I’ve learned a lot about the Newhouse media empire by reading Newhouse: All the Glitter, Power, & Glory of America's Richest Media Empire & the Secretive Man Behind It by Thomas Maier. In my post earlier this week, I shared that the family owned 26.5% of Reddit when the company IPO’d earlier this year.

I did some digging and found no filings indicating that they sold any of their position. This SEC filing says there’s an agreement with the Reddit CEO to vote Newhouse shares (owned by their Advance Magazine Publications entity) for certain nominees to the board of directors. The probability is high that they still own their 26.5% stake.

As of the writing of this post, Reddit’s market capitalization (i.e., valuation) is $11.2 billion (see here), which means the Newhouse family’s stake is worth just under $3 billion. I was curious how a traditional media-focused company obtained sizable ownership in a technology company.

Steve Huffman and Alexis Ohanian launched Reddit in 2005. Roughly eighteen months later, in 2006, Condé Nast, another Newhouse family company, purchased Reddit. In this tweet thread, Ohanian referred to the company’s sale and a “$10M exit.” I’m not sure if that was his share of the proceeds or the entire transaction amount, so I’d assume the Newhouses acquired Reddit for roughly $10–$20 million.  

That was eighteen years ago, and a lot has happened since then, including several fundraising rounds. Assuming the family invested in some of those rounds and covered the company’s early losses for years, they likely invested more than the purchase price. But even if those assumptions are accurate, their investment has paid off handsomely. Reddit, a technology company founded roughly twenty years ago, likely represents a material percentage of this family’s empire, which was born about a hundred years ago with Advance Publications.

The family’s empire has historically consisted of mature media properties such as newspapers, magazines, and cable operations that grew steadily but not rapidly. How the family deployed the cash from these mature properties led to the accelerated compounding of their empire (and wealth). They used cash generated from their mature properties to invest in a technology company with high growth potential because the cost of marginal replication of its product was zero. Said differently, if one person or a million people use Reddit, the cost to run Reddit doesn’t change much at all, let alone proportionally to user growth. Reddit could grow revenue and value faster than the Newhouses’ mature media properties. The Newhouses’ investment in a company whose business model had built-in leverage was the shrewd move that led to an outsize outcome and rapid compounding.