC.

"We can still provide them better tooling and there's a lot we are working on."

The community team which works with the moderators has "doubled or tripled", Huffman said. A new mail system for moderators to communicate with their community is in the works.

India the ‘fastest-growing market’

Reddit has a user base many sites would be jealous of. Its visitors are highly engaged, spending over 13 minutes on the site, something that will please advertisers. Even with 8 billion monthly page views, Huffman said the potential to grow more is huge.

"I think it could be 10 times larger than we are right now, that would be very very large, but I think we can get there. We haven't even internationalized," Huffman told CNBC.

"Our fastest growing market now is India which is a completely different culture from the United States obviously. So the fact that Reddit works in other countries is very heart warming. But we have to put in the actual on the ground effort, which will very likely happen next year. I want to get through the fundamentals, make sure Reddit is growing and healthy in the U.S.. As soon as we get that phase, internationalization will begin for us."

Becoming a real business

In the meantime, Reddit has taken steps to stop the turmoil which it saw in 2015 from happening again. Huffman admitted advertisers sometimes feel "skittish" about the platform, something Reddit is trying to counter.

To that end, the company improved its feature to block users with "more to come", Huffman said, adding that user-quoted abuse is down a "double-digit percentage" in the last month and a half. It has also taken steps to ban certain offensive communities, moves that analysts said would be positive for its potential to monetize.


And it recently introduced its own photo uploading tool. Before people would upload a picture to Reddit via a third party service. This could pave the way for the introduction of video which is an "obvious next step", according to Huffman. Video has been a focus for companies like Facebook as it can command higher ad rates.

"Reddit is already moving in the right direction with regards to monetizing its user base – it has been exploring opportunities for mobile monetisation, introducing native mobile ad formats, as well as apps (a big departure from its browser-based history)," Richard Broughton, research director at Ampere Analysis, told CNBC by email.

"Part of the challenge will simply be convincing advertisers that the changes it has made to its policies are having an effect, and that Reddit is now 'brand-safe'."

But Reddit has a long way to go as Huffman said, but recognizes where the gaps are.

"The challenge we have is helping brands have a home on Reddit. What brands do is they either pay or they try to be more sneaky about it and pretend to be users and when they get outed that doesn't go so well. So I think there is a product in that that doesn't exist yet to give brands a legitimate organic home on Reddit, that could go a long way of reducing some of that tension so brands can have their own communities they can moderate," Huffman said, discussing potential future ad products.

Reddit also employs a team of strategists to help brands figure out ways to monetize the site.

Multi-billion dollar business?

Reddit's finances aren't public but a report in The Information, a technology news website, suggested the company is targeting ad revenues of $20 million this year, up from a single-digit figure in 2015. "We should beat that for sure," Huffman said.

So just how big can this business be?

"Look at Facebook, what are Facebook's revenues? Well that's the potential," the co-founder said.

Facebook over $17 billion of ad revenue last year.

Reddit has not raised money recently. The last round was $50 million at the end of 2014 with backers including Peter Thiel, Andreessen Horowitz and even Snoop Dogg. The site will raise money again but at the moment there is still plenty of cash in the bank, according to Huffman.

And with the ship steadying, what's the exit strategy? Not much in the near-term.

"Scale is what's really important. Selling Reddit now or in the immediate future is not really in the plans for us. The only thing I'm thinking about is making a sustainable business,, we'll figure out the exit strategy later," Huffman told CNBC.

Correction: The article has been amended to reflect that Reddit has 8 billion monthly page views.

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