Just realized the lie about reddit api pricing - RedditMigration to the "Threadiverse" - kbin.social
kbin.socialSo 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.
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Here’s the biggest factor in all of Spez’s deceit, Apollo is an afterthought. 3PAs are smaller businesses, and I’m betting that he didn’t want to outright make enemies of industrial giants like Microsoft and Google (that would be incredibly stupid), so my guess is that Spez is running with the whole claim that he doesn’t want to subsidize the profits of 3PAs to avoid pissing off the people who could ruin him. However, in no unclear terms, he wants to convert his biggest API users, the ones who demand dedicated server pools, into income streams. He wants to sell our content, as his own:
https://www.npr.org/2023/06/15/1182457366/reddit-ceo-steve-huffman-its-time-we-grow-up-and-behave-like-an-adult-company
He really is a disgusting fuck
“We are not in the business of giving that away for free.”
This has the vibe of a dog with a bone noticing its reflection in a lake.
He doesn’t intend to make money off of the third party apps. If he did, he could have set a reasonable price. He wants to shut them down so he doesn’t have to worry about them and to force people on to their app. Few, if any, 3rd party apps will ever pay the advertised price, so it will be peanuts if not literally zero as a revenue stream. The strategy is to get all users on Reddit-owned properties, be it the website or app or whatever else they may come out with.
Infinite growth is why we can’t have nice things. Nobody is happy with bring happy, they’ve gotta have more more more
We call that being a shareholder.
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?
so, as a rough back-o-the-envelope estimate, what i’m hearing is that apollo, rif, sync, etc would each be charged about $20M, so a total of $60M - $70M they’d make if the 3rd party apps all decided to run with the new API pricing. I don’t know what the AI guys would be charged, but lets say an order of magnitude more - $600M - $700M. All told, these API changes - if everyone paid in, would result in ~$1B in extra revenue.
if 85% of people who use reddit continue to do so, and they convert many of these people into their paid app…maybe they get half of that?
so Spez et al get to add $500M to annual revenues, make the potential investors happy, and all it costs is quality?
they’re 40 years old now instead of 23 or whatever…they want money.
if we assume that Musk made some of his moves to really sell his data / meta-data in ways users might not love, I would assume reddit and spez have been doing the same thing and are getting ready to step that up.
reddit is twitter is facebook is cnn is fox is msnbc. engage as you feel comfortable.
I think this whole thread/post is over-thinking it. If all reddit wanted was to break-even or make some profit off of the api, they wouldn’t have priced it this way. They would have had changed the api to a key system and then created a two tier pricing system: third party apps like RIF and Apollo, and a large commercial license for LLM training and such.
This is fuck you pricing. As in, if you don’t want to take a job, you tell them the price is 8x your normal hourly rate. You either get that bag or more likely, they don’t offer the job. Although I say this with less certainty than I would have a month ago seeing exactly how stupid reddit is about all of this, I can’t believe that anyone at reddit is so out of touch they actually thought any of the third party app devs could afford this pricing, and if they did and it wasn’t just to kill apps, they would changed the pricing structure and not triple/quadrupled down.
This is just Huffman going after the IPO so he can get his golden parachute and peace out. I would absolutely put money on him being out less than a year after IPO, with the small asterisk that as bad as he’s fumbling right now the board might kick him before that.
This is exactly what I was thinking. I guess the stuff about API pricing is somewhat orthogonal to that.
The funniest thing is that he is late for LLM pricing. OpenAI, Meta et all already scrapped the whole Reddit dataset many times over.
$500 million is their current revenue so that would be impressive if they could double it just by charging Google and Microsoft.
So doubt they could make that much. Also they already have decades of data they got for free. How much will a bit of new data really change their models?
It all comeback to the fact that Reddit is shamefully unprofitable and everyone needs an exit strategy. A top 10 website that can’t even make a billion dollars in revenue? Lol good luck selling that.
Greed crushes communities :/
The same individuals who benefit from Reddit as a training ground for AI also have a stake in Reddit. They are transferring money from one pocket to another.
Can’t. You’re spot-on.