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

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

James Higginbotham

May 23, 2013 · 3 min read