How a social-media dream deal with Condé Nast fell apart.

In October 2006, Reddit co-founders Steve Huffman and Alexis Ohanian decided it was finally time to sell. A year earlier, their Digg-like social-news Web site had attracted an offer from Google, but the founders wanted to keep developing the fledgling company in-house. This time, though, the buyer that came calling was not the 800-pound gorilla of search engines. It was the 800-pound gorilla of magazine publishing, the one wearing Gucci loafers and a Patek Philippe watch: It was Condé Nast. Reddit was rumored to have sold for $65 million—a number that was denied by both sides. Reasonable analyses have put the price at $15 million to $20 million.

Fast-forward to today. Although Reddit has had solid traffic growth since the sale, both founders, now 26, announced they were leaving the company on the day their contracts with Condé Nast expired: Oct. 31. Halloween.

Granted, the marriage always seemed forced. But the dissolution of the Conde Nast-Reddit partnership says a lot about the oil-and-water mixture of old media and new. In an interview with Drew Schutte, the latest VP to manage Condé Nast’s online properties, just 10 days after Huffman and Ohanian’s exit, about all the company’s online initiatives, the word Reddit is never even used.

Three years ago, Condé Nast saw Reddit as a tool—one it could use to pry open the front door with other Web companies and one that would repair its own online track record, which was mixed at best. “We are confident that other companies will find Reddit to be a partner that can bring tremendous value to their Web efforts,” Steve Newhouse, the executive in charge of CondéNet, said back then. Huffman saw a chance for his company to grow, saying, “We’re excited …  gain the resources to give us the freedom to accomplish many of the goals we’ve been dreaming about.”

Kourosh Karimkhany, the vice president of acquisitions for CondéNet who said he “played video games” with the founders while he was engineering the deal, said, “Our goal will be to build Reddit as an independent company by collaborating with Wired through the integration of its core technology, and by offering partnerships to allow others to do the same.”

That seemed sensible enough. And while Reddit was never a serious traffic challenger to Digg’s 40-million-plus unique monthly visitors—Ohanian says Reddit serves 7 million unique visitors a month; the highest independently available source puts the number at 5.5 million—the traffic nonetheless grew during the three years and ought to have been large enough to turn a profit.