The API Economy

The API Economy is launched and it’s not too late to join in the fun. According to Pew Research, 91% of American adults have a cell phone and 34% of American adults own a tablet computer. The proliferation of mobile devices opens up a multitude of business growth opportunities through the exposure of Application Programming interfaces (APIs). API Economy leaders are generating real revenues from APIs. Salesforce.com generates more than half of its revenue through APIs’. Twitter, Google and Amazon are deriving revenue from API transactions that number in the billions. How can my business make money from APIs? The answer will depend on your product and business model, but can include more than one strategy.

 

Direct Revenue

Direct Revenue is the most apparent business model for generating API revenue. In this model the consumer is billed for usage of the API.  Amazon Web Services is a classic success story for the pay as you go consumer usage revenue model.  Another effective direct revenue use case can be seen in PayPal’s transaction fee model for API usage. Traditional businesses such as software providers can plug into the direct revenue business model by exposing software as a service (SaaS).  Intel’s EC2 Security services are available on a pay as you go basis.  Revenue sharing models pay the API consumer for posting ads on their sites. Google’s AdSense pays 20% to developers for revenue generated from posted images, fotoglif.com pays 50% to photographers, and shopping.com pays by the click.

API Economy Revenue

Distribution Channel

APIs are an outlet for the syndication of content and data. Traditional publishers of content, such as The New York Times, have capitalized on APIs as a news delivery mechanism. Google Maps has been hugely successful following the content syndication model. The Google Maps API had 200 million users in 2011 and is reported by Programmable Web to have 2510 mashups or syndication partners.  Entertainment industry businesses like Netflix, ESPN and CBS are well suited to benefit from exposing content to mobile platforms through APIs. Gaming companies like Ubisoft are using Intel’s Expressway API Manager to expose their content and they are leveraging API Analytics to provide their customers with a customized gaming experience.

 

Marketing Channel

APIs can be a tool for expanding market awareness through 3rd party distribution. Free APIs encourage 3rd party developer usage. Free!The Freemium business model is followed by Amazon, eBay and Netflix. They allow potential customers to view content in a “kick-the-tires” mode thus promoting sales and memberships.  A free API is free advertising.   Facebook and Google also provide free access to most of their APIs.  Their business model is to grab the consumer’s attention and to then sell advertising to marketers very willing to pay for access to that consumer attention. Traditional Retailers can leverage REST APIs to expose commodities, build brand awareness and to enable content acquisition.

 

 

Application Enablement

Exposing content via APIs has encouraged innovation and is also the cheapest, fastest way to getting applications built. Facebook is one example of this economy.  Facebook’s use of APIs has quickly broadened their users experience. The Facebook API subscriber applications of FarmVille, CandyCrushSaga, Spotify and Skype all contribute to the Facebook product.   Salesforce.com has created a preeminent partner environment for customer relationship management through application enablement. Part of the Salesforce offering is a marketplace where apps can be browsed and downloaded. Automotive organizations could tap into this business model by publishing APIs and encouraging the development of applications that could tie cars to maps, music, retail, and traffic.

 

Distribute Services

Another benefit of APIs is to enable mobile access for all platforms.  eCommerce APIs go from web transactions to making sales from phones, tablets, TVs, and automobiles.  In-store price checks are made possible with quick and easy phone scanner applications.  Also consider how telecommunication firms can promote even more mobile usage by publishing API access to traditional services such as telephony, data and location services.  Mobile application developers can become value added resellers for the Telco industry exposing and distributing Telco assets.

 

3rd Party Innovation

Mobile application developers are the innovators that enable the publishers of APIs to address the long tail of markets and segments. long-tail-marketingLong tail marketing concentrates the less popular products and relies on low cost of inventory, carrying lots of items,  targeted product  descriptions, product tracking ,easy access by customers, and customer posted reviews.  Sounds a lot like Amazon, but the strategy could be applied to an industry like Healthcare too.  Walgreen’s has published the Pharmacy Prescription Refill API building on their success with the QuickPrints API. Walgreen’s has been proactively reaching out to developers to include the refill API in existing applications. Healthcare APIs can equip Healthcare service providers with the tools to address the long tail markets.

 

Lock-In

Integrated enterprise code does not change often.  Your business becomes sticky when your APIs are built into the fabric of other business’s operations. Gift certificates are an example of this economic model. And once your API fits operationally – it can be difficult to replace. Utilities could leverage this model by exposing service rates, and usage as APIs.   Electronic devices in the home, thermostats, refrigerators, air conditioning, and lights, build onto the Utility APIs and encourage consumers to lock-in.

 

The API Economy is not just for the early adopters.  Whatever your business model you pursue, the marketplace has plenty of room for more APIs.  Intel’s Expressway API Manager can help you to quickly and securely expose APIs.  Intel’s API Management portal options, cloud and on-premise, provide self-service developer on boarding. Leverage Intel’s guidance on how to evangelize your APIs and be on the way to increasing your bottom line.

For more information on how to get started sign up for Andy Thurai’s webinar, Transitioning Legacy SOA Platforms to Participate in the new API Economy

Follow me on twitter @WBohner

Wendy Bohner

About Wendy Bohner

I am currently working on Interface Integration at Intel for Application Security and Identity Products. Experienced in HL7, HIPAA, J2EE, .NET and Web development technologies. Industry experience in healthcare, benefits administration and telecommunications. As a PreSales Engineer, I am advising customers on solutions for API Management, SOA, Cloud, Security and Identity. My prior roles include development team lead for GE Healthcare, Software development consultant for AON-Hewitt and manager at AT&T. I enjoy reading and following the Chicago sports teams in my free time.

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