You would imagine with a 70 million per month readership that reddit would not be struggling to stay in the black without the amount of ad revenue they could be selling. You would imagine that advertisers would be eating up the chance to pay big money to advertise on reddit like they do with nearly ever other big publisher, but the reality is that as of mid 2013, reddits expenses still slightly outweigh their revenues.
There is a common misconception with reddit users and outsiders that reddit already is very profitable but the reality is that revenues are actually slightly short of expenses. But why do reddit not make as much selling advertising than other big corporations? Well the answer is simple, the people in charge of reddit don’t believe in selling invasive flashy ads (the most profitable) but rather very subtle banner ads, which are very unobtrusive. They value the user experience so highly and believe any other form of adverts would lead to a decline in user experience and drive users away. So to compensate the shortcomings of ad revenue, reddit requires other source for income and next comes the idea of reddit gold.
Since 2010, reddit traffic has been growing exponentially and as more users come, server costs increase rapidly. So to try and subsidise the running costs without hindering the user experience, reddit introduced a new subscription service, branded ‘reddit gold’. First introduced in July 2010, reddit users were offered the option of purchasing the reddit gold service for $3.99/month or $29.99/year. Although seemingly quite pricey, a handful of new features are given to enhance the user experience. These include the ability to display more comments on a page, add notifications to ones account and have access to a private subreddit r/lounge. The other great thing about reddit gold is that it can be gifted from user to user. So if I have read a great comment in r/engineering to help with an assignment or another user made makes a hilarious comment in r/firstworldanarchists I can myself gift them with a reddit gold subscription. The idea behind this form of monetizing is that the users are paying and in return getting a better reddit experience which keeps users happy while making the site better for everyone.
There is third source for revenue from reddit and that is known as the marketplace. It started in 2009 as redditgifts and was a platform for the worlds largest ‘Secret Santa.’ How it worked was similar to the traditional secret Santa where each participating user would be paired with another random user and everyone would send each other gifts. In 2012 there were over 50 000 participants! This community of gift sharing gave reddit the platform to start their own online store, selling as quoted by them ‘the most fun, geeky, unique, and otherwise awesome products in our marketplace.’ Reddit CEO Yishan Wong has an optimistic view of what the marketplace can become. ‘It’s still nascent, but gift exchanges are quite popular and (again in reddit fashion) we heavily curate the merchants who are allowed in the marketplace. We’ll see how it develops.