Tencent doubling down on US social apps, said to lead Reddit’s Series D financing round

After Snap and Discord, Tencent eyes a stake in Reddit.

By

Tencent doubling down on US social apps, said to lead Reddit’s Series D financing round

American social news aggregator Reddit is looking to raise anywhere from US$150 to 300 million in its upcoming Series D financing round. According to TechCrunch‘s sources, the round will be led by Chinese internet giant Tencent.

This would be the first major investment from a Chinese firm for Reddit.

Reddit is well known as an online forum that adheres to free speech principles. Its immense traffic was built by a wide community that discusses issues like gaming, politics, pornography and celebrity gossip. In 2015, the firm finally made a move to implement restrictions for some of the most offensive “Subreddits”.  It’s blocked in China, like many other foreign internet services, but Reddit’s laxer attitude toward porn and nudity has meant that it’s also blocked in other countries that are normally open to US-made internet services, like Indonesia.

Tencent, on the other hand, is not just any Chinese tech company. It is known for being one of the most important architects of China’s Great Firewall, which keeps companies like Reddit out.

However, this wouldn’t be Tencent’s first investment abroad into firms that are banned in China. The Chinese tech giant also has a 12% stake in Snap and it owns a portion of chat app Discord, neither of which can be used in the Middle Kingdom. Tencent might be incentivized to invest in the social space as its main staple, gaming, is increasingly coming under the scrutiny of Chinese regulators. Tencent might also look for stakes in US firms to keep up with competitor ByteDance, the Chinese firm that’s seen immense global success with its short video app Tik Tok.

If this deal goes through, Reddit’s valuation will hit the US$3 billion mark. The exact terms of this fundraising plan might still change before its official announcement.

Reddit was founded in San Francisco in 2005 and was sold publisher Condé Nast a year later until it was re-incorporated as a separate entity and now lives under the umbrella of Advance Publications,  Condé Nast’s parent company.

Advertising is the main revenue driver. Today, that includes promoted posts, cost per impression and video ads. Its recent cost-per-click ads model worked well, leading Reddit to push its revenue to pass the US$100 million mark last year. Reddit also posted a 22% increase in engagement, and a 30% rise in total viewers, according to CNBC.

Editor: Nadine Freischlad