I don't think they've lacked understanding of their value proposition. They thought they had something worthy of capitalizing on, kind of like YouTube.
And they could have capitalized quite a lot on Reddit, but I think they've screwed themselves over the last couple of years by pushing a bunch of features no one liked and not actually focusing on anything that would make them money.
Like, I should be able to pay Reddit to be able to post high quality images and have them posted to all the users of the website without reliance on their shitty mobile app. I shouldn't be able to upload high quality images without paying, and that incentivizes me to give them money.
What are they doing instead? They incentivize their shitty mobile app.
I think they've dramatically overestimated their ability to make money and they've expanded the site to the point that they cant actually sustainably continue to maintain it.
I have half a mind to believe they actually expected the third party developers to pay the outrageous fees and that that would help cover the costs of them running the website.
I think Reddit is unsustainable and it's going to collapse in on itself and go into bankruptcy eventually.
They will continue to fail to make money to support the bloated and shitty infrastructure and hiring practices they've put in place, and when they inevitably fail they will blame these terrible moderators and users for ruining the website.
In reality it was their own greed and shameless lack of self-restriction the wind in terms of establishing their bloated and terrible infrastructure.
But hey, they have an office in San Francisco so they're quite the lovely san francisco high-tech company that's making all sorts of money. And by money I mean investments.