I keep thinking this would have been a much better sell to devs and to users. I have always used Sync, and Boost. I tried the official app a few times, but really only used it for the chat feature. I didn’t want to pay for it, but (I am embarrassed to admit it) I would pay premium to keep my app. I think this would have worked out better for Reddit than the garbage they are pulling right now.
Would that have been a more reasonable solution in your opinion as well?
You’re ignoring the other effects of third party apps - which is to have significantly added to the number of users they have to show ads to in the first place.
Making their API free encouraged active development which increased user engagement. So it absolutely did increase their revenue because it helped to increase the popularity of their site in the first place.
Users that likely will never see an ad of they only use the 3rd party app
Doesn’t matter. The more people who use reddit, the more additional people who will be attracted to reddit. Not only will a percentage of those people use platforms that do support ads, but both groups increase the engagement with reddit, which means more content being added, more discussions being had, more subreddits being created covering new topics.
Ultimately, it still contributes to reddit.