(Photo: Reddit)

Reddit announced today that it will begin phasing out its own in-house advertising platform and Doubleclick for Publishers in favor of Adzerk, a system used by companies like StackExchange and Stack Overflow. In a blog post, Reddit said the site will continue to serve ads, many of them images, in the right sidebar of posts, but Adzerk will now give users the ability to vote ads up or down, helping to train the system to better tailor its ads based on the user’s taste. (Though unlike user submitted posts, no karma is involved.)

If you downvote an ad, it will never appear for you again, and will give you the option of providing feedback to the Reddit team on how they can serve you better ads. A box will pop up, asking the user to pick a reason why they downvoted the ad: "uninteresting," "misleading," "offensive" or "repetitive."

Reddit already began phasing Adzerk in to subreddits like r/funny and r/sports, and will soon roll it out to the rest of the site.

Jena Donlin, Reddit's senior manager of business operations, wrote in the post:

Our primary goal is to make advertisements on reddit as useful and non-intrusive as possible. We take great pride in the fact that reddit is one of the few sites where people actively disable ad blockers. reddit does not allow animated or visually distracting ads, and whenever possible, we try to use ads as a force of good in our communities.

The ads that appear in the sidebar are different from Reddit's self-serve ads model, which allows users to pay for links to appear in the "Sponsored links" section at the top of the page. These ads already allow users to up and downvote them.

Reddit has a long history of tweaking its ad model to fit with its growing audience while also remaining true to its anti-ad ethos. It stuck to self-serve ads for so long because they seemed the least obtrusive way to make money. Reddit also created a Reddit Gold subscription which users can buy in exchange for premium features, which helps bring in additional revenue.

"We've always been laggards when it comes to adopting online advertising because we never wanted to do anything to piss anyone off," Reddit cofounder Alexis Ohanian told Ad Exchanger last year. "We engineered our sponsored headlines as a way to mitigate that, because it generates great money, but in an unobtrusive way where these headlines live among the content and they can be commented on."

Reddit certainly likes to do things its own way. In January, AllThingsD reported the company is raising a $1 million angel round at a $400 million valuation. Rather than bring in institutional investors who might exert control, Reddit opted for a vanity round betting that Silicon Valley elite would agree to its terms.

Earlier today AllThingsD's Peter Kafka offered up a new spin on rumors roiling that Reddit is trying to raise a round of outside funding.

This past Sunday, TechCrunch reported that Reddit is in the process of raising venture capital at a $400 million valuation. Thanks to a banner year that included an AMA from President Obama, 37 billion pageviews and 400 million unique visitors, TechCrunch said Reddit could now command double the valuation it had in early 2011 before its owners Conde Nast spun it out as a standalone operation. Reddit is still fully owned by Advance Publications, the parent company of Conde Nast. 

However, Mr. Kafka's sources say Reddit is raising an angel round from "certain influential investors" at a mere $1 million. According to ATD's report, Reddit still has $18 million in the bank and "doesn't need" the money. CEO Yishan Wong's goal is "buy-in, and input, from Silicon Valley’s elite investors." Says Mr. Kafka:

And any angel who does put money in is likely more interested in something other than a financial return. If Reddit figures out a scalable business model, it could well be worth much more than $400 million. But it’s also unlikely to be the ginormous home run that a small investor can get if they bet correctly on a bona fide startup, when their (relatively) modest contribution can buy them a real stake.

It's a good thing investors needn't be interested in financial return because a source with knowledge of the deal told Betabeat that "angel round means no board seat and no influence, which suits Conde Nast." The source also said: "The terms are outrageous; any angel investor would get tiny, tiny percentages. So Reddit gets cash without giving up anything at all."

Based on those terms, the source said, "I would be shocked if an 'elite' investor bites with these terms. Besides, this is Conde Nast and Reddit. They can talk with whoever they want. They got an AMA with Obama, for god's sake." Rather than access to Valley elite, "It's about getting money at very, very good terms."

But while Reddit has the clout and traffic, revenue is still reliant on just self-serve ads and "Reddit Gold" membership. "I suppose it's bit like investing in a restaurant," said the source. "The investor gets absolutely nothing in return for his money other than a guaranteed booth and a visit from the celebrity chef when he's on a date he wants to impress."

Mark Patricof

MESA+, a four-year old venture arm of the investment bank and strategic advisory firm MESA Global, is launching a $10 million venture fund today for seed stage and Series A investments. The fund will be allocated towards companies in consumer Internet, digital content, advertising, marketing, and commerce and focus on investments in New York, from the Mesa+'s Union Square headquarters.

"Since its inception, MESA has worked hard to connect startups with our network in the media and entertainment world," the company said in a press release, noting that, "we are a startup ourselves." The firm has ballooned from four people to more than 25, including its three partners: Jacob Brody, Andrew Montgomery, and Mark Patricof.

Mr. Brody, a fixture in the city's startup scene, is a mentor at the Entrepreneurs Roundtable accelerator and on the advisory board of Livelyhoods, a non-profit that empowers impoverished children in Africa by training them to become direct sales reps. Mr. Montgomery is also a VP at MESA Global, where he's worked on financing and M&A deals with clients like Blue Man Group, Interpublic Group, and Fantasy Sports Ventures.

Mr. Patricof, son of long-time venture capitalist (and one-time runway model!) Alan Patricof, is also a managing partner at MESA Global. He cofounded <kpe>, leading clients like CBS, Sony, and Viacom toward the transition to digital. He started his career at Creative Artists Agency and was a finalist for the Ernst & Young Entrepreneur of the Year Award.

In a statement about the fund, Mr. Patricof noted the firm's crossover appeal between tech, media, and entertainment: "These industries have increasingly become intertwined; the complex relationship between these industries has made it difficult for many entrepreneurs to build their businesses."

In the press release, MESA+ also offered some details about the fund as well as its frequent co-investors:

MESA+ expects to invest in 50 to 70 companies alongside high quality co-investment partners. We are off to a great start having already invested in 7 companies in New York and California alongside funds including Lerer Ventures, Google Ventures, IA Ventures, Andreessen Horowitz, True Ventures, Floodgate and Betaworks. We are able to invest globally, however our focus will be on the New York market where MESA has a hometown footprint. MESA+ will not lead investment rounds or take board seats, but we will be a trusted partner to our portfolio companies by providing recruiting assistance, strategic advice, PR and business development opportunities.

MESA+ has an impressive group of limited partners that fit well with its investment focus on digital media, including Conde Nast, Saban Capital, and Sony Music. The fund's LP advisory committee includes Andrew Siegel, senior VP of strategy and corporate development at Advance Publications, parent company to both Conde Nast and Reddit, as well as Jonathan Miller, News Corp's former chief digital officer. For its startup bona fides, that list of advisors also includes Dan Maccarone, cofounder and CEO at Charming Robot and cofounder at Hard Candy Shell, which designed the original UX for Hulu, Foursquare, Rent the Runway and Jetsetter.

Mr. Russell, left, and Mr. Keidan (Photo: InsideHook)

In fiction, the experts tell you to write what you know. In founding a company, you're told to fix the problems you find in your own life. So it makes sense, then that Andy Russell--a leading investor behind email newsletters like Daily Candy, Thrillist, Tasting Table, and PureWow--has decided the world needed InsideHook, another free lifestyle newsletter, but this one targeted to his own demographic: "The discerning, urban, established man who lives a fast-paced and rewarding life," as the company describes it.

In a visit to Betabeat's offices last month, Mr. Russell, who helped launch roughly one email property a year for the past eight years as a partner at the powerhouse investment firm Pilot Group, said he recognized the need to cater to the 35-to-55 set by looking at his own life. On date night, he and his wife would end up at the same sushi place around the corner. "My wife looks at me and goes 'Again? Where's the guy who climbed Kilimanjaro on our honeymoon?' Or I used to own a restaurant in the West Village called Moomba. 'Where’s the guy who started the hottest nightclub/restaurant in New York?'" 

(You don't have to take Mr. Russell's word for it. Here's a 1998 article from Ruth Reichl talking about how hard it was to compete with "the Beautiful People" for a reservation.)

Of course, even the Beautiful People get older. Through its newsletter and website, InsideHook will offer "curated experiences" that cater to the male urban-dweller who is aged out of Thrillist, but too damn successful to waste his time researching something fun to do on a Saturday night. Thrillist cofounder Ben Lerer must not mind any overlap--he's an advisor to InsideHook's parent company, Trigger Media.

InsideHook's tagline is "The Life You're Meant to Live," promising, "inspiration for the driven man," in other words hustlers like, say, Mr. Russell or InsideHook's CEO and cofounder Jonathan Keidan, a music industry veteran and former COO of the Jack Welch Management Institute, who represents the bachelor perspective. (Paging, The New York Times!)

In an interview with Betabeat, the New York-based company announced a partnership with Ed Burns, one of the many, many celebrity patrons who frequented Moomba in its hey-day--and a paragon of maturing American masculinity in his own right. Along with the partnership, InsideHook is promoting the nationwide expansion beyond New York City that began back in May. In addition to being an equity participant, Mr Burns is curating "his favorite restaurants, travel destinations, outdoor adventures, cultural activities, style finds and products for men," the company said in a press release. Celebrities who curate in their spare time, now where have we heard that before? Oh, yeah. Categories include recommendations on Food & Drink, Health, Travel, Tech, and Action. Mr. Russell said he knew Mr. Burns through, "Being born and raised in New York City and knowing a ton of people."

InsideHook is the first startup to come out of Trigger Media, a $22 million seed stage fund and incubator for what Mr. Russell calls "subscription curation services." It was launched last fall shortly after Pilot Group cofounder Bob Pittman was named CEO of Clear Channel Communications. (You may also remember Mr. Pittman, who founded MTV, from his stints as CEO of AOL and Time Warner Enterprises.) Mr. Russell came into Pilot Group as the firm's youngest partner, focusing on digital and decided it was time to start something more early-stage outside of Pilot's portfolio of TV and radio stations. His mentor Mr. Pittman is one of Trigger Media's biggest investors, but the rest of the investor table is pretty impressive as well, including Conde Nast/Advance Publications, former MySpace president Jason Hirschhorn, former Daily Candy CEO Pete Sheinbaum, who is also an advisor to InsideHook, as well as Michael Kassan, former president of Initiative Media Worldwise, Ken Fox, cofounder of Internet Capital Group, and OneKingsLane founder Ali Pincus. (Ms. Pincus is the wife of Zynga founder Mark Pincus; Mr. Russel was an original investorin Zynga.)

Mr. Russell told Betabeat there's a "huge void in the digital sphere," for services catering to older men. "Probably one of the reasons it’s a huge void in the daily email publications is because Bob Pittman and I didn’t do it," he said. "I wasn’t exactly this demo/psychographic yet."

But that void might be in part a reflection of how tricky it is to speak to this market. After scrolling around InsideHook, it was hard not to notice the ubiquity of pun-y headlines. There's a round-up of spas that cater to men called "Spa and Order," a survival class on the zombie apocalypse called, "Dead Clan Walking," and luxury outdoor bedroom on a Central Park roof called, "Lady and the Camp."

Unless they're all New York Post loyalists, we're not sure readers will appreciate the humor. Besides, what makes a zombie training class better for a 35-to-55-year-old than Thrillist's younger demographic?

Mr. Keidan, InsideHook's CEO, said the guiding principal is making any free time you might have away from your high-powered job more meaningful. "Some of my best friends for the past five years, what have I done with them?" asked Mr. Russell, seconding the notion. "Well we’ve gone out to a great restaurant, we had drinks and we had funny conversation, but there’s no concrete memory in there."

As for those puns, InsideHook's three editors try to tailor the voice to someone charming and witty who is a "a little goofier with his friends," explained Mr. Keidan, emphasizing the editors have to be uber-connected to the top "mixologists" and "cultural tastemakers." We're definitely the wrong demo to tell if the recommendations are appealing, but the site seems little sparse in terms of regular updates, at least for now.

Nonetheless, Mr. Russell said it's the fastest growing subscription service he's ever been involved in and that's just through word-of-mouth. InsideHook refused to share any numbers, but Mr. Russell did note that they doubled subscriptions last month.

InsideHook plans on making money solely through advertising. We were very surprised to hear that advertisers actually find the rich white men segment under-served. Mr. Russell said that's because trying to reach them online via news or sports channels can cut affluence out of the equation. "We’ve walked into meetings with heads of ad sales at some very big luxury brands and we give them our pitch. One smiled and said we've been looking to spend money in this area, but we haven’t had anyone to spend it with," said Mr. Keidan.

Although the Gilt Groupes and Groupons of the world have made the market much more crowded than when Mr. Russell first entered the game with Daily Candy, he argued that "Guess what? Email is a wonderful way of delivering a great message."

"We did over a year of research into the space," added Mr. Russell. "You can only imagine how many people over 13 years have pitched me this model. And I’ve only done eight of them."

Mr. Martin (Photo: Reddit)

The top-scoring link of all time on the social news website Reddit is a post that users were never meant to see at all. It is titled “test post please ignore,” but almost 27,000 Redditors found it so amusing that they voted it up.

That is testament to the website’s impassioned community—and their brand of dry, often geeky humor (the site’s logo is an alien, after all). But Reddit’s user base, which a recent PBS documentary pegged as 72 percent male, has wide-ranging interests. Other top posts include a link to a news item about the elderly volunteering to clean up nuclear waste in Japan following the 2011 tsunami, and a Q&A session with the famous astrophysicist Neil deGrasse Tyson.

Reddit is one of the country’s most highly trafficked websites, but its general manager, Erik Martin, keeps a remarkably low profile. Most Redditors know the 33-year-old Mr. Martin solely by his username: HueyPriest.

“Part of that’s just me, but part of it is like, we never wanted Reddit to be about the people who work there,” Mr. Martin told Betabeat on the second floor of a San Francisco café that was swiftly inching toward sweltering in the late April heat. Dressed in a plaid button-down and jeans, with dark circles forming beneath his eyes, he looked every bit the startup ingenue. “We don’t want it to be this cult of personality thing that I think some sites get turned into.”

Owned by Advance Publications, Reddit is not a publisher but a platform that allows users to share links, stories and multimedia. Often referred to as the “front page of the Internet,” it is notorious for inside jokes. While cartoon rage comics, for instance, may have originated on the ever-more-offensive 4chan message boards, they certainly reached their apex on Reddit (just read the recent New York Times article for confirmation on that). Users also can create their own “subreddits”—or sections—based on any topic of their choosing, and volunteers with no formal association to Reddit moderate them. Democratization is inherently woven into the site’s functionality: users vote posts up or down at their pleasure: The more votes a post gets, the better chance it has of making it to the “front page,” where the most readers will see it.

And an eye-popping number of users do see it: the site averages 2.5 billion pageviews a month. With user statistics like that, and an especially loyal following, detractors have derided it as a “hive mind,” but that doesn’t fully account for the complexity and generosity of the community: A few months ago, the site hosted a poignant question-and-answer session with a survivor of Norway’s Utøya massacre, for example, and there are countless threads that help collect donations for the community’s sick or needy members.

“‘Hive mind’ is often used pejoratively, and I definitely understand what people are referring to, but I think the idea of a hive mind works pretty well for bees,” offered Mr. Martin, when asked about Reddit’s “upvote now-assess later” tendencies. For bees, he explained, a hive mind means that it takes a democratic consensus to make an important decision, like where to construct a new hive.

“[The hive mind] is a very fast, sort of reactionary thing, and that has bad results sometimes, results where people are not as skeptical as maybe they should be. You need to make sure enough bees are going to double-check the new location. You need a bunch of bees going like, ‘You are right, that is a pretty great new home, it has a tire swing.’”

A little history: In 2005, the site’s young co-founders, Alexis Ohanian and Steve Huffman, were accepted by the startup incubator Y Combinator for its first-ever round. A year later, in a push to expand its online brand, Condé Nast acquired Reddit for between $10 million and $20 million. At the time, Reddit averaged just 70,000 unique daily visitors.

After the sale, Condé worked feverishly to fold Reddit into its stable of well-established print brands, like Vogue and Wired. “We thought of Reddit, [technology blog] Ars Technica and Wired as what Condé Nast deemed the ‘innovation group,’” said Jena Donlin, who runs business operations for Reddit and still works out of the Condé Nast office in Times Square.

Mr. Martin, who had majored in American Studies at Tulane and worked in the documentary film industry, served as the site’s community manager at the time, a role that he said entailed “answering user questions, dealing with spam and finding cool things in the community to promote.”

By all accounts, Mr. Martin also played a significant role in ushering in a successful transition from an independently run website to a division of a major publishing conglomerate. What made the job even harder was that Reddit’s approach to publishing exemplified the democratizing influence of the web, which at that very moment was violently destabilizing the whole we-speak-you-listen model that Condé Nast, with its pantheon of all-powerful editors, had long since mastered.

As Reddit’s user base continued to grow following the acquisition, the tension between the democratized user-generated site and its ancient publishing parent became more pronounced. Reddit does not offer traditional advertising, so its primary stream of revenue came in the form of Reddit Gold, a paid premium membership subscription, as well as what Mr. Martin called “self-serve ads for mom-and-pop shops” and carefully selected marketing partnerships.

The site, which boasts a barebones user interface that harkens back to the halcyon days of ’90s Usenet groups, has always shunned traditional advertising, a stance that even a cash-starved, ad-hungry Condé Nast couldn’t change. Monetizing Reddit is something Condé Nast “has still not been able to figure out,” Mr. Ohanian said in a 2010 episode of Big Think, adding, “Reddit has a fantastic audience ... How do we advertise to them in a way that isn’t screwing them as a user and at the same time providing enough value to an advertiser to want to do it?”

(Photo: Flickr.com/teuobk)

But in August 2010, an advertising controversy erupted between the stodgy parent company and its willful child. The activist group “Just Say Now” wanted to host self-serve ads on Reddit in support of the proposed California marijuana legalization law Prop 19, but Condé Nast refused. The Reddit team responded by agreeing to host Just Say Now’s ads on their site for free, a move that was still technically within the bounds of the parent company’s rules, but made a strong point.

Reddit’s traffic continued to explode, and in early 2011, the site was getting upward of two billion pageviews a month. Condé Nast wasn’t equipped to handle the technological and cultural challenges that came with that kind of traffic. And the tensions between the little-website-that-could and its old-school parent company were starting to take their toll. “In the spring of 2011, we had one programmer and two system administrators and me,” Mr. Martin explained. “It was kind of a rough time, and I was like, ‘If Reddit needs me to move out to San Francisco, I’ll do it. I’ll do whatever Reddit needs. I can’t let this fail.’”

Mr. Martin agreed to move to San Francisco at the behest of Condé, and took on the general manager role. He began to grow the team, hiring a handful of programmers to administer the site. Finally, in September 2011, the company spun Reddit out of the Condé Nast family into its own standalone subsidiary, while still retaining ownership.

“We don’t want to get in users’ way,” Ms. Donlin explained. “We want to serve what the community is already doing. Condé Nast understood that, and it’s why we’re independent. They understood that we needed to be able to do that in order to grow. And they realized in the current structure of Condé Nast, it wasn’t as easy to [grow] because there wasn’t a precedent that was set. We’re more bottom up whereas Condé is more top down.”

Mr. Martin agreed. “The process didn’t allow for [what Reddit needed], that was the main tension. [Condé’s] process is set up for sales cycles that take longer and there’s more sort of time for that kind of vetting and decision-making. But most of the Condé brands have more people on the sales side than we have total employees.”

Reddit hired its first-ever CEO in March 2012, an ex-Pay Pal and Facebook engineer named Yishan Wong. Now, Reddit is a subsidiary of Advance, separate from Condé, and reports to a board populated with executives from both Condé and Advance, along with Mr. Ohanian. “We’ve been working with Advance Publications to complete [R]eddit’s spinoff,” Mr. Wong wrote in a triumphant blog post on Reddit, “[including] a revamped capital structure that will allow [R]eddit to manage its own finances and operations.”

“The way that the site works,” said Kevin Morris, a staff writer at the Daily Dot, in a recent PBS segment about Reddit, “[is that] it tends to attract people who want to know the truth.” In January 2012, the Reddit community’s large-scale vocalization of their opposition to SOPA and PIPA, coupled with support from equally passionate communities on Tumblr and Wikipedia, eventually persuaded lawmakers to table the legislation. Reddit, an online community that had only been around for six years, had successfully helped to defeat the American government.

IN APRIL 2012, MUCH to his surprise, Mr. Martin was named one of TIME Magazine’s 100 most influential people. For the event, Mr. Martin donned a tuxedo for only the second time ever—the first being a friend’s wedding—and completed the outfit with a shiny pair of Reddit cuff links.

“It was very surreal,” he confided a few weeks after the event. “I’ve never been to something like that. I got to meet Ralph Nader, who is adorable. He asked about Reddit and I explained it to him, but I don’t know if I was successful.”

Mr. Martin is unfailingly humble about his contributions to Reddit. “Any credit I would get,” he said, “would be for not fucking it up.”

“At Reddit, he doesn’t say, ‘Hey, check me out,’” explained Nils Olsen, an old friend of Mr. Martin’s. “He says, ‘Hey, check you out.”

“He can be very humble,” agreed Ms. Donlin. “That humbleness has also been what’s made him so successful.”

Mr. Martin will be moving back to New York in July to focus on the business and media aspects of the site and to run the New York office.

As for that TIME 100 award, it doesn’t appear to have gone to his head.

“Ralph Nader went to give me his business card and he said, ‘Well, I kind of ran out of my current cards, but I grabbed this stack of cards from the 1970s.’ All it had was a P.O. box. It didn’t have a phone number, so he scribbled it on the back,” he said.

“I was like aaahhhh, I am framing this! It was amazing.”

That sounded like an upvote.

A version of this story appeared in the New York Observer the week of Wednesday, June 13th.

Reddit, the wildly successful online community for sharing links, news, memes and beyond, was bought by old media mogul Conde Nast in 2006, back when reddit was more of an indie alternative to Digg. But today Conde relinquishes the reins: reddit is spinning out into an independent company, reddit Inc., under Conde owner Advance Publications, and is looking for a CEO.

So, where do you get one of those, Betabeat asked reddit general manager Erik Martin, a New Yorker who moved to San Francisco for the job a few months ago.

"Sam's Club," he said.

Despite butting heads with their old media overlords over things like advertisements for marijuana legalization campaigns, reddit's traffic has grown more than fifty-fold since the acquisition. But the fast-growing site never quite fit in at Conde, which owns Wired and The New Yorker and has a dubious track record with adjusting to the digital media shift, and the companies started considering a severe adjustment to the relationship more than a few months ago, although Mr. Martin couldn't place a date on exactly when things got serious. "We've always been very vocal about times when we've felt restrained by being part of a big huge complicated media company," general manager Erik Martin told Betabeat from San Francisco. "We have always wanted more independence."

Being under Conde Nast gave reddit less access to resources and generally bogged the startup down, he said. But reddit's new independence brings new ambitions. Reddit is hiring for a CEO and more positions to be announced soon, Mr. Martin said. Besides catching up on some deferred iterations to adjust to the way people are using the site, reddit hopes to become a platform for civic engagement and citizen journalism, even for feedback on product development and brand engagement.

"A lot of the reddit community members and the moderators have been innovating, they themselves have been the source of innovation on reddit," Mr. Martin said. "We've just been trying to keep the lights on. We have a lot of catching up to do with things like local reddits ... we need better tools to support that.

Some sub-reddits get so much traffic they "now are basically their own websites," Mr. Martin said, with around 6,000 sub-reddits with more than 100 subscribers. One goal is to make those sub-reddits easier to manage and find, he said.

Greater independence will mean reddit can go to a new board, which includes reddit OG Alexis Ohanian, who had been serving as an "advisor," as well as representatives from Conde and Advance, with proposals instead of jockeying within Conde's budget. Reddit doesn't plan to seek outside funding at this time, Mr. Martin said, but it's not out of the question. "It's a lot more more of a startup," he said. "It's able to happen faster with less overhead."

The reddit blog post (titled "Independence") announcing the change had more than 400 comments in 11 minutes. "I heard some big-shot CEO at Apple just recently left, maybe you can hire him," user ggggbabybabybaby writes. "Someone said his previous salary was only $1 so you could probably double that."