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As someone who has dealt with previously free services relying heavily on ads

I would actually take the approach of "API Access is gated by the account paying money".

This is how Spotify did it (only premium users have API access) and the entire issue of paid vs. free becomes "pay for the API surface".

This is probably what will end up happening and ironically is a worse result for third-party apps than the pricing model that’s causing a ruckus.

The proposed model is fatal for them so I'm not sure how anything else could be worse.