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Just realized the lie about reddit api pricing (kbin.social)

submitted 1 year ago by abff08f4813c@kbin.social to c/RedditMigration@kbin.social

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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.

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[–] lightingnerd@kbin.social 44 points 1 year ago* (last edited 1 year ago) (4 children)

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:

Huffman said Reddit's back-end infrastructure includes separate server pools solely dedicated to handling the scraping that Google and Microsoft do from Reddit every day.

"Reddit represents one of the largest data sets of just human beings talking about interesting things," Huffman said. "We are not in the business of giving that away for free."

https://www.npr.org/2023/06/15/1182457366/reddit-ceo-steve-huffman-its-time-we-grow-up-and-behave-like-an-adult-company

[–] levo@kbin.social 32 points 1 year ago

He really is a disgusting fuck

[–] fear@kbin.social 24 points 1 year ago

"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.

[–] doctortofu@reddthat.com 6 points 1 year ago

“We are not in the business of giving that away for free.” - right, you're only in business of getting it for free and then charging everyone you can for it...

[–] Joe091@kbin.social 2 points 1 year ago

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.

[–] Alto@kbin.social 39 points 1 year ago (2 children)

Infinite growth is why we can't have nice things. Nobody is happy with bring happy, they've gotta have more more more

[–] Goob@kbin.social 16 points 1 year ago* (last edited 1 year ago)

Nobody is happy with being happy, they’ve gotta have more more more

We call that being a shareholder.

[–] SgtSilverLining@lemmy.blahaj.zone 0 points 1 year ago (1 children)

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.

[–] abff08f4813c@kbin.social 1 points 1 year ago

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?

[–] JASN_DE@feddit.de 28 points 1 year ago (2 children)

No one ever said the API price was only to cover the API costs. Reddit wants to make money, that will need more than just the 10 million.

[–] admiralteal@kbin.social 14 points 1 year ago (1 children)

Spez specifically said the pricing was based on the opportunity cost of users being on 3P apps, not the infrastructure costs. The Apollo dev fully understood this, which is why his calculation for determining why it was gouging was based on industry estimates of Reddit's total revenue vs usership.

They were going to charge 3P devs many times what a user of just the reddit.com site is worth to them. Either it was a "fuck you" price to drive away the devs or it is a sign of deep and dire internal financial woes which they were hoping the more competent 3P devs would somehow bail them out on. Likely a mix of the two, though the former is definitely the dominant note I hear.

[–] owenfromcanada@lemmy.world 1 points 1 year ago (1 children)

That first option isn't just about lost revenue from ads--it's likely the opportunity to collect (and sell) user data. Having everyone using only the first-party systems would likely make that a very valuable resource.

I don't know much about their policies on user data right now, but even if they're not currently doing much with it, they could always change those policies and make bank.

[–] Joe091@kbin.social 1 points 1 year ago

Reddit still gets most of the user data even for people that use 3rd party apps. They won’t get all of the telemetry and other marketing data pulled from their mobile app or website though, so I suppose that is a consideration, but that’s not as valuable to the LLMs.

[–] funkyb@kbin.social 5 points 1 year ago (1 children)

fair but the issue has never been about charging for API usage, it's how much they're charging for it. Not sure if you're implying that a single app using the API should pay enough to double reddit's total API operating costs for all apps, but if so, that's pretty unreasonable.

[–] abff08f4813c@kbin.social 3 points 1 year ago

Not sure if you're implying that a single app using the API should pay enough to double reddit's total API operating costs for all apps, but if so, that's pretty unreasonable.

I was trying to show how unreasonable the pricing was. One app pays double reddit's expensives for all apps??? Like, huhwhat? Def. f-u pricing.

[–] snarfback@kbin.social 20 points 1 year ago (2 children)

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.

[–] whofearsthenight@kbin.social 21 points 1 year ago (2 children)

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.

[–] abff08f4813c@kbin.social 8 points 1 year ago

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.

[–] cloudless@lemmy.ml 5 points 1 year ago

The funniest thing is that he is late for LLM pricing. OpenAI, Meta et all already scrapped the whole Reddit dataset many times over.

[–] Doomhammer458@kbin.social 7 points 1 year ago

$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.

[–] Mirodir@lemmy.fmhy.ml 13 points 1 year ago* (last edited 1 year ago) (1 children)

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.

Me [Apollo Dev]: "Because I assume the majority of it isn't server costs. I assume the majority is the opportunity cost per user."
Reddit: "Exactly."

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.

[–] Steeve@lemmy.ca 3 points 1 year ago* (last edited 1 year ago) (1 children)

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:

Third party app users literally shit gold and every advertiser in the world is falling over themselves to target them or
spez is so full of shit he can't even keep his numbers straight

[–] a-man-from-earth@kbin.social 1 points 1 year ago

Hmmm, let's see...

I choose number 2.

[–] SpaceNoodle@lemmy.world 10 points 1 year ago

That's one of Huffman's many lies, yes.

[–] ClassyHatter@lemmy.world 9 points 1 year ago (3 children)

That's the one line that jumped at my face as well when I read that interview. At least one other app developer said they'd have to pay about the same amount of money for Reddit. So all the third party apps would probably be something like 60 million+/year with those numbers.

Relay for Reddit is planning to go subscription only. They are currently planning 2-3 USD per month price point, based on their analysis of users using 100 API calls per day on average. But if the subscription fee drives away low-rate users, they will likely need to increase the price. https://www.reddit.com/r/RelayForReddit/comments/147152b/update_how_the_current_api_changes_would_impact/

[–] crwcomposer@lemmy.world 18 points 1 year ago (1 children)

Relay is that best reddit app that I used. I'll be sad to see it go, because I'm not subscribing to a service to browse reddit.

[–] -_-@readit.buzz 7 points 1 year ago (1 children)

I used it too, deleted it this week and haven't been back on Reddit since. Sad to see it go though.

[–] bryanuc@kbin.social 3 points 1 year ago (2 children)

Sadly, did the same here. I was mindlessly clicking on the relay logo when the blackout was going on when I was bored, so I finally removed it too.

[–] brownpaperbag@kbin.social 1 points 1 year ago

I removed it on Sunday and replaced it with another app that's absolutely silly for me to open once, let alone multiple times, without receiving a notification for it and quickly shamed myself out of mindlessly clicking that spot.

[–] Badabinski@kbin.social 0 points 1 year ago

I had to set a daily screen time limit of 0 minutes because I kept opening it. I'll probably delete the app when I scrub my entire comment history from Reddit.

[–] ylph@kbin.social 3 points 1 year ago (1 children)

DBrady's latest message is more pessimistic on the price point

Hard to tell right now how many users will actually pay at all - I purchased the Pro license for Relay back in 2012 (when it was still called Reddit News and cost $1.99) and used it as my sole mobile way to access reddit, but have not opened the app this week at all (replaced the icon on my phone with jerboa for the toilet scrolling needs)

After the past week's events, there is 0 chance I will ever pay money to reddit in any form, the platform is basically dead to me at this point.

[–] el-sapo@kbin.social 3 points 1 year ago

Oh that thread makes me bummed out. I tried BaconReader, Joey, and settled on Relay. I think I might've paid the subscription if the third party thing panned out better, but with everything else that's happened? I don't think I want to stick around Reddit.

[–] Blazze@kbin.social 2 points 1 year ago* (last edited 1 year ago)

And that $60m is likely chump change compared to their potential to make off data mining.

[–] IntendantTradwife@kbin.social 8 points 1 year ago

Greed crushes communities :/

[–] roving6478@kbin.social 6 points 1 year ago

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.

[–] DaGuys470@kbin.social 1 points 1 year ago

Can't. You're spot-on.

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