Conde Nast, which bought Reddit five years ago, is considering spinning out the social news site.

The publisher would continue to own the site, but it's talking to investors about selling a stake. Sources tell me it is floating a $200 million valuation.

Reddit, which labored under the "Digg-clone" designation for many years, is now a much hotter version of Digg. Last summer, it was doing more than 400 million page views a month' now it's up to a billion. The free site has made some forays into advertising, but they've been very, very cautious.

The theory: taking Reddit outside of Conde Nast's corporate structure would make the site that much more valuable, and would give it a better chance to compete for capital, managers, and employees alongside the likes of zippy start-ups like Quora, StackExchange, etc.

The employee issue is particularly acute for Reddit right now, as most of its original team has left the company and the site is now operating with a bare-bones staff. People familiar with Conde Nast's thinking say the spin-off was contemplated before the most recent round of departures.

"We love our Reddit asset, and it's a core asset for us, and it's getting more valuable every day," said Steve Newhouse, who runs digital operations for Advance Publications, Conde's parent company.

Newhouse, who wouldn't offer any other comment on Reddit, is also overseeing M&A for Advance. Last year he hired Yahoo dealmaker Andrew Siegel to kickstart Advance's efforts, and sold off some stock Advance held in Discovery Communications to give Siegel a $500 million starter fund.

Story Copyright (c) 2010 AllThingsD. All rights reserved.