APIs offer your business a chance to jump into a multi-billion dollar world market
Besides their fame and digital economy success, what links PayPal, Amazon Web Services, Google Maps—even Salesforce?
The answer is they have all successfully racked up considerable revenue from monetising esoteric but incredibly useful pieces of computer code called application programming interfaces, or APIs. (I could make it all even more esoteric by pointing out the multiple API types including REST, SOAP, GraphQL and Kafka, but no need to go there just yet!)
Mystifying names aside, these APIs are extremely helpful to builders of websites, mobile phone apps and even internal company business applications. The easiest way to think of them is as Lego bricks that encapsulate some useful function that a developer can easily plug into the system they’re building. It might look like adding a new payment gateway to your company website or constructing a whole new travel app from component parts. Using APIs speeds things up—and if they’re from a trusted third party library, developers can also be assured that APIs will work as expected. Developers can even read commentary on the APIs and gain other new ideas.
So, APIs seem pretty useful for coders. But what’s all this got to do with your business? Simple: if PayPal can make money from the APIs it builds, there’s no reason you can’t either. Your API might offer new features to developers in the same way Google does with the APIs it sells developers to display its maps in their web pages or applications.
But, you might argue, we don’t do what Google does. Here is an example: let’s say you are an engineering firm with experts on building EV (electric vehicle) charging stations that are so sorely needed in the UK. You’ve written some specialised code to handle the AC to DC conversion step. You quite rightly want to make money directly from that in the EV marketplace. Imagine how useful your specialised code could be to the global Green transport market?
If you hived off that one little bit of code—or even better, several of them that all work together—into APIs that others could use, you’ve generated a whole new revenue stream and benefitted the industry as a whole.
Multiple API monetisation tactics
The good news is that once you start looking, there are actually many opportunities for entrepreneurial companies to monetise APIs:
- Charging for access to your APIs This can be done on factor like amount of usage, number of requests, or other factors
- Offering premium features SMEs can offer premium features or functionality as part of their API offering, which customers can access for a fee
- Revenue sharing Why not split some revenue with third-party developers who want to use your API to build new applications or services?
- Upselling You can try to ask customers of your original API or API set to offer additional products or services based on their use of it
- Data licensing Finally, smaller companies can also monetise their APIs by licensing the data they collect through their APIs to other organisations.
Adding ‘API revenue’ to your balance sheet as its own line item takes a few relatively straightforward planning steps. It also means adopting a product mindset (like Google does) to see what you create as potentially valuable to the wider market you operate in.
‘Product’ here is the operative word: you need to coach your API builders to clearly define the function and value of their APIs. This will make them easier for fellow engineers to understand, as well as ultimately help improve public API search and discovery.
My experience has shown me that successful API monetisation initiatives are the ones that start right from the first stages of the API’s core design. I always recommend starting with a requirements document that spells out the objectives of the API programme and outlines what’s needed to achieve them. To be a proper business plan, it should include the required tools to get you up and running, the expected budget, the people and skills needed to get the job done and so on. Ideally, it should also outline the function of each API—not just the ones you already have, but those needed to achieve the overall program goals.
The importance of an online API market for your wares
So far, so good: you’ve spotted the commercial potential for your APIs and the various market opportunities and you’re now writing all your APIs with these ideas firmly in mind. The next essential step is working out to manage and market your APIs.
Here, an API ‘Hub’ is your essential friend for ensuring that the goals for your promising new API programme are met. A ‘Hub’ in this context is essentially an open online marketplace, or ‘library,’ where your new APIs can be easily discovered, made searchable, and attract the levels of developer attention you seek.
I happen to work for one that four million such coding experts rely on; others options, as they say, are available! Your Hub of choice should include tools for and foster collaboration across the entire development lifecycle - including design, development, testing, and publishing. It should also make it easier to monetise, but linking up to online payment systems like Stripe. It’s vital that the Hub you select has the right security and governance capabilities. Nobody should be authorised to access APIs that aren’t appropriate to their role, or security privileges.
The GTM and communications plan
However, just dropping your new AC to DC current converter API into a Hub won’t transform you into the next Jeff Bezos overnight - even if you have treated it as a product internally. You’ll also need a go-to-market (GTM) and communications plan. A key part of this is deciding which APIs to make available to start with, and which to roll out later. It’s best not to roll too many out at once so you can observe adoption and usage trends, understand disparities, and make adjustments.
For your GTM plan to be effective, you should also outline the entire ‘user journey’ for both the API builders and end consumers. The plan should be tailored for each audience and include clear guidance on how to interact with the APIs in the Hub, and best practices for how to document API functionality and benefits.
Measuring your success
Last but not least, measurement. All of your great work will fail to deliver the maximum value you deserve for all your hard API monetisation work here unless you set some metrics for performance and success. Quantifiable metrics will help you to understand how your API programme is performing in action and see what it is and isn’t working over time. In practical terms, you’re probably going to want to be tracking things like ‘total API call volume’ (i.e., evaluating the growth and usage of your APIs on the open market over time, ‘API call volume by partner’, ‘average daily user count’ and, of course, total revenue to date).
API monetisation by the non-Internet giant—i.e., you—is much easier and worth doing than you may have thought. Perhaps we should seal the deal by quietly pointing out that the open API market is expected to hit $13 billion by 2030.
Thought that might get your attention! So why not take a closer look to see if you have your own equivalent of the Google Maps API in your software—just sitting there and not earning its keep. An API monetisation programme might be just the thing to boost your business in these wildly unpredictable economic times.