In October 2006, Reddit co-founders Steve Huffman and Alexis Ohanian decided it was finally time to sell. A year earlier, their Digg-like social-news Web site had attracted an offer from Google, but the founders wanted to keep developing the fledgling company in-house. This time, though, the buyer that came calling was not the 800-pound gorilla of search engines. It was the 800-pound gorilla of magazine publishing, the one wearing Gucci loafers and a Patek Philippe watch: It was Condé Nast. Reddit was rumored to have sold for $65 million—a number that was denied by both sides. Reasonable analyses have put the price at $15 million to $20 million.
Fast-forward to today. Although Reddit has had solid traffic growth since the sale, both founders, now 26, announced they were leaving the company on the day their contracts with Condé Nast expired: Oct. 31. Halloween.
Granted, the marriage always seemed forced. But the dissolution of the Conde Nast-Reddit partnership says a lot about the oil-and-water mixture of old media and new. In an interview with Drew Schutte, the latest VP to manage Condé Nast’s online properties, just 10 days after Huffman and Ohanian’s exit, about all the company’s online initiatives, the word Reddit is never even used.
Three years ago, Condé Nast saw Reddit as a tool—one it could use to pry open the front door with other Web companies and one that would repair its own online track record, which was mixed at best. “We are confident that other companies will find Reddit to be a partner that can bring tremendous value to their Web efforts,” Steve Newhouse, the executive in charge of CondéNet, said back then. Huffman saw a chance for his company to grow, saying, “We’re excited … gain the resources to give us the freedom to accomplish many of the goals we’ve been dreaming about.”
Kourosh Karimkhany, the vice president of acquisitions for CondéNet who said he “played video games” with the founders while he was engineering the deal, said, “Our goal will be to build Reddit as an independent company by collaborating with Wired through the integration of its core technology, and by offering partnerships to allow others to do the same.”
That seemed sensible enough. And while Reddit was never a serious traffic challenger to Digg’s 40-million-plus unique monthly visitors—Ohanian says Reddit serves 7 million unique visitors a month; the highest independently available source puts the number at 5.5 million—the traffic nonetheless grew during the three years and ought to have been large enough to turn a profit.
Especially because, even under corporate ownership, Reddit kept a lean team. Digg now sports at least 75 employees, while Reddit has been getting by with “six and a half,” Ohanian told me, with some pride in his voice.
So what went wrong? For starters, the idea of Reddit partnering with other media properties never really panned out. One of the few that got built was the Independent, a British newspaper. The idea was to mix Reddit’s voting function—in which readers give a thumbs-up or thumbs-down on stories—with the Independent’s content. In an interview, the editorial director of the newspaper joked they wouldn’t ditch Reddit even if it didn’t deliver them “an audience of five million.” When I checked the site, there was only one link on the page with a double-digit vote count: 12 votes for a three-day-old story about drinking a bottle of wine daily. (For comparison, top stories on Reddit’s home page can hit 1,000+ votes in a matter of hours.)
Perhaps Condé Nast overestimated Reddit’s utility as a tool to build external Web site partnerships. After all, every media site worth its salt now has a row of those little social-media-sharing icons somewhere on its page, and they’re free and simple to install. But why not turn Reddit loose internally, not just on Wired.com, but across the Web sites of Condé Nast’s magazine empire, where The New Yorker, Vanity Fair, and Vogue stood just three years ago as temples of culture and power? By giving Reddit an exclusive foothold on the publishing company’s own content, Condé Nast would’ve at least been eating its own dog food. But Karimkhany seemed to really mean it when he said Reddit would be an independent company.
I wanted to ask Karimkhany about why Condé Nast shorted its multimillion-dollar purchase on staffing, even as Digg was growing by leaps and bounds. Karimkhany was also the general manager of Wired Digital, so he was starving the very puppy he brought home from the pet store. But Karimkhany, who was laid off in November 2008, and who appears to be working on his own startup, declined to talk and forwarded my e-mail to Condé Nast.
When I asked Ohanian why there had not been more integration in the three years he and Huffman were there, he said, “I really don’t know. We’re in a terrarium. Even stuff that happens outside my door is foreign to me.” It’s not hard to imagine the executives of 2006-era Condé Nast thinking they had very little to learn about media from a pair of 23-year-olds, even a pair they had just made millionaires.
When I asked Huffman, who, like Ohanian, is now 26, whether Condé Nast could’ve handled the acquisition differently, he demurred, writing, “Yes there were things Condé Nast could have done, but there were also plenty of things we could have done as well. Both sides have done some learning.”
Indeed, Reddit is a new chapter in an old story of mismanaged social media acquisitions. Take Del.icio.us, which was developed just a year earlier by a Wall Street quant named Joshua Schachter. Yahoo (YHOO) purchased the social-bookmarking site nine months before Condé Nast bought Reddit. Three-and-a-half years of turmoil later, Schachter also left his company, writing in to TechCrunch that, “I was largely sidelined by the decisions of my management. … It was an incredibly frustrating experience.” I had a meeting with Schachter during my time at (disclosure) Condé Nast Portfolio, where, even for an executive doing a dog and pony show, he seemed distracted.
Despite Yahoo’s tech roots, when Schachter joined it was already a company organized around the selling of advertising, much like Condé Nast and much unlike Google (GOOG), whose products all flow from job No. 1: providing the best search experience in the world. It’s not hard to see how a bookish guy like Schachter got lost in the shuffle at Yahoo, or how the same thing could happen to Huffman at Condé Nast. Both programmers, for example, needed a wakeup call about their Web site’s aesthetics. Proudly nerdy early versions of del.icio.us looked about as user-friendly as the interface of a Commodore 64. Even the URL, del.icio.us, was chosen by Schachter as an exercise in linguistic regression rather than usability—but an in-joke at a startup can look like a full-blown nerd alert at a mature company with a sales-driven culture. Which is why it’s shocking that Reddit has hung on to its similarly retro design, something that repeatedly stopped me from using it. It was only by overcoming the interface that I grasped Reddit’s great user base and functionality. (Huffman told me he found Web 2.0 trendiness to be “tacky,” which might explain why he didn’t embrace one good aspect of Web 2.0: usable, intuitive interfaces.)
I don’t know whether Ohanian or anyone at Condé Nast ever asked Huffman to change the site’s look, but someone should have, for starters. Then someone should’ve realized that they bought Reddit not just from Huffman and Ohanian, but from Y-Combinator, a seed-stage startup. Which means that Reddit was at best a midstage company in need of further incubation, guidance, and growth, not one ready to put in a “terrarium” and watch it grow. Reddit’s arrested development is symptomatic of other CondéNet acquisitions, like the once high-flying Ars Technica, which now seems starved under new ownership, deprived of sunlight, nutrients, and oxygen.
It’s a testament to the greatness of the concept that Reddit’s made it this far at all. Many other CondéNet projects not directly tied to magazine content, like Flip, stumbled almost right out of the gate. Even buying computers to run Reddit.com proved to be a struggle; after doing an end-around the IT department and expensing $40,000 worth of servers in the early days, Huffman found it was easier to switch Reddit over to Amazon’s (AMZN) Cloud Computing services rather than keep fighting battles over procurement. “We no longer have to bug Condé Nast for servers, and we no longer have to deal with ColoServe (the datacenter folks), who were absolutely horrible.”
With all the distractions, it’s no wonder the cofounders and faces of the company decided to check out once their contracts were up. (A third cofounder, programmer Chris Slowe, remained. The fourth, Aaron Swartz, never joined Condé Nast.) In fact, after their departure announcement, Ohanian admitted they had been getting ready to leave for the last six months. Though Valleywag reported rumors of their departure two weeks before it happened, Ohanian was having a hard time hiding his plans. During a video interview with Andrew Warner of Mixergy back in June, leaving was already on his mind. “You’re a big success, you can get funding for any business you have,” says Warner. “Why are you still working for The Man?”
“It’s the coffee,” Ohanian tried to kid, before answering, “If it were just about the loot, it’d be a lot easier.” He then explains his attachment to the site and the “little freaking alien,” (Reddit’s mascot):
Given that everything here was pretty tolerable, we had no reason not to go, [laughs at his verbal slipup] we had no reason to go, we had no reason to go, because we were given plenty of freedom. This is my first job working for The Man where I didn’t have to ask for a bathroom break.
When Warner presses the question, saying freedom to use the bathroom and things being “tolerable” are pretty poor reasons for dot-com moguls to stick around a company, Ohanian says that “the very first moment I can say that I really, really dug it … was when I got to go up to the floor of The New Yorker, and they just let me wander around because I had a badge. And I was just wandering around the offices of The New Yorker and I was like, ‘This is pretty fucking great.’ ” Three years later, like countless other 23-year-olds who walked those halls thinking those thoughts, he’d be gone.