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.
This is actually a big thing I learned when going to school for accounting. Any business that isn’t growing is considered stagnant and will fail without new customers. So the two options are:
a) change your business somehow to bring in new customers. This can be difficult unless you’re a first mover. If the market is saturated with competitors, you’ll have to steal clients.
b) move into a new vertical and offer a completely different service. That’s what reddit is doing. Since they’re a fist mover in the API market with existing brand recognition, they’re trying to control the baseline cost for the product.
The concept of eternal growth is actually a contributor to why we have recessions. Businesses grow to the point that they either have to charge crazy prices or commit fraud to keep up with market expectations - too much pressure to preform in the stock market. Then the bubble pops and companies cut their biggest cost (labor) to try and stay afloat.
In fact, accounting is quite relevant here. All that needs to happen is for reddit to act like a car dealership and offer a 30 year loan to the app developers for the first year. Deadlines don’t even need to change, but apps like Apollo can run as they are for another year with the reddit loan (perhaps minus the free users), giving time to update the annual billing to the higher prices necessary for the apps to survive. And of course they’d have over a year to implement any changes, which hopefully would be enough. $20million over 30 years, even after accounting for interest that’s probably less than $1million. So charge users a price that nets $21million a year and the apps can all survive.
Apps would survive and reddit would get a huge cash influsion from all the new revenue generated. Sellig was also willing to talk about allowing reddit ads on Apollo, which would be even more money for reddit.
Why not do this, and get the max money, instead of picking the options that kill the apps and screw over the mods and regular users?