Not sure how reddit exists without ads either though. Running huge websites with user video hosting is a non trivial expense that's hard to entice enough users to cough up money for to make viable.
The move to reddit itself hosting content came much later
I suspect that the rise of imgur as it's own community was seen as a threat, or at least competition, and the question "why are we basically helping our competitors" was asked at least once.
Yet the site's operators got rid of one of the most popular mechs for monetization: Awards.
of course it all went to hell when they went from a small dedicated team to a startup raising millions to add hundreds of employees doing god knows what
Infrastructure costs were covered by reddit gold. This was displayed on each community, some accrued years worth of server time.
Instead of organic stuff like the first IAMA's what that "manpower got you were promotional flybys by actors releasing a new movie or book or something, who didn't even understand what they were doing.
Let the image host show ads to cover their costs.