Or just convert all image links automatically. Some websites do it.

There can be very good reasons for this. Gmail, for example, rehosts embedded images with google to protect users against invisible pixel trackers.

I assumed they hadn't done that so as to keep the wholesale copyright infringement at arm's length from the parent company - is that still Condé Nast?

The company that owns Conde Nast, Advance Publications, still has a stake in reddit. There's a variety of other investors involved:

http://www.wired.com/2015/07/wired-conde-nast-reddit/

1. Provide a better 1st party image hosting experience free of ads and clutter.

2. Block other image hosts from your service forcing people to use yours.

3. Introduce ads.

4. Profit!!!