James Higginbotham

API Architect

#GlueCon 2013 Notes: 20 API Business Models – John Musser, Programmable Web

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20 API Business Models – John Musser, Programmable Web (@johnmusser)

  • The question they get asked the most: “How do you make money with APIs?”
  • Why to have APIs – many reasons
  • An API strategy is not an API business model
    • Drive innovation
    • Marketing channel
    • BizDev/LeadGen
    • User acquisition
    • New line of business
    • Upsell opportunity
    • API as a Product
    • Increase footprint
    • Device support
    • Distribution channel
    • Content acquisition
    • Drive traffic
    • Partner opportunities
    • Accelerate (something)
    • Extend product
    • Increase stickiness
  • Secret #1: Who is the API for – this is a huge question
    • Internal – you
    • Private – your partners and customers
    • Open – everyone else
  • What is the API?
  • Secret #2: APIs only succeed if they offer something of “value”
    • Service (e.g. Twillio)
    • Data (e.g. weather)
    • Audience (e.g. Facebook/Twitter)
    • Function (e.g. Salesforce)
    • Marketplace (e.g. eBay)
    • Access (e.g. Sabre for airline schedules)
  • Secret #3: You need to know who, what, and why
  • History of API business models: 2005
    • Free, Developer pays, Developer gets paid, Indirect
  • 2013 – lots more derivative models from the four core models of 2005, offering richer models and options
  • Secret #4: Most APIs have more than 1 type of ROI
  • Category 1: Free can work
    • Facebook, government, city search (Yellow Pages)
  • Category 2: Developer pays
    • Pay as you go (e.g. AWS), work best if there is no minimum fee
    • Tiered (e.g. Mailchimp)
    • Fremium (e.g. Google Maps)
    • Unit-based pricing (e.g. Sprint, WordStream) – allows purchase of credits, then charge different units based on the type of call (e.g. 4 credits for SMS, 6 credits for MMS)
      • Beware of complex pricing that requires a spreadsheet
    • Transaction fee (e.g. Stripe, PayPal, Chargify, etc)
  • Category 3: Developer gets paid
    • Affiliate programs: CPA (e.g. Amazon)
    • Revenue share: CPC (e.g. shopping.com)
      • APIs are now a billion dollar business – Expedia $2B/yr, 90% of what they do is business through APIs
    • Recurring revenue share: every month as long as the customer remains
  • Secret #5: You need to bake your business model into your API
  • Category 4: Indirect
    • Content acquisition (e.g. eBay, Twitter)
      • eBay 3rd party apps account for $6.9 billion in Gross Merchandise Volume (GMV) in 2008
      • 60% of all tweets come from 3rd party clients (2010)
    • Content syndication (e.g. NY Times)
    • API as SaaS Upsell (e.g. Salesforce enterprise tier at $125/user/month for dev sandbox and API integration)
    • The Glue of SaaS
      • The Small Business Web – 200+ SaaS companies with API success stories
      • “We find that if our customers use any single integration, they are three times as likely to convert to paid” – Sunir Shah, Freshbooks, Aug 25 2010
      • Switching cost becomes higher
    • API business model continuum: Direct (AWS) to hybrid (Expedia, MailChimp, Salesfoce) to Indirect (Netflix)
  • Secret #6: API business models are not 1 size fits all
  • Mobile apps drive API usage
    • Evernote: 99% internal calls (eat their own dogfood)
    • Netflix platform: 800+ devices that use their API platform
  • Secret #7: Internal use may be the biggest API use case

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