How Does Reddit Make Money? Reddit Business Model

DID YOU KNOW?

“303.4 million posts were uploaded to Reddit platform in 2020.” That’s incredible!

You may not be using Reddit as much as you use Instagram but for some millions of people around the world, Reddit is the first place they will look into when they wake up in the morning and also during the evening. 

This is because Reddit will help you to keep up with the trending topics that interest you.

Reddit was created in 2005 by its founders Steve Huffman and Alexis Ohanian. Both Steve and Alexis are college roommates and graduated from the University of Virginia.

Currently, Steve Huffman is the CEO of Reddit.

What Is Reddit?

Reddit is an online forum platform where there is one good subreddit for any topic that you are looking for. It might be funny, business-related, technology, or just anything that you can think of.

In fact, there are more than 2.2 Million subreddits but out of those only 130K subreddits are active.

You can share any format of content on Reddit including articles, videos, audios, images, pdfs, graphics, and more.

Why Reddit is Named as Reddit?

The Reddit name is interestingly derived from the frame “read it”  which means you have read something on the internet which is very interesting or exciting and share it here on Reddit with people who might find it interesting.

Surprisingly Reddit was sold just after 2 years of its creation to a well-known media company called Conde Nast.

But later in 2011, Reddit has become an independent company under Advance Publications which is the parent company of Conde Nast.

Reddit Business Model

The business model followed by Reddit is quite interesting and makes it unique compared to other platforms.

Unlike other forums such as Quora or Facebook groups, Reddit is very strict when it comes to posting content on subreddits. 

You need to obtain a certain amount of karma points before you can publish any content on subreddits. Karma points can be earned by participating and actively engaging in the discussions with the content others have published. 

Whenever a Reddit user shares content, there will be something known as upvote and downvote.

If that content gets a lot of upvotes and engagement by other Reddit users, then the Reddit algorithm will automatically push that content higher in the Reddit Feeds. 

Moreover, one cannot simply post their youtube video links or blog post articles without providing any real value to the subreddit members.

If you do so, you might be completed banned from the subreddit and your account might even get shadowbanned.

This will make its platform free of spammers and all subreddits basically wants to provide value to their users which makes Reddit’s business model impressive.

After all, members in subreddits are looking for information and value from others than getting spammed!

Surprisingly, most of the people around the globe aren’t even aware that a platform like Reddit exists. Nevertheless, the company drives around 52 Million daily active users to its platform.

As of 2021, Reddit ranks on number 9 as the most visited sites by organic traffic worldwide!

How Does Reddit Make Money

So as the platform is very famous for its uniqueness you might want to know how does Reddit even make money and what are Reddit’s revenue streams. 

There are 4 ways through which Reddit makes money. They are through advertising, Reddit coins, Reddit premium, and through Reddit gifts.

Let’s look into each one of them in a bit of detail.

Advertising

This is one of the popular revenue streams followed by most of the platforms and even Reddit makes use of this as this is one of the easiest ways to make money.

Reddit allows its platform users to advertise and promote their business to their audience. The advertisement takes place through banner ads. 

You can find these advertisements on the main home page i.e Reddit feed, in sidebars, in subreddits, and also in the comments section of subreddits.

The advertisers can redirect the users to their business website or they also have the option to advertise their own subreddits to improve and get more people to join their subreddit. 

Check the below images to find where and all you will find advertisements by Reddit

Advertising is one major way through which Reddit earns money. But there are few other ways as well and let’s find out.

Reddit Coins

Well, Reddit coins are like awards that you wish to give to the ones who have made extraordinary contributions to the platform. Contribution is nothing but providing value to the subreddit users in the form of content. 

You can give these awards not just for the posts but also for the comments made by the users.

There are 3 types of awards you can give to the contributors. They are silver award, gold award, and platinum award. And to give these you need a certain number of coins.

Silver Award

To give a silver award to a user, you will need 100 coins

Gold Award

To give this award you need 500 coins. This award will give user 100 coins and the ability to browse Reddit ad-free and also gives access to the r/lounge subreddit for a week.

(r/Lounge is an exclusive subreddit only for the gold/platinum users and Reddit premium users.)

Platinum Award

To give this award you need 1800 coins and this award will give user 700 Reddit coins, ad-free browsing, and r/lounge access for a month.

So to give any of these awards you need Reddit coins and Reddit coins comes with a price. To get 500 Reddit coins you have to pay $1.99, and this is another way through which Reddit makes money.

Read: Best subreddits for business

Reddit premium

Reddit premium is like membership access. With this, you can have ad-free browsing, get 700 monthly coins, access to the r/lounge subreddit, exclusive avatar gear, and lots of other features which you can check out on the official Reddit platform.

You can avail Reddit premium membership for a month or for a year. A monthly membership will cost you $5.99 and a yearly membership costs $49.99.

You might wonder who will even purchase all this just to give these awards and get ad-free browsing, right? Wrong.

There are lots of people who have this premium access and you can check in Reddit platform itself as you keep browsing there will be lots of awards given to one or the other post.

This premium membership makes another stream of revenue for Reddit.

Reddit Gifts

Reddit gifts is a gift exchange where strangers randomly get matched by Reddit and exchange gifts with one another. It is absolutely free to sign up for Reddit gifts and do the gift exchange.

But there is a premium membership known as Redditgifts elves which has some pretty good features. This premium membership costs $9.99 for 3 months and $14.99 for 6 months membership.

So these are basically the 4 ways through which Reddit makes money from their platform. 

In 2020, Reddit generated $170 Million in revenue but the fact is Reddit has still not recorded a profit. As of the latest funding done in February 2021, Reddit is valued at $6 Billion!

Till now (2021), Reddit has raised $919 Million in Funding and has made 33 acquisitions including the latest acquisition of Dubsmash in Dec 2020. 

It has a total of 27 investors including Tencent Holdings.

Check out: Best subreddits for digital marketers

Ending Thoughts

Reddit has a perfect business model setup and because of it, its users are growing every day and Reddit is able to make more money. 

Even though the company isn’t making a profit in the present, it has some serious potential to make big profits in the future times as Reddit is planning to go public and it can be anytime soon.

Hope from this article, you got to know about how the Reddit platform works and what are the revenue strategies used by Reddit to make money.