I get the want to simplify things, but it's already simple enough:
1. Reddit brings out absurdly priced API
2. Developers don't want to pay that much
3. Reddit then behind the scenes berates developers, claiming they are trying to blackmail millions of dollars, to the apps serving harmful ads, to posting about how the apps aren't "good citizens" and instead are scraping wildly
4. Developers push back and announce app closures
If it was about "showing ads", they would have budged on price a long time ago, added in guidelines to use the API and serve ads, etc. This is about controlling user data, tracking every bit they can, leveraging their content, and then monetizing the fuck out of it in the age of AI.