The really good move here would’ve been profit sharing on ads between Reddit and third party apps. But heck these devs were fine displaying ads for Reddit for nothing in return.
Reddit didn’t care.
Normally ads have strict requirements for the placement (show one ad every x amount of posts), which would be hard to enforce across all 3rd party clients. Not to mention that they might be targeted towards the user, measure exposure time, and record interactions. I think the only way to do this is having some sort of SDK, but they probably determined that the cost would be too high.
Second, Reddit had/has an opportunity to hear to actually dictate the ad placement rules themselves. They don’t need to promise a certain number of placement, but rather a certain number of clicks.
Finally, they could have made the ad API something that’s locked behind a human review until the app got popular enough. I agree that it’s simply not worth it to fully automate this. Realistically there’s less than 15 clients that would need to implement this.