Or just charge a reasonable price for API access that offsets the lost ad revenue. I think Reddit's ad revenue is something like $0.12/mo for an average user. If their API pricing averaged out to $0.15/month/user they would still be coming out ahead.

This would still hurt free third party apps, but I'm sure power users wouldn't mind paying $1/month to keep their favorite third party app going.

Instead, Reddit went for insane API pricing that app developers can't realistically afford at the subscription rates people are willing to pay.