Reddit’s $12,000 API Pricing Smothers Third-Party Apps 

In April, Reddit announced new terms for developer tools and services, paid access to the Reddit Data API, and more native moderation tools. They did not disclose the details about the new price until two months later which was revealed to be $0.24 per 1,000 API calls (<$1.00 per user monthly), which they claim to be a reasonable price. 

Christian Selig, the developer of Apollo, a third-party Reddit app, however, revealed that they made seven billion API calls last month, which cost up to $1.7 million per month or around $20 million a year while another popular third-party app RIF (Reddit is fun) estimates a similar ballpark. This sparked an outrage on Reddit and more than 2,470 subreddits have confirmed their participation in a scheduled 48-hour blackout on June 12. A few subreddits have taken a more drastic stance, suggesting that they might cease to exist permanently unless Reddit reconsiders their new policy. 

Where it all began 

This decision by Reddit comes as the platform seeks ways to monetise its vast collection of user-generated content. Their content has increasingly been utilised to train high-profile text-generating machine learning models like OpenAI’s ChatGPT and GPT-4 for which they are now seeking compensation. As of 2022, Reddit had 430 million active users every month, 1.7 billion global monthly visitors, and 100K active communities. 

The company is preparing for a potential initial public offering later this year, and this explains the motivation of their shareholders and investors looking for growth or new revenue streams. 

According to The New York Times, Reddit’s API will not undergo a complete policy change. It will continue to be available for free to developers creating free apps and bots that enhance the Reddit experience, as well as for researchers engaged in academic or noncommercial studies on the platform.

However, Reddit’s co-founder and CEO, Steve Huffman, stated in the interview that companies that extract data from Reddit without providing any value to users will now be required to pay. “It’s a good time for us to tighten things up,” Huffman said. “We think that’s fair.”

“The Reddit corpus of data is really valuable,” he reiterated. “More than any other place on the internet, Reddit is a home for authentic conversation. There’s a lot of stuff on the site that you’d only ever say in therapy, or AA, or never at all … But we don’t need to give all of that value to some of the largest companies in the world for free.”

In terms of revenue, Reddit’s valuation was approximately $10 billion in August 2021. However, two years ago, its ad revenue amounted to only $350 million, a significantly smaller figure compared to Meta and Twitter. Meta generated $113 billion in 2022, while Twitter, despite its controversies, earned nearly $7 billion from advertising.

Struggles of Third-Party Apps 

Reddit accused Apollo for being unscrupulous with their API requests and that charging for them would make it more efficient. Christian Selig, the developer of the app spoke in a recent interview addressing these charges. 

He explained how these requests work and said, “Every unit of action you can think about is an API request. For example, what I do in Apollo to make it feel a little faster is I request the first 25 posts on a subreddit and then as soon as those load I ask for the next hundred, so you get those first 25 four times quicker giving the users a better experience.” Christian clarified that though it is fair to charge for the API’s, it’s the exorbitant prices that’s causing the outrage. 

Though this is still completely within the API rate limits (60 a minute per user) and he uses two, he says, it doesn’t seem wasteful to him but wonders if Reddit deems that as inefficient though it is completely within limits. 

Another sore point for most developers is the inconsiderate timeline. The new policy is to be rolled out on July 1, which gives the developers no time to change their own pricing policy having to take on the extra cost on themselves or shut down the app itself. Reddit said they’re unwilling to negotiate the pricing but are willing to consider a pause in the initiation of the pricing plan.

Earlier this year, Twitter faced significant criticism after implementing a comparable policy that excluded developers and researchers from accessing its valuable data. This move led to the demise of several third-party apps, receiving widespread disapproval.

Removal of sexually implicit content from the third party apps are subject to restrictions making such content unavailable. Christian Selig and others agree that doing so would wipe out a large chunk of users from visiting the app. In other cases, medical questions with ‘gory’ images marked NSFW would also be unavailable to users. The reasons given for this limitation is unclear but are in line with legal obligations. 

While the protest sends a message to Reddit, it looks unlikely that the company would make any changes to the API pricing. If a significant number of users are willing to put up with a partial absence of Reddit for two days, then the company has to think about what percentage of those will leave forever if they don’t relent.