Their monetization is so low (<2$/month/user, when the competition is 10 to 20 times higher) that they could bear to lose 50% of their userbase and still make bank with the remaining ones.
What’s left unsaid here (but I’m sure you realize) is that these same users whose monetization is so low also provide most of the content and moderation on the site. When you spread out the value of that among the (human) userbase, the total value returned to Reddit by each human is higher.
Steve thought he was targeting the AI with this move, but in reality he has been charging his most engaged users. If he’s upset that Apollo has turned a profit, the correct move was to acknowledge that one guy has done a better job than Reddit’s team, not tell all the users that Apollo helped bring to Reddit that they were no longer welcome