TIL why Reddit stays capital light

The theme of Reddit CFO Drew Vollero’s career has been consumer products, he told us, and the social media company is no different—well, except for the kind of product. In his career, Vollero has traded sodas for Barbies, and Barbies for social tech.

A decade with PepsiCo and Yum! Brands across QSRs like Taco Bell and KFC gave Vollero experience in strategic planning, M&A, real estate, and marketing. Another decade and a half with toy maker Mattel added corporate strategy and investor relations to his competencies.

In Vollero’s first CFO job, he had the opportunity to lead the IPO for a major consumer brand, Snapchat, calling it a “once in a lifetime experience.” Vollero helped launch Snap’s IPO in 2017 before taking a detour into private security as CFO of Allied Universal, and ended up at Reddit in March 2021 with the goal of taking it public, too.

In an interview with CFO Brew, Vollero discussed his IPO launch experience and how Reddit’s capital expenditure philosophy differs from some other tech companies.

This interview has been lightly edited for length and clarity.

What did you learn from your IPO experience at Snap that helped you with the Reddit IPO?

If I think about double clicking on Reddit, I think the couple of things that were sort of interesting on that one is, one, I thought we were savvy on using time at Reddit. I joined Reddit in 2021 with the idea of taking the company public in 2022. We could have gone public in 2022; I don’t think we would have gotten the highest price that we wanted, but I don’t think we were necessarily ready as much to be a public company. So we really spent the next two years really polishing our company up. We did something like eight practice earnings calls; we had an investment banking syndicate put together. And so every quarter between 2022 and 2024, we essentially did eight dress rehearsals as a public company, where we would close our books quickly, we forecast our business for the next quarter, and then we would have a board meeting, and then we’d have an earnings call with these analysts. Now, that call wasn’t published, and the analysts didn’t write notes, but other than that, it was a true, legitimate, public market experience.

Compared to other social networking companies, Reddit operates on relatively low capital expenditures. How is Reddit able to do this, and why does it work for the business?

Reddit’s model is capital light. We spent about $7 million in capex last year; we spent $1 million in the first quarter of 2026, so it’s a very different model than some. I think we can do that for a couple of reasons. I think first is, we rely on third-party hosting, and that works for us and where we are today. Today, we use Google and Amazon, and we pay based on our usage. What I really like about using a third party is a couple of obvious strategic benefits, right off the bat. First of all, you don’t have to build for peak. When you’re using somebody else’s services, i. If you’re flexing in a busy time, you just rent more, as opposed to building for that peak of your business, and then being stuck with a bunch of excess capacity. So I certainly love that piece; it helps keep our economics in good shape.

For us, I think building data centers would be a distraction, or a risk; you’ve got to always build ahead and bet on [if] that business is going to be there. Again, for a young business, we can stay focused on our product, we can stay focused on our customers, our ad stack; that, I think, is our secret sauce.

Both of those companies [Google and Amazon] are eager to get our business, and we work with them to figure out who’s the right person to work with…but I think between A, the price of technology gets cheaper over time, and then B, the competitive environment that a dual cloud creates, I think economically we’ve won.

How does this capital light business model and its impacts bolster the rest of Reddit’s business?

Our gross margins are better than most because of the third party hosting, and then also because we’re an authentic platform, we typically aren’t paying creators or leagues enormous amounts of money into royalties, so both those things really help us. And so what we’ve been able to do is we added people. We added a decent amount of people in the early part of the decade; in 2021 and 2022, we tripled the size of the company, we got up to about 2,000 people, and since then we’ve been really kind of being strategic about how we add resources.

When we’re strategic about how we add resources, our incremental margins are fairly spectacular, so our incremental margins here have been running between 55% and 70% for the last couple years…The only thing we’re really spending money on is occasionally some computers and some new offices, so it’s really a unique model where EBITDA is very similar to cash flow, very different than other folks.

I’d be remiss if I didn’t finish our conversation by asking what your Reddit subhandle is, and what your favorite subreddit is.

My Reddit subhandle is u/TimingandLuck, and personally I think that I like r/DadJokes best. The back story for me is even when I was doing the Snap IPO, my kids were on Reddit all the time, and I was intrigued. The way that I communicated with my kids was through dad jokes, and so I started using [r/DadJokes] to text my kids during the day: “Well, what do you think about this one?” just to make sure that we were always keeping in contact.