How Reddit Went From $12M to $2.2B + Cracked Social Media Monetization

30:32There is a lot of creative writing on Reddit. uh i i i was at a i was at a business dinner there was like a uh tech guy and his wife was there and tech i was working on some ai thing and his wife was like i use reddit i love reddit like oh what do you do on reddit she's like oh i love to go to relationship advice and make up awful stories about my husband she's like i've been doing this for 10 years and oh okay my favorite my favorite favorite version of this story I got an email this was years ago and the email said you may have seen this post and I had seen the post the post was this guy posts in legal advice asking for advice and I can't remember the original post the original post is small but then in the comments as people started asking questions it came out that he was trying to hide a gun.

31:32And then people are like, what? Like, we're not going to be an accessory to whatever you did. And so the whole post had this, like, itself was a story as it evolved. And it kind of blew up elsewhere on Reddit. So the author of that original post emailed me and said, if you hear from the police about this, I want you to know this is all fake. I made it up. It was just a troll. And he's like, if you don't believe me, you can check. I'm also the author of these other posts, which happened to be one of my favorite stories on Reddit from way back when about Grandpa Wiggly. There's a series of posts, these AMAs, like 15, 16, 17 years ago, where the guy's like, my grandpa doesn't ought to use computers, but he makes mayonnaise.

32:16Grandpa Wiggly's mayonnaise. And so if you want to ask me questions, I'll ask my grandpa and respond with whatever he says. He came back three times, people interviewing this old guy, Grandpa Wiggly. He's like, I made all that up too. And we checked and it's just this guy. He's just a funny guy who just writes these elaborate like stories. But I think that I like, I don't get upset about those things because the point of Reddit is often not the post. The point is the conversation, right you read these relationship advice or am i the asshole or whatever like the experience is the conversation the conversation is real the post is just a prompt for a conversation so sometimes it's a real request for advice sometimes it might be a troll but the advice is real and the experience is real the community is real but sometimes people are just goofing off And I think that's one of the fun things about Reddit.

33:17That's amazing. I love that story. Yeah. Do you remember there was like this kind of dark with that Netflix movie or something where like people on the Internet like fought to find like the killer of this like cat. And it was like this whole thing. And it's like you just can't you can't beat the Internet. You can't beat the Internet in a lot of ways, you know, for better or for worse. You just think about how much attention is concentrated in some of those moments. it is bewildering we've seen this in the the usage numbers we had this one account used to be the highest account uh the highest karma account on reddit qgyh2 was the username and we were just like is this a real person or is this a bot just like 15 years ago or more bots bots like that weren't really a thing yet, that sort of automation.

34:14And everything we could find suggested this was a real person. In fact, somebody on our team eventually met this person, but they were spending like 18 hours a day on Reddit. We're just like, when does this person sleep? Like, this is insane.

34:28But some people just have that sort of attention and stamina and, you know, whatever it is that you take a, you add that up thousands of times and yeah, some crazy things kind of much. VCX by Fundrise, the public ticker for private tech, allowing investors of all sizes to invest in venture capital. View the portfolio at getvcx.com. That's getvcx.com. Some of you may not have heard this yet, but our sponsor Public just launched something called Generated Assets, and it brings AI into investing in a way I've honestly never seen before. Here's how it works. You type in an idea like AI-powered supply chain companies with positive free cash flow, or defense tech companies growing revenue over 25 % year over year.

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35:54Full disclosures in the description. Founders ship faster on deal. Set up payroll for any country in minutes, hire anyone anywhere and get visas handled fast so you stay focused on scaling. Deal takes care of onboarding, HR, IT, ER, benefits, and compliance, so your team can grow without borders. It's why more than 37 ,000 fast-growing companies trust Deal to move fast. Visit D-E-E-L dot com slash sorcery. That's D-E-E-L dot com slash S-O-U-R-C-E-R-Y. To the point of human verification and just understanding if people are human or not on these platforms, I recently interviewed Alex Wanya of Tools for Humanity.

36:33And so one of the interesting points that he had is he said in two months, maybe max two years, these platforms will not be usable unless they have technological shifts, if they make technological changes. What do you think other platforms' best practices would be to change and have humans verified? Again, with other platforms, I think they have a different model. And so I think they may have different approaches or levels of care. For us, our product is people. Our product is people in conversation and authenticity and community. And community doesn't happen without people. So for us, it really is an existential issue.

37:25The assumption is when you're on Reddit, you should be interacting with other people. I know Alex, Tools for Humanity is a cool company. They do World ID. I think the, we're going down this route of human verification, and we need to do so in a way that also preserves our users' privacy. So I think World is interesting. I think services like that are interesting because a third-party service to verify, like are you a human? or maybe you know maybe you're uh where you are what country you're in or your age those are kind of the three things that are really important to us i'm kind of a safety point of view but we don't want to know your name we don't know we don't want to know your address um because on reddit the anonymity is safety it's a big misconception people think anonymity equals lack of safety as just real-world platforms with bad behavior don't exist.

38:26There's plenty of platforms with real-world identities and lots of bad behavior. What incentivizes good or bad behavior is, I think, the context. So the Reddit communities create this context for overall good behavior.

38:40But I think, you know, if we had gone to our users three years ago, pre-AI, and said we're going down this human verification route, They'd be really upset because it feels so, you know, it's such a potential risk to privacy. Now it's something they actually want. They want to know that Reddit is doing everything it's can to preserve Reddit, the humanness of Reddit. And so I think third-party systems for verifying, you know, humanness in different ways are really important. So tools for humanity slash world is one. That one's nice because it's third party, unique identity per person, but we get no piece of information about the person.

39:31There's others we use that actually check your ID. I don't love those, but we're compelled or coerced to use them by various governments. And then there's Face ID and Touch ID, just like built into the phone. What I didn't appreciate about Face ID and Touch ID, or other 2FA, like YubiKey, things like that, is actually require a physical presence to use them. So there has to be a human holding it to use it. So for many of our use cases, that's human enough. But our design of these things is that you, it's not, Reddit doesn't do the verifying. In fact, the way we want to implement these things is you actually kind of leave the app and then come back.

40:11So it's very clear you're in a different app, you're on a different website, and then all Reddit gets back is like a token that says they passed. So then we never know who you are, just that you passed this test. I think that's a model that will work very well for us. You're a human, but we don't know anything else about you. Then we can preserve the humanness, but also the privacy and the safety. Through the different generations of social media and media in general, we've gone through things like forums. We've gone through different social feeds, mobile. Now we're having different algorithms and AI.

40:47What have your biggest learnings through those different waves been? And how has Reddit endured? So the things that are important to Reddit, we've talked about. It's communities. It's authenticity. It's, you know, alongside those things, maybe being stubborn. Not making changes too quickly. But the UI, the pixels, the formats, the platforms, that's all for grabs. Those things evolve. So I think what we've been able to do is evolve on the things that matter, like the platforms. Move to mobile, the style has changed, support more content. Reddit used to be only links. Right now it's links and text and images and video.

41:35and we don't have audio yet. I'd love to have audio. But the communities, the authenticity, the voting, the human poweredness, even where Reddit has algorithms, at the end of the day, nothing can become popular on Reddit without a community of people within the context of their values voting on it and making it popular. Those are the qualities of Reddit we protect, but then we have to just continue to evolve and we will. We have and we'll continue to do so. So I think it's being stubborn about the right things but otherwise evolving on almost everything else. What have you learned about human behavior?

42:17What's interesting about Reddit is you don't get famous in the real world for being good at Reddit. You might become infamous once in a while. You don't become rich by being good at Reddit. Which is not true on social media. You can become rich and famous by being good at social media. And so I think the incentives of social media often cause people to behave in a way that is not true to themselves. You're incentivized, for example, to say extreme things. Also funny. Social media is very funny, but then it also can be very extreme. And people say things that they may not believe just to get credit for saying it.

42:57Reddit doesn't do that. and so I think that those sorts of incentives are what's really important and and keep reddit reddit speaking on the business side how do you track metrics for reddit like what are the success metrics like how do you keep on seeing the puck move forward so I think with metrics there's always the number and the story and now when I when I ask teams when they set goals actually I I want both, the number and the story. So what are the numbers we care about? We care about DAU, daily active users. How many people are actually using the platform? We care about revenue. But there's a healthy way to use the platform.

43:38There's a healthy way, a sustainable way to grow. And there's unsustainable ways. Same with dollars. There's easy dollars, and there's maybe harder, but more resilient dollars. And so, yeah, we have goals for growing users, for growing revenue. but we also have our mission which is to empower communities and make their knowledge accessible we also have you know sub goals around you know Reddit's the de facto place for communities online Reddit's safe and fun and so we both try to hit the numbers but also within the guidelines of the story and try to do things the right way. And I think that can be harder.

44:26If you're only focused on numbers, I think you risk losing what's important. And then now you're kind of a slave to the numbers. But you can't ignore the numbers either. But then you're not going to make any progress. And so I think both are really important, the number and the story. I think you're being a little humble, but you have some really big numbers. Well, it helps that the ads work. So last time I checked, you have 121 million daily active uniques, 471 million weekly active uniques, about 100K active communities, 24 billion posts and comments. And last year reached up to 2.2 billion in annual revenue, which was up 69%.

45:13Is that good? That's pretty good. Great. And what was it? it was when you joined in 2015, you're at$12 million in revenue. So you went from$12 million in revenue in 2015, rejoined, to 2025 of$2.2 billion. Did you think that was going to happen? In 2015, I did not think that was going to happen because I didn't think more than maybe a week ahead. We were so in the present then. So in the present, just trying to save the company, turn the company around. So no, I did not think that was going to happen.

45:58And, you know, we found our, it took a while to find our voice on the business side. Turns out, I mean, turns out ads is great. Ads, as a business model, this is coming from the person. And I told you, I didn't like ads. Ads scales. So it's a business model that scales with usage. So it's very healthy there. And it turns out it's a business model that's aligned with just what people talk about, which is what Reddit is. And so there's a natural fit. I think one of the most important things we did, so my partner in running Reddit is Jen Wong. She joined us, she's our COO. She joined us in 2018. team.

46:37And one of the biggest decisions we made around then was we were going to invest in our own ad tech. So our own ad server, our own tracking, our own measurement, all of this. We were small to do that. And we moved off of programmatic. So most websites or platforms smaller than Reddit will use some ad network. So somebody else sells your ads for you, you just basically, and you split it. So you give them the inventory, they sell it, you take a rev share. We said, as a matter of strategy, we want to own the relationship with our customer. And we can't do that unless we have our own ad tech. So we made that investment.

47:17And in the process of selling and explaining Reddit, we learned that Reddit is actually driving a lot of purchasing decisions. and so it just happened that our product is a natural fit i feel very fortunate for that because when we started reddit we weren't thinking about that um nor i mean maybe on reddit people weren't even talking about that it just it just turns out like there's such a question behind every hobby like what's the funnest thing you do when you take up a new hobby it's like buying all the new stuff like getting all the new gear um and so there's just some natural alignment there and we've been able to, I think, navigate that in a way that doesn't come at the expense of our communities and sometimes is even additive.

48:05And then also, I think, make smart strategic decisions like invest in our own tech and own the relationship and build a sales force. All of these things are smaller scale companies. Many don't build their own sales force and they don't build their own tech. And it's worked out for us. Another part of performance besides metrics and tracking all the business stuff that I lean into a lot is who you surround yourself with. One of our sponsors is Brex, and they're all about performance. So for me, I believe performance is a metric of who you surround yourself with and who you're inspired by, who you keep around.

48:41Who is that for you? Do you have a mentor? Have you had someone that you've kind of like stuck as your North Star? Hmm. I have lots of friends who meet that description. but they're also really, really private, so I'm not going to name check them. But yeah, I have a number of close friends, some of whom were investors in Reddit over the years, who I just think are very, very high integrity, very consistent, give good advice. Well, I mean, Jen, Jen, our COO, is one of those people. You know, the funny thing about being a founder CEO is it's a job you inherit, and you have to earn. And so then you end up hiring people, especially as you scale, who have actually worked their way up to be execs at public companies.

49:40And so Jan, our COO, Drew, our CFO, both much more experienced than me. I've learned a lot from them. and then I learn a lot from people I don't know. You know, for example, I think Warren Buffett and Charlie Munger, the founders of Berkshire Hathaway,

50:07obviously two of the most successful investors, business guys of all time. They're just so stubborn about their principles and both in investing and in life. And so, and I think that's a great example of you can be very, very successful without being an asshole. And so I think there's folks like that. When we were preparing to go public, a person I called a number of times was Rich Barton. He was the founder CEO of Expedia, then Zillow, then Glassdoor. And he had a lot of really good advice for me on whether to go public? His answer was yes. He's like, do you want to ever play in the big leagues or do you want to stay in the minor leagues forever?

50:53And he also asked me some good question. He's like, I said, should we go public? He's like, well, what did you tell your investors you were going to do? Well, I said, you know, we're going to go public someday. He's like, well, then you should probably do that. And he also put that idea in my head that we opened a conversation with. He's like, promise me one thing, Steve. You take your company public, don't be one of those CEOs who spends the rest of their career bitching about it. Just say thank you. That was great advice. And so that's how I try to think about it now. Okay, so we're strolling the halls of Reddit San Francisco.

51:27How many employees are in this office? Like right now? Yeah. 25. 25? It's, we, okay, no, that's not true. On a normal day at this hour, probably 25, because there's only on a normal day in San Francisco, we don't have a big office attendance. But I actually think there's an onsite going on right now. So there might be 50 or 100 here, but we don't have a return to office policy. Okay. San Francisco is probably our quietest office, even though we have the most employees in the Bay Area. But my, I think I have this theory. My theory is that the median age of Reddit has always been about my age. And during...

52:11Yeah. Yeah. I was born in 1983. Oh, so I think during COVID, everybody had kids. I had kids. And then everybody moved out SF into the burbs. And then the commuting here is so brutal. I just don't have the heart to make new parents commute two hours a day when they want to see their kids. and we are way more productive now than we were before COVID. So you can't convince me that being in the office is the key to productivity. Maybe it is, but I think it's like lever number 10 behind like having a consistent strategy and having good leaders. So it hasn't hurt us not forcing people to be here, but people do come in.

53:02And we ask teams to come together about once a quarter or so, like in person. Do your planning, do your dinners, do your happy hours, do all that. So like one of that, there's an onsite going on here probably every other week. But then the every other week is on the quiet side. Okay. Well, that's not bad. How much has AI played a role in productivity and product development for Reddit? I think, I mean, it's really picking up. It's such a moving target, but the tools are changing so fast. I mean my own experience I'm a programmer like this my first love is programming so I've done almost every day since I was a little kid I something happened in December not something happened there was the new models came out in December and I haven't read let alone written a line of code since December wow but I've produced so much more but I don't even like The model right now, I still think it's like you have your editor cursor or whatever.

54:05You've got code and then AI on the side. I don't even have an editor anymore. It's just AI. Anyway, suffice to say, it's changing really rapidly. Our bottleneck at Reddit right now is actually code review because we can produce so much code, but we've got to review it and deploy it. We're still working through that. But the challenge or the fun part is like, I don't know what the tools are going to be in a month. Like it's really evolving so fast. So I think you can't get married to any particular tool or way of working right now. And how does that change headcount? Are you imagining that's going to decrease engineers?

54:43What is that going to? No way. No way. We are a building company. Okay. And so in order for engineering headcount to go down, we'd have to know everything we wanted to build. So let's say AI makes our engineers 50%, 100%, or even 10x more productive. We'll just build more stuff. Like do more with more. It's not do the same amount with less. We just have a lot of work to do. And if we're not doing more with more, our competitors are. So I think there are maybe areas like our G &A, so non-engineering, that's been flat the last couple of years. So we can scale those teams. But the building teams, we're builders.

55:26And if we can use AI to build more, we'll definitely use AI to build more. That's what we're doing. How does this impact entry-level jobs? That's everyone's biggest concern. Oh, so the kids coming out of college right now learned how to program with AI. They're really good at it. And so I think we will go heavy on new grads because they're so much more AI native. It's the old people like me. It's like I didn't want to give it up. I finally did like the models got good enough But that's like my craft. It's my hobby. It's my first love. I don't want to like not write code anymore Right the younger people don't have that package.

56:03They just write with AI and so And I think there's so many reasons to hire new grads also the best new grads Like if you don't hire them as new grads, you will never see them. They will never be on the job market again They're too valuable to ever let them be on the job market. So if you don't hire them when they're young You will never see them or if you do they're a hundred X more expensive. So you got to Got it got to get them right out of the gate My brother is a reddit super fan He a lot of we're good with brothers. Yeah, he he is an active user One of the was like 471 weekly active uniques, but okay There's probably five of them, but yeah.

56:50Maybe. So Reddit's been around for 20 years. My brother Colin had a pressing question he really wanted to ask. What is the next 20 years going to look like for Reddit? So 20 years, everything's going to change. If we look back on the last 20 years, like the format changes, the pixels change, how you discover Reddit, a lot of those mechanics have evolved. What's not going to change is the core of Reddit, which is communities that hold conversations. It's communities of people talking about things they care about. Voting, user submission, that users do everything interesting about Reddit. That is Reddit, but everything else has to evolve.

57:35It always does. 20 years is old, and it's not just old on internet times. It's just old. So, and I look back at all the change we've been through in the next 20 years are probably going to be even more accelerated. What's the biggest lesson you've learned as a leader? The same way that Reddit's the world's greatest bullshit detector, it's like not, Reddit's not special in that regard. People can feel authenticity. And so I think as a leader, you have to be authentic. And so that means say what you believe, be clear about what you care about. And that means sometimes you're saying things people don't want to hear.

58:14That means sometimes maybe you're stubborn about a particular value or principle. But I think that sort of consistency and directness is really important because that builds trust. And people won't do anything. Certainly they won't follow you if they don't trust you. And so you have to be consistent and authentic. And I think sometimes that's hard to do because there's a natural tendency to tell people what they want to hear.

58:46But that's a short-term strategy that doesn't work. What is behind your head? This is the band hammer. This was made to the woodworking community, the woodworking subreddit, which I love. i'm not a woodworker but it's one of my favorite things to do on reddit is just spy on other people's hobbies so for some reason i get a lot of woodworking content but this community made they made like six band hammers and they gave they gave us one they also made one i think one of the other owners of a band hammer is um arnold schwarzenegger oh my god one of the other ones so yeah this was made by the woodworking community and given to us you're gonna need a picture with arnold schwarzenegger i i've been i've been messaging him he hasn't responded he hasn't responded?

59:28All right. Arnold. We need a picture. I think there is a picture of him with this band hammer. No, with you. Yeah, not with me. Okay. But you know, Arnold's band hammer is pretty cool. Okay. That's pretty cool. Lastly, is there anything in this office that we should see or know before we go? Well, we got the band hammer. You know, I don't know. Do you have a secret meditation corner? Like what's the, what's the lore here? The lore? Yeah. It's an office in San Francisco. Okay, our old office had lore. Our old office was NBC's headquarters. So like famous bands used to play there and there's a secret tunnel to the hotel next door.

1:00:04Oh my god. But this is just an office. It's a beautiful office. It's a special office with great energy. Yeah, but the soul is what's inside. The soul is all of these people and empty desks. Amazing. Okay. Thank you. Thank you. Hey, it's Molly. If you enjoy our interviews, check out our newsletter, sorcery.vc, where we deliver a once a week top deals and tech headlines email and also go deeper on our podcast interviews. Subscribe to Sorcery today. And don't forget to subscribe to the podcast on YouTube, Spotify, Apple, or wherever you listen. Link in description to sign up.