Which begs the question: What the hell was reddit doing that they didn't immediately implement an image hosting feature to keep users on the platform? Imgur rose to fame because it was the darling image host of reddit users, and it wasn't long before imgur needed to pay hosting costs and started sucking users away from reddit and into their own "imgurian" sharing hub.
I guess the internet back then was still in the "Open effort to make the internet awesome for everyone" phase, and hadn't yet gotten to the adversarial "Capture users and never let them leave" phase.
Similarly over on twitter without any image hosting capabilities let third party sites like twitpic host images for years before evetually developing their own service. Twitpic eventually caved under the load of hosting so much stuff without income and it was good that Twitter was successful enough to take it all on directly.