So it's well known now that the developer of Apollo estimated the new API pricing would cost $20 million a year. For a source, see the title of https://www.theverge.com/2023/5/31/23743993/reddit-apollo-client-api-cost
But from https://apnews.com/article/reddit-blackout-steve-huffman-ceo-api-0a4f7b344ecfbf50c924b030c344c55e the price from supporting third party apps is $!0 million a year. And presumably this is all third party apps combined!
Huffman says the “pure infrastructure costs” of supporting these apps costs Reddit about $10 million each year.
Something's very not balanced here. That one app would have paid for Reddit's third party infra costs twice over.
I can not remember which ones now (can anyone help me out here actually?), but I think a few apps said they'd try to make it work with the new pricing.
Which means Reddit likely stands to make a huge pot of money once the new API changes take effect, in the short term.
Even if Reddit loses the best subs, the best communities, the best users, and the moderation goes to where the sun don't shine, I could see that new revenue boosting investors confidence enough to lead to a successful (if slightly smaller) IPO.
If Reddit goes downhill and loses lots of value afterwards, well, spez has already made his quick buck, so I doubt he wouldn't feel very sentimental about it.
Folks, please explain to me why I'm wrong. Please.
The difference between "pure infrastructure costs" and total costs of third party apps are the opportunity cost in ads and other potential money making schemes (NFT avatars etc.) that they cannot shove down people's throats on third party apps.
They even specifically admitted to this in one of the calls with the Apollo dev so it's not just conjecture on my part.
Edit: Of course that doesn't mean that Reddit's decision is a good thing. They'll have even more opportunity cost if many of their power users just leave, which seems to be the logical result to their actions.
But even that is bullshit. Apollo has, at a high estimate, 1.5M monthly active users. Let's say the opportunity cost for Apollo alone is $10M: $20M minus the actual cost of all third party apps (the highest possible estimate). So spez is claiming the opportunity cost of 1.5M users is $10M at least. Reddit has 430M monthly active users, so Reddit is claiming without third party apps they could be making 430M/1.5M*$10M = $2.87B in revenue.
Their revenue is reported at $522.4M last I checked (which was literally just now).
Now Reddit's revenue isn't a direct calculation based on MAU, it's based on advertiser spend. So one of the following must be true:
Hmmm, let's see...
I choose number 2.