As far as I know, this is incorrect. In fact, before the introduction of reddit gold reddit was so self-insufficient they were not allowed to hire because they were not making enough base revenue for Conde Nast to consider it worth growing in staff. Not profit, revenue.
It might have changed post Gold, but I'm not so sure about that.
What? You're saying they're making 40k (hosting costs) + all salaries from advertising? I find that incredibly hard to believe. Like impossible to believe.
I have no idea what their hosting costs were, or their 5 salaries, but they did make enough to stay afloat, although not enough for CN to approve more staff. Jedberg's commented in this thread, so I suggest you ask him whether they were profitable pre-gold.
Actually they were around $22,400 according to the comment just under that. Still, I wouldn't be able to tell you whether or not they operated at a loss. You'd have to ask jedberg.
300 million pageviews/month goes a long way. Sure, their CTR is probably lower than most sites, but their traffic is huge.
Let's say their CTR is 0.1%. That's 300k clicks/month. I'm building in some wiggle-room here, as a 0.1% CTR is abysmal, but often their ads aren't really ads. Even at $0.01/click, that's still $30k/month. More than enough for hosting. Now, I'd hazard a guess that most of my numbers are quite a bit on the low side, as reddit has operated for years without CN shutting the doors. Also, from what the admins have intimated from time to time, they make money, but not enough to register on CN's radar.
I wouldn't discount their ad sales; traffic like that carries a lot of weight.
It might have changed post Gold, but I'm not so sure about that.