Reddit would need to monetize those users, presumably by adding ads etc to Apollo, eventually turning Apollo into the Reddit app which already exists today (and which Apollo users don't want to use). Only the users willing to tolerate Reddit's enshittified UX would stick around.
Reddit can just force Apollo to shut down and accomplish the same for $10M less.
I don’t see how that would work. A fraction of Reddit users use Apollo. A fraction of Apollo users pay Apollo. A fraction of those users would be open to also pay Reddit on top of that.
Why would the Apollo developer keep working on their app if this subset of users bring in $500/month at best?
I do agree however that it would have probably caused less trouble, because suddenly the users have to pay Reddit rather than the developers.
I don't know how many employees Apollo App has, but I wonder if a viable solution is just to build their own Reddit? I realize that's a massive task, but if the only other option is shut the company down, it might be worth exploring. They've already got the interface built and if you remove a lot of the bells and whistles, Reddit is a pretty simple app other than the scale at which they operate (which is obviously a massive challenge).
Would those users continue using Apollo after Reddit bought it and filled it with ads or would they start to slowly drift away to other clients over time?
The cost for reddit as stated in another part of the call is an opportunity cost. By acquiring Apollo instead of shutting it down they would seamlessly acquire a lot of users who would have a hard time adjusting to the native app and potentially leave the platform, so this call is still a cost to them.
It's not a deal though. Reddit says the users are worth $20 million in lost advertising. So either Apollo pays the money, the users move to another app that pays, or the users return to the official site and app. Either way, Reddit gets their $20 million.
Apollo has no leverage here unless there is strong evidence most of the Apollo users will leave Reddit if the app shuts down. I don't believe they will. The other potential leverage is the upcoming subreddit blackouts, or hinting at taking the Apollo users to start a competitor. The developer said they are not going to build a competitor (that was a mistake, they shouldn't have revealed that card), so I think the blackouts are the only chance of lowering API costs.
Yes, that makes sense. But do you think Reddit would actually do that? Apollo has a better UX. Reddit has proven they don’t want to build a good UX. If they bought Apollo they would only ruin it.
I agree. The Apollo dev arguably owns the user last-mile. It wouldn't be a stretch to offer users an alternative. Reddit was open source until 2017 (https://github.com/reddit-archive/reddit) so most of the heavy dev lifting is already done. The major cost would be in infrastructure.
But it would be very simple for Reddit to require ads to be served in Apollo. They could say that in order to view a feed of posts at scale, you'll have to include ads that are injected into the feed. They could revoke the API token for any clients which don't do that. In fact, there are plenty of ways for Reddit to get their money back.
Simply put, the Reddit CEO definitely wants to kill 3rd party apps. He just knows that saying it out loud would have an even bigger backlash. With the current approach, he can pretend to care about 3rd party apps, but do everything to make it financially impossible to run one.
Like many apps, Apollo had (a small number of) paid users and (a large number of ) free users. And because they were competing with the Reddit app (which is free) their pricing model was only $10/year.
Reddit's changes would mean that they would have to cut off all of their free users entirely, and 10x the cost of the paid users. Also, they would have to lose money on all of their existing yearly paid paid users until renewal time.
That sounds completely reasonable - if you assume the users currently on Apollo 1) Can't be made to pay, directly with a price for the app or micropayments or indirectly via ads 2) Would move to the official app if Apollo shut down and 3) Don't bring in posts and comments with which other users engage, raising money that way.
Sounds to me that shutting it down is the one sure way to lose money, but I also don't trust that the reddit team had made that calculation properly. This all seems like a short term profit or like a power play to me.
There would have been a huge uproar if they did that too. Most Apollo users don't pay. I'd be surprised if they would get even a 2% conversion rate. The other 98% of users would be angry about losing access. Reddit would still be accused of effectively killing off 3rd party apps.
The economics are basically the same. Apollo could charge their users $0.25 per thousand requests and continue to operate. They don't want to do so.
It is a burden for the app developers to implement payment processing. And one month was not enough notice. But fundamentally, this is killing apps because most users won't be willing to pay.
(Also, 1000 API requests isn't that little. For example, getting the top 25 posts of a subreddit is just 1 API request. Posting a comment is 1 request.)
Unpaid users are important to these apps because it's what drives adoption. You can release a new paid app to browse Reddit and get maybe 1000 users, or release a free app and get 1 million users, of which 1% convert to paying customers (i.e. 10,000 customers. These numbers are just made up for illustrative purposes).
Alternatively (and I know many folks won't like this idea), Reddit can offer to buy out Apollo and the other 2-3 top iOS and Android apps with a generous Discounted Cash Flow market value; These Apps have put a lot of effort in development over the years and they have helped make Reddit better and more accessible.
They would be perfectly monetizable if they wanted to. I'd happily pay for a Reddit premium subscription if I can keep using Apollo, because I use it for the better UX, not to skip ads. But clearly they would rather kill third party apps than take their money.
If Apollo keeps operating, it charges its users more and pays reddit $20 million for one year, and presumably continues paying that into the future.
If Reddit purchases Apollo for $10 million, then those customers now belong to Reddit. For the first year, Reddit would "only" earn $20 - $10 = $10 million, but after that those customers would continue directly earning revenue.
It's all about reasoning with the value of the app in terms of the api rates. Either the rates are unreasonable, or that would be a reasonable sale to Reddit.
That's assuming that Apollo brings in enough revenue to cover the costs and they want to run a business.
I'm not a user of that App so excuse me if I am mistaken, if Apollo is currently free and without ads then the developer had a lot less to worry about then than now.
Additionally the outrage, as far as I am aware, has less to do with Reddit needing to make money rather it's way of going about making money is killing the user experience which kills the point of the website.
Buy Apollo app for $100k. Hype up that we will build a Reddit competitor and take advantage of the hatred for Reddit's management. Clone Reddit's API endpoints so existing Apollo app will just "work". See if we can legally keep using Reddit's content as the seed content. Maybe allow existing Reddit users to "Log In with Reddit" and then ask if they want to pull their history from Reddit over to Apollo. Also give them an option to delete all their Reddit content after transferring to Apollo.
Relaunch the Apollo app with the above strategy. Next, build a website to compete with Reddit.com and to get SEO.
20 million/year is how much the Apollo users would bring in when served ads (the opportunity costs).
Reddit pays Apollo 10M, starts serving their ads in the app, and now rakes in 20M/year without any extra effort.
Conversely, now they need to convince all the angry users of Apollo to come back to use their shitty website/app, something that will never happen. A lot of people that aren’t even using Apollo are going to be angry at the mistreatment and leave the site altogether. On the whole it’s quite likely that Reddit’s losses will amount to more than the 10M they’d have to pay once to get a ton of money in the future.
Reddit can just force Apollo to shut down and accomplish the same for $10M less.
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