Why Is Reddit Donating Ad Revenue to Charity?

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The internet’s front page is getting more transparent about its finances by giving away 10 percent of its advertising pay to charities chosen by redditors. The social platform announced that it would donate one tenth of its 2014 ad revenue to a charity chosen by its users in a blog post late Monday morning. Chief Executive Officer Yishan Wong, who authored the post, said the change is to show that Reddit’s money goes towards more than just its bottom line.

“We want to show that advertising doesn’t just support the Reddit platform, it also directly supports the causes and goals of Reddit as a whole,” said Wong in the blog post.

As a private company, Reddit does not post annual or quarterly reports that would give better transparency into the company’s finances. In addition to advertising money, Reddit also makes money from its gold subscriptions. While it is free to register for a Reddit account, users can opt to pay for a Reddit gold membership for either $3.99 a month or $29.99 a year. Reddit also takes a 15 to 20 percent commission from its Reddit Gifts marketplace.

Despite multiple revenue streams, media reports from as recently as December 2013 show that the company is still in the red. Reddit has never made a profit its eight-year run, even when Condé Nast owned the website. Wong’s stated his goal is have Reddit break even in the near future.

Reddit users speculate that the public announcement is a lead to them to remove or disable the advertisement-blocking software some install on their web browsers while using the website. This software prevents the ads from loading, which denies the website money from the user viewing the advertisement.

“Yeah, this sounds a whole lot like ‘telling you guys we’re losing money wasn’t enough to get you to shut off adblock, so maybe you’ll be willing to do it for charity,’ and you know what? At least for me, it worked,” wrote Reddit user BillW87 in the comment section of the blog.

The charity gift comes with a few strings. The charity must be a 501(c)(3) organization. A 501(c)(3) is a nonprofit for educational, charity, scientific, safety testing, or for the prevention of cruelty to children or animals that has been verified by the Internal Revenue Service. The Reddit team will oversee the nomination and election to make sure that the winning charities win on their merits as lobbied for by redditors, not by virtually stuffing the ballot box.

“Ultimately, it will be up to all of you what happens — if things go well, the community will be responsible for disbursing a very real amount of money to a set of causes of your choice,” said Wong.

The money won’t reach any charity until 2015, when Reddit can tally its ad revenue from January 1 to December 31 of this year. The move will make it easy to calculate approximately how much the site will be making from its advertisers when the amount of the donation becomes public.

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