A hot guess: they measured how many users they're able to lose and decided to go with the plan. The remaining part will be enough to run the business for a while, because they're of younger generation that has been conditioned to ads already and they simply don't bother about em or use of any 3rd party alternatives
However, looking at the app, the moderation decisions, the 'firing', and just about everything that the admins do, I know they haven't measured anything.
I've worked in enough BigCos, startups, middle sized, &c. companies to know that Reddit's management, like literally every other company's management, is just making stuff up on the fly and hoping it works. Because that's all that they have ever done.
They think "they may be whining now, but in a year they'll forget anything ever happened and we'll get the promotions for implementing our brilliant plan". It may also be true. Or it may ruin the viability of Reddit as a business, in which case the persons who decided it will fail sideways and move on to receive the same salary somewhere else.
The rumors of Reddit's death are greatly exaggerated. I'm shocked at the number of people here who don't understand that Reddit has thousands of SWEs and PMs and Directors now, and they've definitely run the numbers on many outcomes.
Reddit has no viable competition for the service it provides. And it's no longer a space for techies and nerds, Digg v2 is something that happened in the old world. There's a bunch of people using Reddit exclusively on their phones via the first party app, and I'd bet it's approaching majority. Reddit is not going anywhere.
I don't get their current motivations, either. They're about to cut off their nose to spite their face. This is how social media sites die. See, e.g. Digg.
$X is the fallout from the new Reddit policies w.r.t. third-party apps, and the power struggle with moderators.
$Y is the additional amount of money that Reddit gets from improving their advertising metrics before an IPO.
Reddit is betting that $Y > $X. And they can stop counting $X when the IPO happens.
As far as I can tell, there's just not enough community presence elsewhere, for most communities, except a few places like Discord. And Discord sucks even worse than Reddit, in a lot of ways.
Does anyone know if Reddit has actually ever turned a profit?
Because if they have not, it is hard to say what they rely on. And quite possible that they track which subreddits and users are profitable and which are not, and know exactly which people they want on the site and which they do not.
So you may be right that "greedy behavior" is driving their actions, but that might be manifesting in unexpected ways, such as deliberately angering the pieces of the community that don't click ads.
This is just speculation of course - I know nothing about reddit's operations, but it is worth considering that what is good for the users does not match up with what is good for Reddit's business. That will be a problem in the long run, but may drive their short-term actions.
Or, they no longer have free 3rd party access but provide a paid tier that allows 3rd party access. Say $10 a month, you have to be logged in but it means you can still use the app of your choice. They can limit the amount of requests to something well above the average person use but low enough that is isn't abused by data scrapping.
It seems like a decent middle ground. But what would I know, I am but the son of a candle maker! I know nothing!
Besides, IMO an ad-infused API where every Xth post/comment is an ad may be a compromise.