Thursday, October 11, 2007

what reddit taught me about startups: making money (really?)

WARNING: I have a distorted perspective on startups, as I've only started one, and it happened to do well. Everything you're about to read is probably hogwash. So please don't go around saying "Alexis from reddit says we don't need to make money."

Say Steve told you.

It's been said before (although I wonder how encouraging it is to the new YCers who hear it) but here I go again: we didn't start reddit worrying about how to make money. Those first three months, Steve and I were in that Medford apartment just trying to build a good website; if it were popular enough, we'd be able to make money from it.

This refrain worked for a while, especially once we'd secured angel funding (all in all, we took less than $100,000) and we knew how little we spent every month in rent, food, and servers (in that order).

In January '06, Bill at Federated Media emailed Steve and me about selling banner ads for reddit (see how I wish I could take credit for generating this business connection?). At the time, the Google and AdBrite text ads we'd been half-heartedly running were bringing in literally a couple dollars every month. But we were always insistent on keeping the front page free of ads, so we'd always kept ads on the less-trafficked comments pages. Sure, it meant significantly fewer pageviews; we wanted the best user experience.

So we agreed to run skinny 120x600 skyscrapers (about as low-rate as a banner ad gets) on our comments pages. It was the smallest, most discrete ad we could run. I had a nifty admin tool to approve/reject any banner ad and before long we were getting a steady stream of new campaigns they'd sold.

To the credit of FM, checks in the hundreds started arriving (I know, as handler-of-things-non-technical, I kept the books). The final check we received from FM (we let the splendid Wired ad sales team take over post-acquisition) was for just over $4,000 -- that's a lot of Sam Adams.

Keep in mind that those comment pages got only a small fraction of reddit's traffic. When we finally put 300x250s on the entire site, we were pleased to see very little negative feedback. Most redditors probably have ad-block on anyway, heh.

I didn't intend for this to sound like an FM fluff piece, but they really did do us a solid. Then again, we never got offered a FashionBug ad campaign ;-)

And it was shortly after this relationship got started that another fortuitous email appeared in my inbox, this one from Condé Nast...